Bhoomika Singh
The retail industry has always been an important part of the Indian economy. In terms of economic value, India’s retail industry is one of the top five retail marketplaces. According to Kearney Research, the sector is expected to grow at 9 per cent over 2019-2030, from US$ 779 billion in 2019 to US$ 1,407 billion by 2026 and more than US$ 1.8 trillion by 2030. Also, it’s embracing technology in a big way.
The Indian retail sector is at the vanguard of innovation as the country embraces technology breakthroughs, thanks to the revolutionary power of artificial intelligence (AI). SME Futures spoke with a few retail leaders in India who are adopting AI solutions as well as with AI solution providers to see how AI is transforming the Indian retail sector and propelling it into a more dynamic and customer-centric future.
AI, a game changer
“AI technology is pivotal in transforming the Indian retail sector,” says Karunya Sampath, Co-Founder & CEO of Payod, a provider of innovative solutions for the Indian retail sector.
“Through advanced data analysis and machine learning algorithms, retailers can gain valuable insights into customer behaviour, preferences, and buying patterns,” she adds.
AI has opened the doors to endless possibilities for retailers. For example, inventory management, once a tedious task, has now become more efficient with AI-driven demand forecasting. Retailers can optimise stock levels, minimise wastage, and ensure that products are available when customers need them.
Rahul Singh, Co-founder of EcoSoul Home, an eco-friendly home essentials products retailer has been witnessing remarkable growth post deploying AI solutions. “After deploying AI based tools and solutions, we experienced massive transformation across our commercial and operating metrics,” he admits.
“By embracing AI, we aim to reshape the CPG landscape and lead the industry into a future defined by innovation, efficiency, and consumer-centricity,” he adds.
The dynamic relationship
Personalisation is the foundation of modern retail and artificial intelligence has substantially improved customer interactions. Using AI-powered chatbots, shops can now provide real-time support to customers, answering questions and guiding them through the purchasing process.
“Earlier we had to call customers, there was way too much human involvement,” says Anubhav Bansal, Co-founder of Healthmug.com, a health e-commerce platform.
“However, now the high bot success rate has overcome the 10 per cent human failure rate, and that has made our customer communication available 24×7 with more clarity,” he tells us.
AI is also revolutionising the online shopping experience through recommendation engines. By analysing a customer’s browsing history and purchase patterns, AI-powered systems suggest products that align with their interests, thereby increasing the likelihood of conversion.
“By leveraging AI algorithms, our solutions enable businesses to make data-driven decisions, respond swiftly to market changes, reduce waste, and create products that meet consumer expectations. Through our sustainable practices, we strive to contribute to a more environmentally responsible CPG industry,” Singh asserts.
Enhanced customer experience
In the competitive retail market, customer experience reigns supreme. AI, with its ability to analyse massive volumes of data in real time, has revolutionised how retailers interact with their customers. Indian retailers now possess the means to create targeted marketing campaigns that resonate with individual shoppers, fostering loyalty and trust.
Enlisting the areas in which Healthmug has deployed AI solutions, Bansal elaborates that they are using a consultation bot for pre-screening questions to make the doctors aware of a patient’s issues beforehand. They also use bots for seller selection, courier selection, product placement, and order placement.
He says, “After deploying AI, our funds are managed well and our losses have been reduced, customers are offered better prices and reach, and the time management of the courier partner is better.”
“We leverage AI-driven analytics to gain deep insights into consumer behaviour, allowing us to understand market dynamics, identify growth opportunities, and make data-driven decisions,” says Rahul Singh.
AI aids in supply chain optimisation
AI’s potential is not limited to the front end of retail operations. It is also instrumental in optimising supply chain logistics.
Traditional supply chains were frequently inefficient, resulting in higher costs and delayed deliveries. However, by forecasting demand patterns, optimising inventory levels, and expediting logistics, AI has emerged as a game changer.
“We focus on the digital transformation of the reverse supply chain using our Returns Automation – Platform as a service solution. The reverse supply chain has a significant impact on customer experience, productivity, and the bottom line,” says Jeby Cherian, Chairman and COO of Blubirch, a Returns Automation Platform as a Service (RA–PaaS) solutions provider.
“Our AI-based RA–PaaS provides an enabling platform for retailers to reduce costs and improve customer experience by the digital transformation of the reverse supply chain,” he adds.
AI algorithms assess various factors, such as weather, traffic, and historical data to determine the most efficient routes for deliveries, reducing transportation costs and delivery times.
Speaking of the supply chain, the Co-founder of EcoSoul says, “Our AI-powered supply chain solutions optimise inventory management, demand forecasting, logistics, and distribution, enabling streamlined operations and improved efficiency.”
