Digital native firms dominate AI race
The race for Artificial Intelligence is well underway, and apparently online firms outpace long-established companies.
Artificial Intelligence is one of the most significant technologies currently available in the retail market. So, it is no surprise retailers around the globe are trying to accelerate the speed and scope of their AI projects to fully unleash the enormous potential hidden between algorithms. For that, they are willing to spend billions of dollars every year. According to a study by Capgemini, by 2022, the annual spending on AI might top US$7.3 billion dollars globally.
First movers can already be observed: In 2018, approximately 28% of the top 250 global retailers already implemented AI, which is an increase of 24 percentage points compared to 2016. But with the race for best solutions and business cases, some business segments outpace others and leave behind other branches.
While digital native companies are increasing investments and finally starting to take off, looking at current numbers for classic brick and mortar companies is anticlimatic. According to the Capgemini study “Building the retail superstar”, only 10% of those companies are using AI today, compared to the 68% of online-only retailers working on AI initiatives. With 30% already using AI, omnichannel firms lie midway between those two figures.
Naturally, the business model of pure-play online and omnichannel firms are more data-driven than those of their long-established brick and mortar competitors. Still, the huge imbalance is notable, especially looking at how AI is implemented, which is mostly machine learning for deep dives into customers habits and business data. Today, 67% of the top 250 global retailers are using machine learning, making it the most popular tool – a tool that could help offline-stores as well as start-ups or online-only-retailers. Hyped to replace thousands of jobs, chatbots or voicebots follow in second place, but with at most 20% of firms using them today. Why is this the case?
One reason might be an increasingly cautious approach towards AI in the last years. First perceived as the ultimate savior for retail and the steward for the chaos evolving out of the endless data stream, firms nowadays try to curb expectations towards AI to a minimum. In 2017, no less than 51% of all companies expected an “increase in product sales and services” higher than 15%. In 2018, this number shrunk to one percent. On the one hand, this might be due to a better and deeper understanding of AI and therefore an adaption in expectations. On the other hand, firms are slowly starting to realize how many hurdles they would have to clear to even reach the finish line.
The most surprising thing to realize when observing the global landscape is this: Neither firms from the U.S. nor Germany are deploying the most AI in retail. Instead, the Brexit-fearing British companies as well as those from France do. Research shows that the difference between the leading states and the average ones is not only visible but also significant. The UK is leading the chart with 39% of all top retailers in the country already deploying AI compared to the global average of 29%. The United States are lagging behind with a surprisingly low AI penetration of only 25%, far behind France which has already developed a basis for further growth due to a strong ecosystem of AI start-ups.
In the study “Building the Retail Superstar: How unleashing AI across functions offers a multi-billion dollar opportunity” Capgemini Research Institute surveyed 400 executives from retailers across a broad range of sectors across the U.S., UK, France, Germany, Italy, Spain, Sweden and the Netherlands in August 2018 and, in October 2018, conducted secondary research of the top 250 retailers, determined by 2017 revenues from Bloomberg.
Visit our news area for additional content around the topic of eCommerce.