What do customers want? It’s the question that all retail organisations ask when determining their business strategies.
Throw an array of new technologies relating to data, artificial intelligence and the cloud into the mix, however, and retailers can quickly feel overwhelmed and unsure.
According to Mike Edmonds, business strategy lead for worldwide retail, consumer goods and gaming at Microsoft, it is important to remain focused on the basics.
“Although technology continues to change at an exponential rate, customer expectations remain consistent,” says Edmonds. “Customers want to engage with brands on their own terms, they expect to be remembered based on previous interactions, seek personalised experiences and want to become loyal to brands they trust.”
Mike Edmonds is business strategy lead for worldwide retail, consumer goods and gaming at Microsoft
Consumers enjoy both online and physical shopping, and their preferences shift depending on the purchase, occasion or location. For example, in 2023 internet sales made up 26.6 per cent of total retail sales in the UK, according to the Office for National Statistics. Meanwhile, in the USA, internet sales accounted for 15.4 per cent total sales, according to the United States CensBureau.
“What this really means is that customers demand flexibility from the brands that they interact with,” says Edmonds. “Online shopping will continue to grow in popularity and become more prevalent because it is convenient for the customer,” he explains. “But brands that understand how to bridge digital and physical touchpoints to deliver memorable retail experiences will continue to build deep, meaningful relationships with their customers and be more successful as a result.”
Retail in the cloud
The cloud is an important tool for bridging this gap between digital and physical touchpoints.
“With data in the cloud, retailers have an opportunity to create the foundation for delivering frictionless, personalised experiences across touchpoints,” says Edmonds. “Retailers can create omnichannel profiles for every customer and continuously enrich this data with internal and external data sources to deliver insightful experiences that result in trust and loyalty.”
Microsoft is helping retailers maximise what the cloud offers with Microsoft Cloud for Retail. At the NRF 2024 event, it revealed several new capabilities for the platform that are intended to make it easier for retailers to adopt and scale generative AI.
These include Microsoft Copilot templates for personalised shopping and store operations on Microsoft Azure OpenAI Service, which allow retailers to create AI-powered experiences, such as personalised shopping suggestions for customers or insights into workflows and products for their employees.
“Through our Copilot template for store operations, retailers can provide solutions that empower employees by giving them access to insights in the flow of work,” says Edmonds. “Store associates can use natural language to get answers regarding store procedures, store catalogues and so on in a quick, efficient manner. The Microsoft Experience Centers will be one of the first retailers to implement the Copilot templates.”
New Copilot capabilities in Dynamics 365 Customer Insights allow retail marketers to build and launch personalised marketing campaigns in real-time. Several Microsoft partners are augmenting their own solutions and improving operations with AI-based tools from Microsoft. Sitecore, for example, is integrating its OrderCloud solution with Microsoft Fabric, providing a real-time connection between product, customer and order data, making it easier for users to derive value from it. Blue Yonder, meanwhile, has launched its new generative AI capability, Blue Yonder Orchestrator, which is embedded into its Luminate Cognitive Platform built on Azure. This allows retailers to use natural language to gain real-time insight into their supply chain data, predictive insights and recommendations for generating the best outcomes.
Unlocking new potential
Retailers are quickly beginning to realise the potential of AI for enhancing the shopping experience. McKinsey’s 2023 report The economic potential of Generative AI: The next productivity frontier states that AI-based shopping experiences have the potential to grow yearly revenue by as much as $600 billion across the retail and consumer goods industries.
“AI, data and the cloud unlocks real potential for retailers to meet and exceed customer expectations in ways that were previously unavailable,” says Edmonds. “Furthermore, generative AI has the game-changing ability to empower retail customers and employees to unlock the value of their data through natural language.”
According to the AI Adoption in Retail study from Microsoft and The Futurum Group, 69 per cent of the customers said they were more likely to shop with a retailer using AI to gain more personalised choices and more efficient experiences.
Choice Market, an urban market chain based in Denver, Colorado, is using cloud technology and AI in its minimarts, which are all fully autonomous and provide a seamless cashier-free experience for customers. The stores use camera technology from Microsoft partner AiFi, combined with sensors and AI, to identify when customers pick products from shelves.
