Stefan Ivic, partner at Omnia AI, Deloitte Canada’s AI practice, says adopting AI can drive tangible results for real impact
Insights let retailers make smarter decisions and boost profitability
Businesses and retailers are missing out on enormous growth potential and may not even realize it.
Although Artifical Intelligence (AI) is familiar, it doesn’t seem to be the go-to solution in business. As such, companies are losing out on extending their reach and further understanding customer needs by not embracing this technology.
“Retail is no longer operating at the speed of business but rather at the speed of each individual customer; personalization at scale is the new game,” says Stefan Ivic, partner at Omnia AI, Deloitte Canada’s AI practice.
Ivic points out that AI can bring retailers closer to consumers and boost return on investment by better understanding their customers at an individual level. With AI, they can be smarter about everything from product inventory and assortment to shelf optimization, marketing and sales.
“Even loyalty programs can go a long way in helping retailers understand their customers and predict shopping patterns,” says Ivic. In addition, cloud-powered AI solutions will continue to evolve and become more accessible to even small and mid-sized retailers.
Research by Deloitte, Canada’s AI Imperative: From predictions to prosperity, points to a number of factors that may prevent businesses in Canada from using AI, including lack of understanding, trust, awareness, and an inability to bring small pilot or test applications to scale.
“That’s exactly what we’re doing at Deloitte. We’re talking to retailers and giving examples of how they can accelerate adoption of AI to drive tangible results and real impact to their bottom line,” he says.
“Many times what we tell them is revelatory, such as the fact there is no longer a need for a huge upfront investment in AI to reap its benefits, plus the fact that value from any investments that are made will pay back extremely quickly.”
Ivic says examples of this can be seen with retailers that lack the time, resource and capability to determine optimal discounts for individual products. This often leads to reactive, tactical discounting activity that fails to maximize margins or sell-through rates.
Deloitte is currently supporting more than 50 retailers globally to solve these challenges using AI and has delivered more than $300 million in annual incremental margin while saving 15 percent of planners’ time spent on markdowns.
“We have developed solutions that use machine learning and predictive analytics to recommend optimal discount depth, timing and number of hits at a product level. It is a configurable solution to meet retailers’ tailored requirements,” he says.
Using the inventory, price and sales data, the optimal markdown depth and frequency —and seasonality—is identified. Planners then access a web-based tool to view price recommendations and make decisions. After every markdown, the system assesses the effectiveness before recommending the next markdown opportunity. The same concept can be applied to optimize promotional effectiveness, pricing, inventory, as well as product assortment and allocation.
AI adoption in Canadian businesses has flatlined at 16 percent and remained unchanged since 2014. Although retailers have been able to use technology to capture data about every aspect of customers and their interaction—as well as data pertaining to the entire product lifecycle, from sourcing and buying, to the supply chain, merchandizing, and sales operation—they remain challenged with converting data to real intelligence.
As AI helps to shift tasks such as forecasting demand and ordering inventory to intelligent algorithms that will improve customer relevancy, Ivic says Deloitte’s dialogue with clients is crucial.
“Ultimately AI will be embraced by those that survive and remain competitive in a time where profit margins are razor thin in many business sectors. The longer that retailers and other entrepreneurs delay adoption, the more opportunities will be lost,” he says.
“Nowadays, it’s a fine line between customers becoming more engaged: the retailer is the one that needs to adopt and respond quickly, and do so at scale.”