What does retail mean? - Definition
In short, the term retail refers to the sale of goods and services directly to the end customer. It encompasses several sales channels, such as bricks-and-mortar retail, but also digital sales channels such as online shops. This means that not only smaller shops are considered here, but also large retail chains. The retail sector includes the point of sale, which is the interface between manufacturers and end customers. In most cases, goods are purchased in small quantities for personal use across various sectors in the retail sector. The sectors that can be categorised as classic retail include:
- Electronics
- Food
- Clothing and fashion
- Furniture
- Books and media
Having answered the question of what retail is, we will now look at how the technological development of AI systems, such as Google's Gemini, changed the retail sector forever in the 2020s.
How the retail sector was changed forever by AI in the 2020s
The transformation of the retail sector through generative artificial intelligence is - as of August 2024 - in full swing and has, in our view, brought about interesting changes:
- More accurate prediction of customer demand:
Of course, machine learning technology existed before the time of ChatGPT 4o and Google Gemini. But due to the fact that computer processors and graphics cards have become increasingly powerful since the early 2000s, the algorithms programmed according to this mathematical model are able to solve more complex tasks in the first place. The world has changed dramatically in recent decades and is now more interconnected than ever before, which is why predicting customer demand has become more difficult. The retail sector is therefore benefiting immensely from the increased performance of AI systems. - Personalisation of the shopping experience:
Similar to predicting customer demand, there were of course already approaches to personalising the customer experience in this area before the 2020s (individual product suggestions in online shops, partially individualised newsletters, etc.) - so what has changed? That is a legitimate question. We will answer it below. For example, by setting up an interface between your online shop and ChatGPT's API, you can ensure that customised descriptions are created for each customer. In addition, you can now fully customise your newsletter. Previously, you could only work with variables that could be replaced by the first name or surname, for example - and writing hundreds of personalised emails is hardly an option and not economically viable. This is where ChatGPT's API can be used to further automate email marketing by telling the AI which products the customer has already purchased and then informing them that a personalised email should be written based on this. With all these points, it is important to mention that the GDPR must of course be strictly adhered to. Please consult a data protection expert to avoid any missteps. - Dynamic pricing in real time:
As a retailer, you now also have the option of adjusting your prices in real time. A standard discount for regular customers is nothing new. But adjusting the price individually live so that it increases or decreases depending on the purchase history - this is new, for example, and only works via an interface to an AI. You don't have to leave the price adjustments purely history-based and can also make them interaction-based, for example.
We only wanted to mention a few points as examples, as it would go beyond the scope of this article to analyse all the new possibilities. Our aim was to show you that there are many approaches you can take to increase the turnover and success of your company with the help of AI. We hope to have given you some food for thought with these approaches and examples. In the following, we will show you how modern retail - especially online retail - is organised and how a warehouse management system can support you in a variety of tasks.
Retail – Best practices
Modern retail has become increasingly demanding in recent years because: Economic sectors with a high growth rate and profitability attract competitors like magnets. As a result, customers now have more expectations than ever before. “Can't I also order this on Amazon if the shop delivers more slowly?” Many customers often use the shop's website for information purposes only, and buy their product on Amazon just to receive the goods a little faster, while paying fees and in some cases even storage costs to Amazon because they do not have their own (Amazon Capacity Manager).
What has not been mentioned so far is the large number of returns, which is why some shops no longer take back goods free of charge. Our modest assessment is that competition will continue to intensify due to the rapid technological development of AI technology.
To meet customer expectations and remain competitive, you should consider the following points:
- Fast delivery times
- Competitive prices
- Use of AI to optimise the web shop (see previous chapter)
- User-centred design of the online shop (UX & UI)
- Digitisation of your logistics
At EIKONA Logistics, we are experts in your digital supply chain and can help you with the digitalisation of your logistics and implement a warehouse management system for your warehouse that is tailored to your needs. Contact us right now using the button below and we will get back to you as soon as possible.
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Summary
Retail means nothing other than the sale of goods or services directly to end customers. Retailers buy products in large quantities from manufacturers or wholesalers, after which they sell these smaller quantities on to consumers. Typical distribution channels include supermarkets, speciality shops and online shops. The retail sector therefore forms a bridge between end consumers and manufacturers. AI technology has turned the retail sector on its head in the 2020s and now offers you a variety of approaches that you can use to optimise the success of your online shop. Modern retail is demanding, but if you follow the best practices, which include digitising your warehouse or fast delivery times, then nothing stands in the way of your success.