Following implementation of Microsoft Smart Store Analytics, Choice Market was able to make improvements to store layout.
A heat map of the store showed that customers were entering in the afternoon and heading to the burrito area in search of Choice Market’s breakfast burritos, one of the chain’s most popular items, but leaving empty-handed. This led Choice Market to increase breakfast burrito production and move the in-store display to be more eye-level. Sales increased by 50 per cent almost overnight.
Choice Market leveraged data and AI to analyse shopping patterns and improve customer service (photo credit: Facebook/Choice Market)
Myntra, one of India’s biggest online fashion retailers, has developed its own AI assistant on Azure OpenAI Service. The chatbot can provide customers with recommendations regardless of whether they search using specific key words or vague ideas such as inspiration for an upcoming holiday. This means users can communicate with the tool naturally. The AI assistant is also able to recognise region-specific festivals such as Pongal and Onam, and can understand languages like Hindi, further breaking down cultural barriers for its customers. “This is the first time we have a solution for solving the unsolved ‘search’ problem in the fashion, beauty and lifestyle industry and it is live for customers at scale,” says Arit Mondal, director of product management at Myntra.
Customers can use Myntra’s AI assistant to find clothing recommendations using natural language prompts (photo credit: Microsoft/Selvaprakash Lakshmanan)
Easing the adoption process
Whilst many large organisations have started taking steps towards this next stage in digital transformation, there are many small and medium-sized enterprises that may still find the concept of adopting AI in the workplace daunting. Microsoft is committed to helping them throughout the digital transformation journey.
“The products and solutions we offer are based on three categories: adopt, extend and customise,” said Edmonds. “So, for instance, an organisation that doesn’t have the need or use case to develop their own custom copilot can adopt one of our ready-to-use copilots, which are built into a variety of our products from Office 365 to GitHub.
“Alternatively, a different organisation may be looking for a solution that is more tailored to the needs of the business, which is where they can take any of those existing copilots and extend them through plugins and extensions. Lastly, an organisation with a more ambitious strategy could customise and create their own copilots through either our Azure AI Studio or Microsoft Copilot Studio.”
Edmonds expects a surge in adoption as retailers stop watching AI evolve from the sidelines and start taking action.
“Organisations are now becoming confident and have the data they need to start applying AI to the business,” he says. “However, it is important that organisation don’t deploy technology for the sake of deploying technology but identify how they can use technology to amplify human potential.
“Over the next year we are going to see a broader adoption of AI, an increase in the number of potential use cases and a more human-focused approach to application.”
Partner perspectives
We asked a selection of partners how they are working with Microsoft to provide retailers with cloud-based solutions that transform the customer experience.
“With our cloud-based integrations for Dynamics 365, Avalara is enabling retailers and other businesses to transform the customer experience by automating the one to process of managing tax compliance,” said George Trantas, senior director of global marketplace at Avalara.
“Blue Yonder provides merchandising, supply chain and fulfilment solutions that enable intelligent, resilient and sustainable global supply chains,” said Shannon Wu-Lebron, vice president of global retail industry strategies at Blue Yonder. “We combine the power of the Blue Yonder Luminate Cognitive Platform with Azure and Dynamics 365 to help retailers create secure, specialised, real-time connections and workflows.”
“Today retailers are fighting for wallet share, customers are picky, and choices abound,” said Poly Choudhury, retail domain consultant for the Microsoft Business Consultancy Community at Infosys. “Building loyalty is not just incentivising or offering one-off experiences but retaining customers for life. That means exceeding expectations across the value chain, from seamless product discovery to efficient checkouts, is the key to winning their hearts.”
“Sitecore’s composable capabilities enable retailers to orchestrate their content intelligently across unified commerce experiences everywhere,” said Jake Hookom, vice president of commerce at Sitecore. “Sitecore is built on Azure, combining the cloud platform’s ecosystem of scalable storage, automation, application deployment and AI services across the globe with Sitecore’s modern content and commerce capabilities.”
Read more from these partners in the Spring 2024 issue of Technology Record. To get future issues delivered directly to your inbox, sign up for a free subscription.