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AI is Driving Brick & Mortar Sales

Retailers are spending a massive amount of money on artificial intelligence (AI) -based technologies and it’s not just for the purposes of generating online sales, according to panelists at ICSC’s ReCon convention.
Retailer spending on artificial intelligence (AI) is projected to grow from $2 billion in 2017 to $7.3 billion by 2022, according to Coresight Research.
There is a growing link between brick and mortar locations and digital sales. Online retailers with brick and mortar locations were able to increase online traffic in their marketplace by more than 37% according to Deborah Weinswig, CEO and Founder of Coresight Research.
The research validates the notion that the in-store buying experience is still one of the relevant aspects of driving sales, especially in luxury retail markets.
Site selection, inventory management, dynamic pricing, and event promotion are all ways in which AI has enabled iconic luxury brands like Guess and Tapestry, the holding company of Kate Spade, Stuart Weitzman, and Coach, to gain access to new markets and compete in an increasingly crowded retail marketplace.
Digitization is not only enabling these retailers to remain customer-centric, it’s also ensuring that the right product is in the right place at the right time for the right price.
Tapestry has leveraged AI and machine learning to create a proprietary software called Falcon for site selection. Falcon assesses site location data of Tapestry’s stores and those of its competitors, and layers in data from online traffic to determine where it should open and close stores.
For Guess, another iconic brand, AI technology has enabled the luxury retailer to steadily increase purchasing power and extend brand reach globally.
“We needed to find a connection with emerging customer groups. And AI has been effective at reaching and learning about a younger customer who we didn’t have a chance to reach before, said Carlos Alberini, CEO and Director of Guess who spoke at the International Council of Shopping Centers (ICSC) convention in Las Vegas this week.
Guess is using AI to analyze the customer points of engagement in both brick and mortar locations and website traffic said Alberini.
A key benefit of machine learning is the ability to layer on global data about school holidays and weather forecasts to plan for the best days and times to host sales and promotions, the panelists said.
AI is also enabling dynamic pricing. “Back in the day, somebody in the mall who works for you used to gather pricing data and it would take two to three weeks to react. Today, we can react on pricing within 24 hours,” said Todd Kahn, Chief Administrative Officer and Head of Finance at Tapestry.
Consumers in the marketplace today are looking for the validation that comes from a luxury brand, but with customized individuality. Customers are demanding both authenticity and individuality from retailers, Kahn added.
Despite the massive efficiencies gained from deploying AI-based solutions, panelists underscored that technology is not a replacement for people.
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“Everything we sell no one needs. We are selling desire, luxury, and functionality,” said Kahn. “Technology is great, but it doesn’t make up for that connection you have with the customers. A lot of people come to try to sell us amazing retail tools. You know what is really great is a killer salesperson who is standing there to create an exceptional experience for our customers, ” he said.

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