Demystifying AI: Negative AI headlines may be obfuscating the truth behind AI’s real potential for retail and the ways operational AI can automate processes

4 minute read

Artificial Intelligence (AI) dominates today’s news cycle, and for good reason. It is both a catalyst of major change in numerous industries, and a technology upon which significant negative sentiment is growing around its future applications. But we must be careful not to consider ‘artificial intelligence’ as a blanket term, because it simply isn’t. Putting the specifics of their programming aside, it’s safe to break today’s AI tools into two key types, each with its own focus and methodology.

Headline-grabbing applications like ChatGPT and DALL-E are made possible through what’s called generative AI. These make use of large language models (LLMs), which utilise a deep catalogue of data drawn from all of history, including sources like books, encyclopaedias and the general web. These can then be prompted with natural language to create new text-based content, realistic-looking synthetic data, or digital images like generative art.

The controversy surrounding such systems stems from their ability to create potentially undetectable forgeries like deepfake images and video, documents which look authentic but may contain misleading information – or, worse, the perceived potential of AI-powered chatbots to generate and spread disinformation[1]. Technologically rapid development in a context of a lack of industry guidelines and government regulation has sown the seeds of deep-rooted suspicion. Used correctly, though, generative AI has numerous practical business applications in industry, commerce, education, and healthcare provision. But today’s generative AI also has significant limitations.

The power of operational AI for retail

When business data is the focus, as it tends to be when looking to optimise retail processes, we turn to what we’ll call operational AI. This kind of model does not generate new or original works. Instead, operational AI is focused on analysis and classification of the data it is given. It deals in absolutes, applying its algorithms to live, true figures, and outputting valuable real-world data in return – the kind of data which can enhance the efficiency and performance of retail activities. AI can help automate processes, simulate marketing strategies, and optimise pricing and promotions.

Operational AI does not dominate the headlines in the same way as engines like ChatGPT, but countless organisations have already deployed it to forecast demand, optimise prices and benefit from predictive sales insights. Indeed, AI’s use in business analytics has existed for the best part of a decade. Over that time, much has been learned, which means its power is increasing all the time.

Increasing processing power and advances in AI science and technology have led us to the point at which existing AI models can be re-platformed and powered up, creating the opportunity to run many different algorithms concurrently. The data we have gathered about the way such models work leads to new, advanced models. These are even more adept at automatically predicting trends, aiding in sales planning, providing immediate shop-floor feedback, and optimising prices to meet customer desires – all while pre-set guard rails and parameters ensure the accuracy of the AI-powered system’s recommendations.

In the next few years, the potential of retail AI will grow further still. Planning, negotiations and pricing work, which today might require many staff and countless hours to administer, could be automated and optimised by these smarter, more reliable, more accurate AI tools (an ensembled use of several different AI algorithms) that require only minimal oversight.

AI can improve efficiency significantly. The models can incorporate customer, pricing, promotions, loyalty, advertising, stock and assortment data – and the models then support algorithms that provide the kind of insights that ensure exceptional retail performance through the optimisation of prices, promotions and the go-to-market strategy. The impact will be felt from the head office to the shop floor, and from the distribution centre to the store stock room.

Generative AI’s negative headlines may be off-putting, but it is clearly only one side of the AI coin. Embracing the power of operational AI is the way to discover incredible and immediate profitability gains, find new efficiencies through automation, and master marketing strategy. Given the pace of development, the potential of tomorrow’s retail AI models will be even greater.

[1] https://edition.cnn.com/2023/05/01/tech/geoffrey-hinton-leaves-google-ai-fears/index.html

Read more in our article featured in Modern Retail.