Embracing AI: A Culture Change in Retail
Retailers have been facing numerous challenges in recent years due to a confluence of factors. The rapid rise of e-commerce giants, high operating costs, and changing consumer preferences have created a highly competitive and uncertain landscape. Traditional brick-and-mortar stores have struggled to adapt to the digital era, leading to declining foot traffic and sales. Additionally, supply chain disruptions, rising operational costs, and labor shortages have further strained retailers’ ability to maintain profitability. To survive and thrive, retailers must continually innovate, invest in technology, and provide exceptional in-store experiences to meet the evolving demands of today’s consumers.
There is a growing consensus that artificial intelligence (AI) can be a powerful ally in addressing the array of challenges faced by retailers. In a recent KPMG study, Thriving in an AI World, 90% of retail business leaders indicated that their employees are prepared and have the skills for AI adoption.
“Retailers have been investing significantly in their digital transformations to respond to customer expectations and thrive in the new reality, and given the potential benefits, AI and analytics brought to life by improved technologies are indispensable parts of their business strategy.”
- Matt Kramer, national consumer and retail sector leader at KPMG.
The right AI platform can be used to optimize how data is used to improve the retail establishment — connecting complex data to simple answers that drive better business, optimizing every aisle, display, product placement, and every facet of how to run a store. Ultimately elevating the customer experience by transforming the store, improving their bottom line, and driving operational efficiency.
However, for AI to truly flourish and revolutionize the retail sector, it necessitates more than just technological implementation; it demands a cultural metamorphosis within retail organizations. So what role does cultural change in retail play in embracing AI to help propel their business toward transformation?
First, it’s important to define what is meant by cultural change within an organization. Gartner defines cultural change as “the process in which an organization encourages employees to adopt behaviors and mindsets that are consistent with the organization’s values and goals”.
A culture of innovation is a key driver for AI adoption in retail. It encourages employees to explore new technologies, experiment with AI applications, and propose creative solutions. Retail executives need to create a culture where employees feel empowered to suggest and utilize AI-driven improvements, knowing that their ideas will be valued and supported. If their desire to utilize AI goes unrecognized, the consequences could be very detrimental to the retail itself. Nitin Mittal, a Global Management Consultant at Deloitte, stated in an interview with Harvard Business Review:
“…what is being observed in many of these organizations is that the pressure to move ahead at speed and with skill is coming from the employees themselves. If we don’t provide them these particular tools, and we don’t provide them all the ways of augmenting themselves through generative AI, they are going to find their own ways, and that could lead to unfortunate circumstances where they end up using, let’s say, open source models and start leaking an organization’s data through the usage of those open source models.”
The adoption of AI necessitates a fundamental shift in mindset within retail organizations. Traditionally, retail has been built on tried-and-true methods, with decisions often driven by instinct and experience. AI, on the other hand, thrives on data-driven insights. Retailers must transition from relying solely on intuition to embracing the power of data analytics and AI algorithms to inform decisions. This will involve collaboration across all departments. Breaking down silos and fostering cross-functional teamwork is essential for successful AI integration. Retail leads will need to invest in training programs to upskill employees in AI-related areas, ensuring that they can leverage AI tools effectively. A culture that encourages resilience, problem-solving, and learning is crucial for overcoming challenges that may arise from implementing a new AI platform.
In a recent article from Forbes titled “Why Organizations Routinely Fail To Realize The Full Potential From Their Data Science Efforts”, poor integration of data science in the product teams and across the organization is one of the main pitfalls discussed; shedding light on why an AI solution fails to deliver real value to stakeholders.
“Organizational embeddedness of data science is key, making sure data science permeates throughout the company and across departmental boundaries.” Forbes Author Hannah M. Meyer, Former HBS & HSG researcher, and a Wiley-published author
It’s no surprise that leadership plays a pivotal role in driving culture change. Retail executives must champion the adoption of AI and set a clear vision for how it will benefit the organization and their employees. Their commitment to AI initiatives will inspire confidence among employees and stakeholders. It will be imperative that they encourage a culture of flexibility, innovation, and continuous learning, reward people who are adopting the new technologies, and provide support and resources for those who are struggling, including those who are afraid of these changes.
One important factor in determining how well AI is embraced by an organization and its employees is trust. Trust that the AI was developed by taking into account all of the specific retailer’s pain points and goals. Therefore, the ability to customize and fine-tune an AI platform to meet the unique challenges faced by different retailers is key. Another issue around trust is the willingness of front-line employees to take orders from an algorithm, as illustrated in this recent article from Harvard Business School Working Knowledge, called “What Makes Employees Trust (vs. Second-Guess) AI?”. However, research shows that:
“…knowing less about the algorithm but following its advice based on trusting the people who designed and tested it — can lead to better decision-making and financial results for businesses”. Article from MIT Management Sloan School
It should be mentioned that while AI is a catalyst for creating digital transformation at retail, it will never be a substitute for actual humans. Success relies on the synergy between AI-driven efficiency and human qualities like emotional intelligence, adaptability, creativity, and building trust with customers. AI can enhance data analysis but lacks the emotional intelligence and interpersonal skills that human sales associates offer.
Human judgment, creativity, and adaptability are crucial in retail’s complex challenges. Building trust and lasting relationships with customers requires personal connections, especially in situations demanding ethical decisions or human judgment, from resolving disputes to managing incidents in the store. The social aspect of shopping and personal interactions are integral to the customer experience, challenging AI to replicate.
Retailers need to continuously monitor their store’s performance, adapt to changing market conditions, and be responsive to customer preferences and feedback to effectively address these issues and remain competitive in the retail industry. While AI is reshaping the retail landscape, offering unprecedented opportunities for growth, efficiency, and customer satisfaction, its successful integration requires more than just technology; it demands a culture change within retail organizations. Embracing AI involves shifting mindsets, fostering innovation, promoting collaboration, and maintaining a customer-centric focus. It’s a journey that requires adaptability, resilience, and strong leadership.
ABOUT ARTELI
Arteli is the first advanced artificial intelligence and machine learning platform to reinvent retail by transforming analytics, blending the physical with the digital, for brick-and-mortar showrooms. Created to function as the central hub for retail executives, Arteli connects executives with actionable insights, propelling their business toward transformation by improving their bottom line, and driving operational efficiency. Arteli aims to reinvent in-store retail by revitalizing in-store shopping for people’s largest purchases. It’s not merely data; it’s comprehension, informed decision-making, and, ultimately, the catalyst for achieving revolutionary outcomes at retail.
