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AI Will Transform Retail Merchandising For Those Who Are Ready For Change

by Robert Hetu  |  June 28, 2019  |  Submit a Comment

Retailers are aware of the significant opportunity to leverage vast amounts of customer data to drive in-depth customer analytics that enhance merchandising processes through AI. The goal is creating customer-centric assortments, across every touchpoint, optimally priced and available to consumers when and where they expect to browse, transact and acquire items. Gartner conducted the 2018 Unified Retailer Survey to understand organizations’ multichannel or cross-channel strategies and digital business initiatives.   Below are the high level key findings from this research.

Key Findings

  • Retailers overwhelmingly have or plan to implement AI solutions in five merchandising processes: product development and selection, planning, buying, demand forecasting and allocation and replenishment.
  • For most retailers, AI will be accessed as part of advanced applications that enable merchandising processes rather than generic AI platforms.
  • Practicality, transparency and explainability are foundational principles for successful implementations.
  • AI implementations will be unsuccessful without significant organizational change.
In the modern retail era, where every decision must support customer experience needs, across every touchpoint, many retailers rely on spreadsheets and averages to perform analysis, prepare plans and execute strategies. Merchandising processes are still largely antiquated and overly manual. This leads to missed opportunities through slow response, inability to reach detailed levels of analysis and simple human error. Often the urgent tasks outnumber user ability to respond, resulting in a long list of unfinished items.

 

In November 2015, Gartner published a prediction that, by 2020, merchant leaders will be using algorithms, prompting the top 10 retailers to cut up to one-third of headquarters merchandising staff. AI implementations in merchandising will be unsuccessful without significant organizational change. To facilitate this change, it must be confronted head on and with transparency across business users and senior executives. While Gartner predicted substantial reductions in merchandising staff, only a portion of this will be redeemed as labor cost savings. Many resources will need to be redeployed to improve customer experiences and support new collaborative activities.

Practicality, transparency and explainability will be key tools for successful transition to AI as part of algorithmic retailing in merchandising.

Keys to AI Success In Retail

Practicality is a fundamental force in success with a merchandising team. Addressing a known problem, making things quicker and easier for the business, ultimately supporting their existing KPIs, will attract attention and positive responses from the team.

Transparency is a must with this group who will not trust until they verify. Avoid black-box solutions in favor of open algorithms and explainable results. This is a fine line, as they do not want to know the science, but will want to understand how it goes about learning and deciding. They will expect ability to manage parameters, rules and controls that are expressed in business terms.

Explainable AI (XAI) enables a better adoption of AI by increasing the transparency and trustworthiness of AI solutions and outcomes. XAI also reduces the risks associated with regulatory and reputational accountability for safety and fairness. Explainability is perhaps the most challenging to provide but will do the most good for progressing from pilot to production. Using plain business language, familiar visualizations and scenarios, the application “tells a story” about the results it determined. Users must then be able to question through “what-if” analysis and build their comfort level, supported by an all-around test-and-learn, team culture and approach to working.

Gartner clients can read the entire research with explanations, statistics, and examples here: What Retail CIOs Need to Know About AI for Merchandising

Additional Resources

Category: ai  merchandising-process  

Tags: advanced-analytics  ai  algorithmic-retailing  algorithms  analytics  customer-analytics  customer-centricity  merchandising  multichannel  omni-channel  personalization  retail  trends  

Robert Hetu
VP, Analyst Retail
7 years at Gartner
29 years IT Industry

Bob Hetu is a Research Director with the Gartner Retail Industry Services team. His responsibilities involve tracking the technology markets and trends impacting the broad-based retail merchandising and planning areas. Mr. Hetu is an expert in the areas of brand, vendor and assortment management, merchandise planning, allocation, and replenishment. Read Full Bio




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