ai and iot in retail: its impact on retail value chain & … · 2020. 9. 2. · iot is...

http://www.iaeme.com/IJARET/index.asp 766 [email protected]

International Journal of Advanced Research in Engineering and Technology (IJARET) Volume 11, Issue 7, August 2020, pp. 766-777, Article ID: IJARET_11_07_075

Available online athttp://www.iaeme.com/IJARET/issues.asp?JType=IJARET&VType=11&IType=7

ISSN Print: 0976-6480 and ISSN Online: 0976-6499

DOI: 10.34218/IJARET.11.7.2020.075

© IAEME Publication Scopus Indexed

AI AND IOT IN RETAIL: ITS IMPACT ON

RETAIL VALUE CHAIN & SHOPPERS’

BEHAVIOUR

Dr. Samarth Singh

Associate Professor, Management Education & Research Institute,

Affiliated to GGSIPU, Delhi, India.

ABSTRACT

Retail sector in India has started leveraging new age technologies like AI and IoT

resulting in improved efficiency, reduced cost and better customer experience. ML,

NLP, Data Science, Computer vision and Conversational AI are widely used AI

technologies finding their usage in retail value chain across planning, procurement,

production, distribution, operations, customer service, sales and marketing. Similarly,

IoT is revolutionizing every aspect of Retail be it inventory management, real time

promotions, shelf Management , optimization of store layouts. It is not only retailers

but consumers also are using technology like smartphone to augment their shopping

experience and make informed decision .The present paper is divided into two part.

First part explores various new age technologies like AI and IoT leveraged by retail

sector and their usage in retail value chain .Second part includes technology usage

by shoppers covering an empirical study on shoppers’ behaviour using smartphone

in Delhi.

Keywords: IoT, AI, Retail,shopping behaviour, retail value chain

Cite this Article: Dr. Samarth Singh, AI And IOT in Retail: Its Impact on Retail

Value Chain & Shoppers’ Behaviour, International Journal of Advanced Research in

Engineering and Technology (IJARET), 11(7), 2020, pp. 766-777.

http://www.iaeme.com/IJARET/issues.asp?JType=IJARET&VType=11&IType=7

1. INTRODUCTION

Retail sector in India is expected to witness a growth of approximately 11 percent CAGR in

2021with and advancement in technology adoption (Nasscom 2020). The sector currently 8th

in the world contributes nearly 8 % to GDP and provides employment to nearly 8 % of Indian

Population (Nasscom 2020). The sector has started leveraging AI though it has been using

technologies like virtual reality, augmented reality, internet of things, robotics.AI makes these

technologies more important by feeding them with data and thus helps the retailers in decision

making by providing real time information. Similarly IoT helps retailers in smooth decision

making by streamlining information flow through connecting machines and people. Retailers

AI And IOT in Retail: Its Impact on Retail Value Chain & Shoppers’ Behaviour


worldwide are investing heavily in IoT to transform their business, improve efficiency and

reduce costs. With IoT technologies, retailers can combine and analyze data from different

sources to develop deep insights about customers, so that they can provide better service, and

always have the right products in the right place at the right time.Technology is not only re-

enegising retailers but also shaping shoppers’ behaviour . Technologies like smartphones are

driving buying behaviour as never before. Technological developments are providing new

opportunities for influencing shopper behaviour (Shankar.V. etal 2011).Shoppers are using

smartphones for searching products, coupons, which is influencing their perception .

Technology has given power to both marketer to influence shopper buying cycle and the

shoppers who have increased control over access and use of information than they had it in

past .

The present paper is divided into two part. First part explores various new age

technologies like AI and IoT leveraged by retail sector and their usage in retail value chain.

Second part includes technology usage by shoppers covering an empirical study on shoppers’

behaviour using smartphone in Delhi.

2. NEW AGE TECHNOLOGIES - AI AND IOT LEVERAGED BY

RETAIL SECTOR AND THEIR USAGE IN RETAIL VALUE CHAIN

2.1. AI in Retail Value Chain

ML, NLP, Data Science, Computer vision and Conversational AI are widely used AI

technologies in Retail (Nasscom 2020).

Table 2.1. exhibits the usage of various AI technologies.

