Retailers turn to AI to overcome staffing, supply chain challenges

The trend: More retailers are investing in automation and artificial intelligence to streamline operations and reduce costs.

Three prominent uses include:

• Implementing automation to reduce labor needs
• Making ecommerce fulfillment more efficient
• Personalizing the shopping experience to maximize conversions and LTV

Managing the labor crunch: Amid a continuously tight labor market with nearly twice as many job openings as available workers, restaurants are struggling to get by with fewer staff than they would prefer. That’s led many to embrace automation wherever they can.

• Panera, Chipotle, and White Castle are just a few of the fast-food chains implementing robot cooks to handle food prep and reduce the number of workers needed per store.
• Panera is also testing AI voice tech in drive-thru lanes to speed up ordering and enable employees to focus on other tasks.
• Restaurateur Danny Meyer invested $10 million in AI voice tech firm ConverseNow, whose products enable restaurants to automate order taking via phone and other voice channels.

Fulfillment optimization: While ecommerce has become a necessity for most retailers, ecommerce fulfillment is an expense, resource-intensive, process that can be difficult to get right. AI has proven to be a valuable tool for companies looking to optimize fulfillment and become more responsive to fluctuations in customer demand.

• Levi’s developed its BOOST engine to maximize efficiency and minimize the resources required to ship ecommerce orders. The system allows more orders to be fulfilled by stores, which expands inventory availability while reducing fulfillment costs.
• DoorDash is partnering with Relex Solutions to use machine learning to optimize inventory planning and restocking for its DashMart convenience stores. The partnership should allow the food delivery platform to avoid getting caught with excess perishable inventory, as well as tailor its product selection based on local demand.

Personalizing the customer journey: By using AI to offer an experience personalized to consumers’ habits and product preferences, retailers can convert more customers and maximize lifetime value.

• For example, Dick’s Sporting Goods is using AI to combat cart abandonment. The retailer partnered with Metrical to deliver personalized content—such as discounts—to improve cart conversions as well as the overall customer experience.
• Lily AI, which counts Macy’s, thredUP, and The Gap as clients, raised $25 million in Series B funding for its AI-powered algorithms that connect shoppers with the products deemed most relevant to them, per TechCrunch.

The big takeaway: Implementing AI and automation can be complicated, especially across large organizations with many moving parts. At the same time, these technologies help retailers deal with issues ranging from rising fulfillment and labor costs to inventory buildups caused by rapid changes in consumer demand.

While large-scale transformations like Levi’s BOOST engine may be an impossibility for many retailers, moves like Dick’s Sporting Goods’ personalization initiative or Panera’s AI-powered drive-thrus can have just as big an impact on bottom lines. As eMarketer principal analyst at Insider Intelligence Patty Soltis noted, these moves allow companies to learn “what inspires behavior, which is more valuable than a survey or other forms of feedback.”

Go further: Check out our forecast on robotic and autonomous systems.

This article originally appeared in Insider Intelligence's Retail & Ecommerce Briefing—a daily recap of top stories reshaping the retail industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.

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