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Why retailers turn to big data and AI

May 29, 2018

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Swedish clothing-retail company Hennes & Mauritz AB (H&M) is increasing its use of big data and artificial intelligence in an effort to reclaim its customers, after experiencing one of the worst sales slumps in its 71-year history. The retailer said that profit sank as a result of the crisis that lasted for ten straight quarters. The company is facing a series of problems common within the industry: a sudden increase in online shopping has led to a drop in common shopping, and online startups are becoming more powerful opponents than it was ever expected. According to the Wall Street Journal, H&M will renounce its longstanding tactic of supplying its worldwide shops with similar goods. Instead, the retailer plans to use big data and AI to customize goods delivered to individual stores around the globe.

Designers vs. big data and AI

Fashion retailers everywhere rely on designers to anticipate what clients want to buy and H&M is no exception. But the company’s performance during 2017 proved that not all physical stores were tailored to local needs. H&M decided to analyze store receipts and returns, but also blog posts, search engines, and other sources, in an effort to efficiently develop its supply and demand response and markdowns. Some H&M stores have already started adapting to the new technology and, as a result, their merchandise is tailored according to local customers’ needs. “We will invest even more in advanced analytics and AI. We see huge potential across the board here – in everything from assortment planning to supply chain and sales,” Karl-Johan Persson, CEO H&M, stated. Even though fashion retailers have already turned to new technology to attract new customers, H&M’s plan to use big data and AI to customize merchandise in each store remains largely untested in the retail fashion industry.

Reliable technologies for retail and fashion

H&M is not the first fashion retailer that turns to technology, nor is it the first to experience problems due to an increase in online shopping. Zara started using robots for online sales with in-store pickup to ensure a fast and well-organized pickup process for customers. This allowed the retailer to use its current stores as appropriate pickup and return points for online clients, as well as traditional ones. Walmart has taken things to a new level by using robots not only for online purchases and pick up in store sales but also for shelf-scanning inventory supervision and other actions. “This combination of people and technology is helping make our stores more convenient and easier to shop, ensuring that products are available when our customers want them. It’s just another example of how we’re using technology to save our associates and customers time,” Walmart stated on their official blog. As more and more actions are automated with the use of robots, retailers may soon replace their human employees. “Our entire industry will be operated by AI and robots, not humans,” predicted the chief executive of Chinese e-commerce company JD.com, Richard Liu.

The costs of automation

While H&M is planning to use big data and artificial intelligence in an effort to reclaim its customers, other retailers have already cut down jobs all over the world in favor of automation. Shop Direct reported that almost 2000 warehouse workers may lose their jobs as the company resorts to automation and Marks & Spencer made a similar statement concerning 450 jobs, as the retailer continues to develop its distribution centers. As many jobs will most likely disappear in the near future, US policies for technology-driven job displacement may become necessary. One of the goals of the legislators that envision the future of work should be to ensure that US citizens don’t just lose their jobs to automation, but are also prepared to find new jobs in other industries. While neither companies nor policymakers can perfectly predict the economic future, both can prepare by taking action in the present.

Retailer H&M has turned to big data and AI after experiencing one of the worst drops in sales in its history. Companies all over the world are rapidly turning to big data, AI and automation to save time and money, while their expensive human employees may be forced out of the retail sector soon. Research suggests that many people employed in the US are at risk of being replaced by machines in the future, so policymakers may need to prepare for this possibility. As retailers adapt to automation, big data and AI, so should assistance programs and policies.