AI technologies in Retail Value Chain Usage

Conversational AI It is used in Chatbots / Voicebots to increase

experiences of customers along with prepurchase and

post-purchase engagement

Machine Learning To create simulation & model to predict output on the

basis of variables like location, sales etc

Data Science To create recommendation engine by analyzing

consumer behaviour both online or offline

Natural Language Processing Handle customer conversations on the system and

respond to their queries

Computer Vision Monitors customer actions, tag objects & analyze

interactions to develop customer insight

Across the Retail Value Chain AI is used in various retail functions for real time smooth

decision making Table 2.2

Table 2.2. Adapted from Nasscom 2020 –AI Pervasivenes in retail

In Planning & Procurement i) Stock replenishment

AI helps in analyzing various data like sales, vendors etc

and thus help in predicting demand and automating orders

of the products.

ii) Catalog management

Image recognition solutions powered by AI help in tagging

and categorizing product catalogs

iii) Assortment rationalization

Application of ML on various data like purchases, returns,

loyalty card, search results, help in customizing retail

assortments and reducing stock keeping units

Production i) Generative Designing

Dr. Samarth Singh


Designing tools powered by AI & ML offer self-learning

generative design solutions

ii) Quality control

Computer vision helps in improving quality by identifying

defects

iii) Predictive maintenance

AI powered Predictive tools help in identifying potential

breakdowns, schedule service etc

Distribution and logistics i)Logistics network management

AI powered Logistics network management help in

optimizing route and schedule vehicles.

ii)Automated warehouse

Robots powered by AI and having visual recognition help

in automating picking and packing products

iii) Supply chain optimization

Image recognition powered by AI coupled with IoT devices

not only help in preventing food waste due to temperature

variations but also help in predicting products shelf life of

products

Store Operations

i)Returns management

AI-enabled predictive analytics powered by AI help in

examining past transactions of the customers like sales,

searches etc and thus help in predicting their patters to buy

and reducing product returns

ii) Self-checkouts

Deep learning,Computer vision and sensor fusion help in

self-checkouts in a retail outlet

Sales and Marketing i) Optimize marketing campaigns

Deep learning algorithms powered by AI help in

personalising recommendations on the basis of data such as

user behavior etc.. It also helps in predicting consumer

intention regarding purchase along with purchasing

behavior and thus help in optimizing marketing campaigns

ii) Customer segmentation

Data-driven micro-segmentation is possible due to advance

analytics on earlier purchases,channel of purchase and time

of purchase etc.

iii) Sales forecasting

Predictive analytics powered by AI helps in sales

forecasting by leveraging past data of sales,comparisons

within industry along with economic trends

Customer Service i) Chatbots

Chatbots powered by NLP could improve engagement of

customers by providing necessary information related to

product, payment, recommendation etc.

ii) Immersive shopping experience

Immersive media driven by AI along with AR/ VR can

provide virtual trial rooms and thus increase shopper

experience

iii) Visual searches

Image recognition powered by AI allows customers to

visually search products in retail outlet using image and

notify similar products in the outlet



2.2 IoT in Retail Value Chain

IoT is revolutionizing every aspect of retail be it inventory management, real time

promotions, shelf Management , optimization of store layouts etc .

2.2.1. Inventory Management and Dynamic Merchandising

Retailers face a major challenge of inventory management. IoT helps to deploy sensors like

RFID tags, on products and thus help in realtime tracking. RFID tags on inventory

communicate via cloud to the retailer, thereby helping retailer to analyse the trends and sales

data to anticipate proper stock levels. Moreover customer finds several options to make a

purchase resulting in strong positive impact on customer perception of retailer

2.2.2. Intelligent Digital Shelving

Intelligent digital shelving grab customer attention by playing eye-catching video marketing

various retail products and promotions which helps in increased sales. Brand and price

promotion messaging on a digital signage can generally produce a sales, grabbing customer

attention for new product launches. Further, it helps to reduce operating cost as it eliminate

printed price labels.

2.2.3. Shelf Compliance

Automated shelf compliance solutions use the latest digital image recognition technology to

ensure product placement on store shelves complies with planogram models. At the same

time, retailers can increase revenue by reducing lost sales due to out-of-stock items

2.2.4. Optimizing Store Layouts

Bluetooth beacons inside the retail outlet can track smartphones and record purchasing path

which can help in optimizing layout and provide product or promotional information.

2.2.5. Increased Sales

Retailers use Smart Mirror functionality to read the RFID tags on the hang tags of the product

and thus when customer tries a dress in front of mirror the app communicates with retailer

data centre and thus determines other items that pair with dress. The smart mirror display

those items giving shopper an impression as if he is trying the items. If they are liked the sales

associate is intimated resulting in cross selling and multiple selling.

2.2.6. Enhanced reach through Next Generation Vending Machines

IoT has helped in creating next generation vending machine. These machines can perform

various activities such as monitor level of its inventory, can vary prices based on demand and

inventory,enable predictive maintenance, monitor products condition and can reduce price

accordingly and can also access customer’s past purchases and recommend product right.

