We’re at a critical moment in the evolution of physical retail. It’s no secret that ecommerce has steadily become more and more dominant over the last few years – with sales increasing from $1.8 trillion in 2016 to $4.9 trillion in 2021.

This growing preference towards ecommerce is reflected in the proportion of retail sales made online, which stood at 25.3% in January 2022. That’s 5.5% higher than before the pandemic (19.8% in February 2020), taking revenue away from brick-and-mortar stores and illustrating the behavioural shift that has taken place among consumers.

Despite these trends, physical stores still have an important role to play in the future networks of omnichannel retailers. It all depends on how these stores function and what retailers do to improve or transform the customer experience.

That’s why so many are putting the focus on digital innovation, which has become part and parcel of retail survival. The likes of convenience chain 7-Eleven and food retailer M&S have recently incorporated digital solutions to boost efficiencies and improve the customer experience. But we’re only just at the beginning of this innovation wave. There are several current and future opportunities available for those retailers ready to pave the way in the next era of retail.

Today’s challenges

Whether through self-checkout theft or underage purchasing, in-store crime is a major problem facing retailers and supermarkets. In the UK, one in five shoppers admit to regularly stealing items while using self-scanning checkout stations, while 50% of retailers say they’ve seen an increase in shoplifting since the pandemic.

AI-based computer vision tools are helping retailers fight crime and fraud more effectively. For example, these tools can be harnessed to spot suspicious in-store behaviour, identify serial offenders, and even estimate the age of customers to prevent underage purchases.

One London-based convenience store was able to cut shoplifting losses by 90% by using AI-powered cameras that that can tell what people are putting in their pockets. The technology connects to existing cameras, automatically monitoring potential shoplifting activity and sending a short video to staff when it detects any suspicious gestures or movements that indicate a shopper is attempting to steal an item.

In terms of self-checkout theft/fraud – which costs retailers billions of pounds every year – shoppers employ several tricks to fool self-checkout machines. These include scanning expensive items through as less expensive ones based on their weight and putting items in their bag without scanning them. Retailers can prevent this by implementing computer vision to work alongside traditional weighing scale systems.

The technology monitors what customers are scanning through self-checkout machines and how they’re using the weighing scales. If a customer tries to weigh a different item, the computer vision can recognise this in real time and prompt them to try the correct option – thereby preventing customers from tricking the system.

Although these are valuable solutions to some of today’s prominent retail challenges, they’re scratching the surface of AI and computer vision’s potential to transform the sector. Even more value is available for those retailers that implement AI to deliver smarter systems, more efficient operations and an unparalleled customer experience.

Tomorrow’s opportunities

The first thing most people think of when considering the next era of retail is boundless stores, an innovation that is already being spearheaded by Amazon through its Amazon Fresh stores.

These stores don’t have any physical check-outs. Instead, customers can simply browse the store, select the items they want to purchase, and leave without ever having to interact with staff or payment systems. Computer vision technology monitors the entire store in real time, detecting which items customers select and automatically charging them through a connected bank account.

Offering such a seamless and efficient way to shop would help encourage in-person visits and could be integrated into broader retail solutions that transform the customer experience. For example, retailers could provide customers with personalised recommendations based on their purchase history, or use customer journey data to optimise store layouts. They could also focus on operational efficiency, using AI to optimise inventory management or automatically scan products to detect damaged packaging.

There are many more potential applications of AI and computer vision. The starting point for retailers is to identify where they are in their digital journey. They must take the time to understand their readiness for computer vision – such as whether they have access to high-quality data – identify the most valuable use cases and map out the biggest future opportunities.

They must then partner with a company that can guide them on their AI journey. The right partner will be one that understands how to extract the most value from data and technology projects, and has the expertise to deploy solutions that will have a tangible business impact. Only then will retailers be in a position to start building their competitive advantage in the next era of retail. Find out if you’re ready for the next era of retail with a free maturity assessment to see how Computer Vision can improve your business.

Calum Fitzgerald, Founder, Dae.mn

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