AI Revolutionizes Retail: Boosting Profits and Cutting Waste in 2024

The retail sector is set to undergo a significant transformation in 2024, with an increasing number of retailers adopting Artificial Intelligence (AI) to enhance profitability and minimize food waste. Tommi Vilkamo, Director of RELEX Solutions, highlights the growing importance of AI in the retail industry, emphasizing its potential to revolutionize various aspects of retail operations.

Retailers embracing AI for enhanced performance

AI technology is rapidly becoming a crucial tool for retailers. According to Forrester Consulting, over half of retail marketers now employ AI-driven personalization strategies across multiple channels, a trend that is expected to grow in the coming year. Vilkamo stresses the importance of using AI with purpose, focusing on measurable value, improved customer experience, and employee empowerment to ensure its effective integration into retail operations.

AI is not limited to a single application within the retail sector. Vilkamo predicts that AI co-pilots will soon assist retail professionals in all aspects of their work. These technologies will provide personalized customer recommendations and aid in supply chain management, promotional performance, and space planning. The full extent of AI’s potential applications in retail, however, remains largely untapped and is expected to unfold in 2024.

The impact of AI on retail jobs and regulations

Concerns about AI’s impact on employment in the retail sector are prevalent. However, it is anticipated that the creative sector, rather than retail, will bear the brunt of AI’s influence in 2024. AI is seen as an opportunity for retail professionals and workers, rather than a threat.

The regulatory landscape for AI in retail is expected to become more stringent in 2024. The European Union’s provisional agreement on an AI Act, along with the NIS2 Directive, will introduce new regulations, particularly affecting AI use in customer loyalty programs and the security of critical supply chains. Retailers and AI providers will need to allocate resources to ensure compliance, with start-up AI providers facing significant challenges in adapting to these new regulations.

AI’s dual role in transforming retail processes

AI is reshaping retail processes in two distinct ways. Specialized AI, which performs narrowly defined tasks at an elevated scale, is being used increasingly for demand forecasting and optimization of consumer goods value chains. These solutions enable retailers to increase sales, reduce waste, and explore various scenarios, becoming a necessity for retailers aiming to stay competitive.

In addition, retail-specialized variants of general-purpose AI systems, such as ChatGPT, are enhancing productivity and creativity in decision-making processes for retail professionals. A study on ChatGPT-4’s impact at Boston Consulting Group showed significant improvements in task completion rate, speed, and quality. Similar benefits are expected for retail professionals adopting these tools.

Vilkalmo concludes that AI adoption in the retail sector will continue to grow in 2024. Retailers will use AI to minimize food waste, enhance the effectiveness of promotions, and increase revenue and profit. AI also allows retailers to automate their supply chain, eliminating manual processes and enabling workers to focus on essential tasks, thereby improving productivity.