2.2.7. Personalized Product Information

Intelligent mobile advertising solution has helped retailers by displaying customized

advertisements to by coalescing mobile data, internet and social media browsing. Further,

consumers can also get customized information based on their interest and thus help in

efficient shopping.

2.2.8. Realtime Promotions

Smartphones are an important key part of IoT. Smartphones are used for sending realtime

promotions based on customer’s shopping history, personal preferences, location etc.

Dr. Samarth Singh


2.2.8. Social Media Marketing

Intelligent social display screen are used by retailers for entertaining customers. Customers

take their pictures when they see themselves on such screens which is posted online. Thus

Retailers have large number of photos of happy customers endorsing their brand.

2.2.9. Fleet Management

GPS devices have been used for years to track movement of delivery trucks. IoT helps in

tracking movement of delivery trucks more efficiently. It helps in deciding routes for delivery,

recommends appropriate speed, adjusts storage temperature etc. This leads to reduced fuel

costs, accurate lead time, theft and loss etc

The second part of the research aims at studying technology usage by shoppers.

3.0 REVIEW OF LITERATURE

Shopper behaviour especially with technology like smartphone, along the path of purchase

and relevance of its understanding has been studied by few researchers.

Dholakia,N and Sinha,P.K.(2005) observed shoppers’behaviour in Ahmedabad in both

traditional and new formats .They revealed that in case of traditional format shoppers

generally try to get the feel of product and refrain from browsing. They scan the outlet and

generally do ask for an alternative from retailers. In case of new formats, shoppers browse,

look for various brands ans are even willing to deviate from their list. Infact,some shoppers

make mobile calls to seek advice from family members.

Verhoef, Neslin, and Vroomen (2007) mention that Shoppers generally make a visit to

retailer’s websites befor making a purchase

Kalyanam, Lal, and Wolfram (2008) mention that technologies like RFID, VR, and

mobile technology have provided increased opportunities to retailers to influence shopper

decisions

Mckinsey report ( 2008) Indian shopper do not travel for more than 15 minutes for

regular shopping .They like to see the best brands even if they are not ready to buy them

.They want to check prices within and across stores.

A New York Time article by Rosenbloom,S. (2010) mentioned that retailers are looking

forward to offer real time coupons while shopping, They would offer loyalty cards on

smartphones. Even shoppers are comparing prices & scanning information using their

smartphones.

Huang et al. (2011) show that targeted mobile app promotions based on projected

shopping path of shopper inside store increase shopping time and path length and thus

increase impulse purchase by over 20 percent.

Smith, A. (2013) reveled that while inside store shopper use smartphone to seek shopping

advice from friends and family followed by looking for product reviews and price

comparisons.

4. OBJECTIVES

The study aims to study shoppers’ behaviour using smartphones

5. RESEARCH METHODOLOGY

The research is descriptive in nature. 500 shoppers visiting organized retailers in delhi are

chosen as respondents using convenient sampling. The data is collected using a structured

questionnaire using survey method .The data is analysed using statistical techniques.



6. RESULTS AND FINDINGS

6.1 Smartphone behaviour before visiting store

Shoppers, regarding their behaviour about use of smartphone before making a visit to retail

store reveal (Table 6.1) that majority of them use it to receive discount offers and coupons to

redeem them at store. Following this, smartphones have been used to conduct research about

various products, to receive promotional messages of the retailer, to locate a nearby store in

decreasing order of usage. Further, Shoppers least used their Smartphones for QR scanning to

know more about products.

Table 6.1 Smartphone behaviour before visiting store

N Mean Std. Deviation

I do not use smartphone for shopping 500 1.3840 1.17955

I use smartphone to locate nearby store 500 3.0720 1.07384

I use it to receive discount offers and coupons to redeem at store 500 3.2120 1.17721

I use it for QR scanning to know more about products 500 3.0360 .99029

I use it to receive sms of retail promotions 500 3.1320 1.11941

I use it to research about different products 500 3.1880 1.09684

A detailed study of shopper’ smartphone behaviour before visiting retail store highlight that

almost 91 percent shoppers use smartphones in shopping (Figure 6.1)

Figure 6.1 91 percent shoppers


Dr. Samarth Singh


Similarly (Figure 6.2) highlight that almost 21 percent shoppers frequently use

smartphones to locate nearby store. However almost 20 percent shoppers never or rarely use it

for locating stores.

Figure 6.3 highlight that almost 31 percent shoppers frequently use smartphone to receive

discount offers and coupons to redeem them at store. However almost 20 percent shoppers

never or rarely use it for receiving discount offers and coupons.


Similarly result as depicted in figure 6.4 highlight that almost 25 percent shoppers

frequently use smartphone for QR scanning to know more about products.