AI can manage inventory and forecasts too
For Indian retailers, managing inventory levels has always been a challenging balancing act. Overstocking leads to a surplus and increased holding costs, while understocking can result in lost sales and dissatisfied customers. AI-driven predictive analytics now empowers retailers to strike the right balance.
“We offer a comprehensive range of services tailored to meet the specific needs of businesses in this industry. These services include AI-powered customer analytics, demand forecasting, inventory optimization, personalized marketing, and supply chain automation,” states Sampath from Payod.
She adds, “By utilising AI in these areas, retailers can enhance operational efficiency, increase customer satisfaction, and drive revenue growth.”
Retailers may develop precise inventory estimates by analysing past sales data, seasonal changes, industry trends, and external factors using machine learning algorithms. “This helps organisations to optimise inventory levels, reduce stockouts, and improve customer satisfaction. These technologies can change forecasts automatically depending on real-time data, boosting accuracy over time,” says Singh of EcoSoul.
Challenges slowing down the revolution
However, despite its numerous benefits, the adoption of AI in the retail sector doesn’t come without challenges.
While the integration of AI in the Indian retail sector promises immense potential, there are a few challenges that are inhibiting retailers from going for it. To begin with, data privacy and security concerns remain at the forefront while the cost of adopting AI technologies, the need for skilled professionals and optimising AI systems for retail-specific use cases add to the challenges.
Cherian says, “Availability of data is a challenge, as training an AI system needs millions of pieces of data to train the system. While the industry as a whole has this data, the availability of the industry data at a granular level for any one player in the industry is a challenge. This requires the industry to come together to offer such data for innovative initiatives.”
Another challenge is the availability of talent, he points out, saying, “While AI is growing significantly, the talent that is required in creating use cases, and architecting the solution is in short supply.”
Retailers must tread carefully to strike the right balance between personalization and privacy, assuring customers that their data is safe and utilised responsibly.
Fraud detection and security
As the Indian retail sector expands into the digital realm, it has become increasingly vulnerable to cyber threats and fraudulent activities. Here too, AI proves to be a formidable ally. Advanced AI algorithms can analyse vast amounts of transactional data to identify suspicious patterns and anomalies in real time.
“We prioritise data protection by employing robust encryption methods to safeguard sensitive information. Access controls are enforced to limit data access to authorized personnel only. Furthermore, we strictly adhere to relevant data protection regulations, such as GDPR, to ensure compliance and customer trust,” says Sampath.
In terms of data safety, Chrerian recommends taking the following precautions when implementing AI technology: data encryption, a protected datastore, regulated access to data, anonymized and pseudonymised data, decreased data and privacy rules.
Government’s part in AI adoption
It’s important to note that while AI can offer valuable opportunities for marketing and operational efficiency, it should be used ethically and transparently.
“They lay the groundwork for a supporting policy framework that addresses data privacy, security, and ethical concerns while encouraging innovation. Furthermore, the government invests in essential infrastructure and digital connectivity for AI adoption in retail. They assist research and development by providing funds and encourage collaboration between industry and academic institutions,” Cherian points out.
While speaking on what more the government can do, Sampath says, “The government can support retailers by offering incentives and subsidies for AI implementation. Additionally, it can promote AI education and training programmes to equip the workforce with the necessary skills to work alongside AI systems.”
Indian retailers’ artificially intelligent future ahead
The future of Indian retail will indeed be powered by AI, and the journey ahead promises exciting possibilities for all the stakeholders involved.
According to recent industry reports, the e-commerce industry witnessed a phenomenal 36.8 per cent YoY growth in terms of order volumes. The total value of digital transactions stood at US$ 300 billion in 2021 and is projected to reach US$ 1 trillion by 2026.
“Online retail penetration is expected to exceed offline retail penetration by 2.5 times over the next decade. The ‘Future of Retail’ research from Deloitte Touche Tohmatsu India LLP (Deloitte India) predicts that the online retail sector, which stood at US$ 70 billion in 2022, will rise to US$ 325 billion by 2030,” Cherian asserts.
“Customer engagement will be transformed by the combination of augmented reality (AR) and virtual reality (VR) technology, which will enable virtual try-on experiences and interactive showrooms,” he adds.
Weighing in, Sampath articulates, “Advancements in hyper-personalization will enable retailers to provide tailor-made experiences to individual customers, further enhancing customer loyalty and engagement. Cashier less stores powered by AI will revolutionise the shopping experience, making it more convenient and efficient.”
The integration of AI in the Indian retail sector is reshaping the industry, offering retailers the tools that they need to succeed in an increasingly digital world. As more businesses embrace AI-powered solutions, we can expect a more personalised, efficient, and customer-centric retail experience for all.
