'Innovative UK retail has all the ingredients to maximise the opportunities of AI'

From supplier negotiations to store operations, AI offers retailers the chance to reap big benefits, believes Matt Truman

Innovative UK retail has all the ingredients to maximise the opportunities of AI

Matt Truman / Opinion / 22 Nov 2023

Originally published by Retail Week.

It’s been almost a year since ChatGPT was launched – a seminal event in the elevation of the proximity and power of artificial intelligence into the public consciousness.

There’s a sense of hype around the transformative capabilities and associated risks of this area of technological innovation. At the same time, it would be dangerous and complacent to dismiss this as just another fad, the next metaverse (sorry, Zuck).

Let’s start with the opportunities that AI can unlock and why the UK economy in general, and retail specifically, could be poised to benefit disproportionately.

Recent research by Capital Economics estimates the AI “revolution” could drive faster and larger gains in overall economic productivity than historical analogues such as steam power (broadly, in the 19th century), electricity (20th century) and the information technology boom of the last 40 years.

As Nobel laureate economist Paul Krugman observed: “Productivity is not everything but in the long run, it’s almost everything”. At the societal and individual level, productivity gains drive improvements in standards of living.

Moreover, Capital Economics’ research suggests the UK is particularly well placed to benefit from AI – in part because of the world-class higher education institutions in the country and the transmissibility of AI benefits into an economy that is services-led.

Our retail industry, meanwhile, has a track record of innovation, most obviously and recently at the vanguard of the development of the online channel. The ingredients are here for the UK retail sector to seize the AI opportunity.

Cutting through the hype

AI, unusually even by the standards of technological quantum leaps, has the capacity to transform virtually all segments of the industrial value chain. Within retail, it is not hard to conceptualise how AI could be harnessed in product design, manufacturing, supply chain, merchandising, marketing and customer service.

The challenge, then, is how and where to start on this journey. Already there are thousands of emergent technology companies hitching their wagons to the AI star – the tiny island of Anguilla (population 15,000) is doing very brisk trade ($30m – £24m – estimated income in 2023, or roughly a 10% increase in GDP per capita) in licensing ‘dot AI’ domain names to companies seeking to showcase their credibility in the space.

Cutting through the hype, which undoubtedly exists, we are already seeing a number of tangible, real-life use cases for the application of AI to retail.

For example, Pactum uses AI to allow companies to autonomously negotiate terms with suppliers – typically this is applied to the long tail of supply relationships, often in goods not for resale, where intensive human-led negotiation is intrinsically inefficient.

The company is already working at scale with Walmart with impressive results in terms of successfully completed processes, discounts negotiated and payment terms extensions – at Walmart’s scale the annual bottom line benefit could breach $1bn (£804m).

Within store operations, I have been highly impressed by Quorso, an AI-powered co-pilot for store and area managers. Quorso simplifies their daily work by translating millions of data points from dozens of systems into smart actions to capture lost revenue and optimise operations – with over 90 live commercial use cases.

Benefits include directly attributable sales uplifts (up to 1.5% like for like), material time and cost savings, and a 50% to 90% reduction in the 20-30 systems managers typically have to navigate.

PetSmart, Dollar General and others have been early adopters of this tool that tackles one of the negative, unintended consequences of the information technology boom – a proliferation of data and reports that swamp regional and store-based colleagues. Every retailer with a large estate of physical stores should consider how AI can enhance its day-to-day activities to make work more rewarding for its colleagues and improve the experience for its customers.

Embrace the possibilities

These are just two of many examples of AI already delivering enhancements to retail. There are several more across the value chain from manufacturing to marketing. Paccurate harnesses AI to optimise transportation costs and reduce the environmental impact of product delivery. Persado uses generative AI to personalise content for consumers, enhancing brand engagement, customer loyalty and conversion metrics.

These opportunities exist today and will continue to develop as the technologies advance and capital flows into the sector. Our advice for industry leaders is simple: embrace the possibilities; bias your business towards action and beware of the risk of getting stuck in a quagmire of competing opportunities; accelerate your data strategies; and don’t let perfect be the enemy of good.

Finally, a word on the most commonly aired concern about the potential societal impact of AI – that it could presage mass unemployment as machines and algorithms outcompete human endeavour.

This is possible. We do, however, take some comfort from a recent MIT study that showed 60% of US workers are today employed in occupations that did not exist in 1940. Let’s not write off the adaptability of our species just yet.