How AI is Transforming Retail with Help From Innovative Startups

By Sara Trontelj

The world of retail is changing even faster now than ever before. The e-commerce effect continues to push brick and mortar stores to keep up with the new era of retail. Brands are becoming retailers, retailers are becoming brands, and Amazon has made it clear to competing companies that business realities can change at any moment. This, compounded with the rising issues surrounding the COVID-19 pandemic, is pushing retailers to rethink their business models.

The shift to e-commerce has not been easy for retailers. Although the phenomenon has become supremely convenient for the consumer, many brands still struggle trying to make an impact in this space. One of the biggest difficulties is losing their grip on customer service, it becomes a challenge to reach and serve their consumers in a meaningful way. 

To stay competitive and customer-focused, brands must incorporate the latest tech. And artificial intelligence will play a key role in this.

How AI is Changing Retail

Retail brands are looking to innovative startups to help them gain a competitive advantage in the space. We see this clearly illustrated in a report done by CB Insights, which points out that AI startups seeking to help retailers raised almost $2.7B across 564 deals between Q1’13 and Q2’19. 

The report states, “Retail is under pressure to crack the AI code…Corporations in every industry are scrambling to adapt and integrate artificial intelligence into their products — and retail is no exception.”

AI is transforming the retail experience. It’s collecting data in-store and online, revamping the checkout experience, predicting which products will sell better than others, enabling just-in-time supply chain management, improving supply chain transparency, and much more. 

Automating Product Decision-Making

Artificial intelligence and deep product learning are now capable of automating product-related decision making and workflows. This is possible using AI that can read, see, hear and understand consumer feedback at scale. For example, Plug and Play portfolio startup Commerce.AI does this for brands and retailers such as Walmart, Coca-Cola, Rakuten, USPS, Chanel, Midea, Netgear, Cisco and more.

Using AI for market intelligence, you can uncover market opportunities to build or market the right product.

According to Andy Pandharikar, Commerce AI’s CEO, “Using AI for market intelligence, you can uncover market opportunities to build or market the right product. With the amount of unstructured product feedback data doubling each year and consumers increasing reliance on this data for their own purchasing decisions, retailers have to use an AI-driven solution to know which products they should be putting on the shelves and which ones to exclude.”

The ability to predict which products will become bestsellers isn’t the only capability retailers have gained from AI. New tools and platforms designed by innovative AI-based startups are also enabling retailers to enhance their marketing efforts and significantly improve their customer service.

AI-Enhanced Marketing and Customer Service

The way a business engages with its customers can either spell success or failure for that company. Communications must stay pertinent at all times, and marketing has to be effective on the individual level. It’s also important for businesses to find innovative ways to make shopping and decision-making easier, and to be available 24/7 for customer questions and complaints on a global scale. 

This is of utmost importance especially now, with sales shifting completely online, retailers are dealing with an unprecedented influx of customer requests, questions, and complaints they need to deal with fast. 

Here’s how AI helps businesses meet these needs.

Marketing Campaigns Are More Precise than Ever Before

ai in retail marketing campaigns

AI algorithms help retailers launch highly targeted marketing campaigns. Today, the most competitive marketing is fueled by big data and orchestrated by AI. Advanced algorithms automatically ensure that every ad is fine-tuned for each customer who’s exposed to it.

The best messaging is personalized based on customer location, habits, past spending preferences, and much more. Such targeted marketing delivers only what’s relevant to customers, which boosts customer loyalty and retention.

Chatbots: Valuable Conversations Driven By AI

ai in retail chatbots

AI gives retailers chatbot capabilities to engage more of their customers but with fewer human employees. For larger retailers, chatbots manage thousands of inquiries at once. Such automated customer engagement enables customer service reps to focus on more urgent customer needs while lower-level cases are handled by the AI.

Virtual Fitting Rooms Are Not Science Fiction

ai in retail virtual fitting room

AI makes virtual fitting rooms possible. Trying on several outfits can be time consuming and inconvenient. But retailers are now offering customers an almost Star Trek holodeck-like ability to see themselves in an outfit without trying it on. 

Shoppers can touch a smart mirror’s interface to see options like colors and styles. Health-and-beauty retailers are also offering such capabilities so customers can virtually experiment with an unlimited array of cosmetics. This is extremely valuable now that consumers cannot visit stores.


These AI-based capabilities are, of course, simply the tip of the iceberg. But the bottom line is clear: The key to surviving and thriving in this new retail landscape is to leverage the latest technology. It is only through the steadily advancing capabilities of AI and machine learning that retailers will stay relevant and competitive and get through these unprecedented times and beyond.