Result (Figure 6.5) highlight that 26.4 percent shoppers frequently use smartphone to

receive SMS of retail promotions. However almost 21 percent shoppers rarely or never use it

for receiving retail SMS.



Figure 6.5 26.4 percent shoppers

Results (Figure 6.6) highlight that almost 26 percent shoppers frequently use smartphone

for researching about different products. However almost 15 percent shoppers do not use it for

product researching.


6.2 Smartphone behaviour inside store

Regarding use of smartphone inside store the results reveal that majority of shoppers use it for

accessing promotional coupons which they can redeem inside the retail outlet. Following this,

smartphones are being used for checking online reviews about the product , barcode scanning

to know more about product, to check online the prices of competitors, scanning barcode for

comparing other retailers’ prices, and checking price on retailers’ mobile site in decreasing

order. However Smartphones’ usage for making an online purchase at other retailer having

had entire information inside the store was accorded least importance (Table 6.2)

Dr. Samarth Singh


Table 6.2 Smartphone behavior inside store

N Mean Std.

Deviation

Access promotional coupons to redeem them at store 500 3.1320 1.09039

Check for product reviews online 500 3.0740 1.15377

Check competitors pricing online 500 2.9560 1.08647

Check prices on retailer's mobile site 500 2.6600 .97278

Scan bar code and compare prices with other retailers 500 2.9480 1.07313

Scan the bar code to know more about products 500 2.9960 1.10200

Make online purchase having had the information in store 500 2.5660 .94203

A detailed study of shopper’ smartphone behaviour inside the store highlight that 25.2

percent shoppers frequently use smartphones to access promotional coupons to redeem them

at store ( Figure 6.7)


Similarly Fig 6.8 .highlight that almost 25 percent shoppers frequently use their

smartphones inside store to check product reviews online.


Figure 6.9 highlight that 20 percent shoppers frequently use their smartphones to check

competitors pricing online.




Figure 6.10 highlight that 14.4 percent shoppers frequently use their smartphones to check

price on retailer’s mobile site.


Figure 6.11 highlight that 21 percent shoppers frequently use their smartphones to scan

bar code and compare prices with other retailers.


Dr. Samarth Singh


Figure 6.12 highlight that almost 23 percent shoppers frequently use smartphones for

scanning barcode to know more about products


Result (Figure 6.13) further reveal that 7.2 percent shoppers frequently make online

purchase having gathered entire information inside the store.


7. CONCLUSION

New age technolies like AI and IoT is enabling retailers to transform their business. It is

helping retailers to optimise operational performance with real-time intelligence in various

areas of retailing- inventory management, intelligent shelving, personalized information,

optimizing store layouts, real time promotions etc. With these technologies, retailers have an

enriched access to customer insights thereby helping retailers in having the rights products at

right place at right time resulting in increased profitability. Further, technologies like

smartphones are driving buying behaviour as customers have been using it for searching

products, coupons, reviews etc. Which is influencing their perception.



REFERENCES

[1] Dholakia, N., & Sinha, P. K. (2005) .Observation on observation in India’s dynamic urban

markets .Qualitative social research, 6(1).Retrieved from http://www .qualitative-

research.net/index.php/fqs/article/view/519/1125

[2] Huang,Y., Hui,S.,Inman,J.,& Suher,J.A (2011).The effect of in-store travel distance on

unplanned purchase with applications to store layout and mobile shopping apps. NA-

Advances in ConsumerResearch, 39,136-137.Retrievedfromhttp://www. acrwebsite.org/

volumes/1009723/ volumes/v39/NA-39

[3] Nasscom (2020) AI Pervasiveness in Retail.Retrieved from

https://www.nasscom.in/knowledge-center/publications/ai-pervasiveness-retail

[4] New york time (2010, Feb 27).Cellphones Let Shoppers Point, Click and Purchase. New York

Times. . Retrieved from http://www.nytimes.com/ 2010/02/27/ business/ 27shop.html? _r=0

[5] Shankar,V., Inman ,J.J.,Mantrala, M. ,Kelley ,E.,& Rizley,R. (2011). Innovations in shopper

marketing: Current insights and future research issues. Journal of Retailing 87(1), 29–42.

[6] Smith,A.(2013).In-store Mobile Commerce During the 2012 Holiday Shopping

Season.Retrieved from http://pewinternet.org/Reports/2013/in-store-mobile comme rce.aspx

[7] Verhoef, P.C., Neslin,S.A.,&Vroomen,B.(2007).Multichannel customer management:

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ai and iot in retail: its impact on retail value chain & … · 2020. 9. 2. · iot is...

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