This Changes Everything in Retail…Almost
In late March, New York Times columnist Thomas Friedman shared a fascinating conversation he had with Craig Mundie, former Chief Research and Strategy Officer at Microsoft. The topic of discussion was Generative AI, and Mundie was about to showcase a demonstration that would leave Friedman in awe. As he began, Mundie emphasized, “You need to understand. This is going to change everything about how we do everything.”
The first encounter with Generative AI can indeed be mind-blowing. The deeper you delve into it, the more astounding it becomes, as you witness the rapid pace at which it is transforming our world. A perfect example of this would be a recent video by photography influencers Tony and Chelsea Northrup. In January, they speculated that AI photography was still a few years away due to existing glitches. However, a mere two months later, they had to release an update, titling it “I was WRONG about A.I. We’re all screwed.”
But what does this mean for Retail? Will AI/ML, Generative AI (GAI) and even Artificial General Intelligence (AGI) truly change everything in Retail? Almost. Underestimating the impact these technologies are having and will continue to have on retail is a colossal mistake. Over the next decade, we are looking at trillions of dollars in potential impact.
In fact, the effect is so significant that IHL is constructing a forecast based on nearly 300 different aspects of retail business activities to quantify the influence of various types of AI. The areas include Business Intelligence, Marketing and Sales, Commerce, Stores, Supply Chain, Legal/Real Estate, Collaboration, and Infrastructure. Some sectors will see more dramatic changes than others, but every single one will be affected.
Our forecast will highlight three main aspects:
- Enhanced human productivity
- Increased system efficiency
- Expanded revenues
If you are familiar with IHL’s work, you know we have consistently mentioned that the early stages of COVID drove the most significant transfer of retail wealth ever from small to large retailers and from “non-essential” to “essential” retailers. Among the top 120 North American retailers deemed “essential” during the early stages of the pandemic, the resulting 3-year revenue growth amounted to nearly $1 trillion USD. This staggering figure surpasses the entire retail GDP of India!
That is just the growth…in the last 3 years. The impact from AI in retail over the next several years will be greater. And despite key opportunities for disruption by smaller up and coming players, this trend will once again favor the largest retailers who have the resources to dedicate the teams required to make the most of these technologies.
Many of the most significant areas of impact have already been in process of moving to AI, with notable gains being made. AGI and AutoAI will make these systems even better.
However, certain aspects of retail will remain comparatively unchanged. This brings us to the crux of the retail experience: having the products customers want, at the right place, and the right time. While technology and AI can undoubtedly improve the efficiency and accuracy of this process, the essence of consumption will remain the same.
And for AI tools to be the most successful retailers need to have abundant data, that is accurate and tagged or defined. That’s why our industry needs a realistic assessment of the impact, not just the hype. Some retailers are ready to run, others are just learning to crawl. But the race is on.
The first of IHL Group’s AI research products is coming soon. Your company can be a part of it. Click here if interested in learning more.