How AI Discovers My Preferences: The Rise of Intelligent Retail Systems
Sep 10, 2024
In the past decade, AI technology has grown at a rapid pace, surpassing previous advancements in human development. With the evolution of neural networks and the emergence of innovative technologies like 'AlphaGo' and 'ChatGPT,' the advancement of AI is accelerating.
AI is transforming consumer lifestyles through personalized services across various industries, including retail, finance, and healthcare. Initially, AI technology was primarily used online, but it has recently been implemented in offline stores to enhance customer experience and improve operational efficiency.
Traditional customer segmentation methods relied on limited data to define personas and develop marketing strategies, but this approach struggled to adequately capture customer diversity. In contrast, AI can analyze customers more precisely using more refined data, such as gender, age, and in-store behavior patterns. This enables the completion of store operation data, contributing to increased sales and cost reduction.
While AI technology has positive impacts, there is also the risk of negative outcomes due to incorrect data training or biased decisions. Therefore, ethical AI usage and data protection are crucial, and efforts to safeguard customer privacy through data anonymization techniques are necessary.
This analysis explores ways AI can enhance consumer convenience and safety, examines both the positive and negative aspects of AI use, and provides insights into its application in offline settings, offering a perspective on its current state and future potential.
Personalized AI: From Online to Offline
Personalized recommendation technologies, which were initially widely adopted online, have developed based on the collection and analysis of large-scale data to understand customer preferences. This method involves analyzing user profiles, behaviors, and content data to provide customized recommendations for individual users. Recently, these personalization technologies have also been applied to offline stores to enhance customer shopping experiences and optimize store operations. AI is utilized in various ways to analyze customer data, provide real-time personalized suggestions, and increase store efficiency.
A prominent example of AI-based customer analysis in offline stores is 'customer path' analysis. This technology identifies the movement and interactions of customers within the store, with AI collecting and analyzing real-time data from CCTV footage or sensor-based sources to understand customer behavior patterns. This enables optimization of store operations, such as placing popular products in high-traffic areas or reinforcing customer service in areas where customers spend more time.
AI is also employed in 'product placement optimization.' By analyzing customer interest and sales data, AI optimizes product placement, positioning popular items in high-visibility areas to boost sales. Additionally, it arranges products to maximize cross-selling opportunities.
Real-time personalized promotions are another significant use case. AI provides customized promotional messages when customers perform specific actions, encouraging purchases. By integrating with location analysis technology, AI sends push notifications to customers in particular areas or provides personalized promotional information through digital signage.
In the realm of 'inventory management and replenishment,' AI is effectively utilized to optimize stock levels based on customer purchase patterns and automatically replenish stock when needed. This ensures that stores consistently have the products customers want, preventing missed sales opportunities and enhancing cost efficiency.
The use of these AI technologies to streamline store operations is increasingly common, with various brands actively implementing them in practice.
The Arrival of the ‘AI Era’… Changed ‘Personalized’ Services
Before the introduction of AI, personalized services largely relied on customer segmentation techniques. Personas were defined based on demographic information such as age, gender, and income level, as well as purchase history data, and marketing strategies were designed accordingly. However, this approach struggled to reflect the complex preferences and behaviors of customers, which could lead to reduced customer satisfaction and brand loyalty.
With the advent of AI technology, it has become possible to analyze individual customer preferences and behavior patterns in detail using large-scale data, providing highly personalized services. AI collects and analyzes various types of data in real time, including online behavior data as well as offline store data such as movement patterns, dwell time, and items of interest. This allows for accurate predictions about which products customers might be interested in, enabling the provision of personalized recommendations and promotions.
AI also contributes to increasing customer satisfaction and brand loyalty. Personalized services that accurately reflect customer preferences offer a better shopping experience and enhance repeat visit rates. By analyzing specific customer behaviors, AI helps in developing efficient inventory management and promotional strategies, and provides real-time personalized recommendations and promotions, boosting sales.
The introduction of AI technology is driving innovation in personalized services, playing a crucial role in accurately reflecting customer needs and preferences, and thereby increasing both satisfaction and revenue.
The Boundless Reach of AI Expansion
The introduction of AI technology has significantly improved store operations. AI automates various tasks and analyzes real-time data to support inventory management, customer behavior analysis, and promotion management, thereby enhancing operational efficiency. For instance, AI can immediately detect when a product is out of stock and send a notification, or identify misplaced items and prompt their correct repositioning. Additionally, it can quickly detect contaminants or expired products and issue alerts, ensuring store cleanliness and customer safety.
AI analyzes customer behavior within the store to enable staff to provide prompt assistance and contribute to personalized services. Such AI-based systems maximize store operational efficiency, improve customer satisfaction, and boost sales.
In security management, AI technology plays a crucial role. AI-based video analysis technology can detect thefts or intrusions in real-time and issue warnings, significantly enhancing security effectiveness. The adoption of ‘Edge AI’ and ‘On-Device AI’ technologies strengthens data processing and security, while also enhancing privacy protection.
AI also plays a significant role in safety management. It can detect lost children or elderly individuals in theme parks or recognize when customers fall, allowing for rapid intervention. Thus, AI is crucial in enhancing safety and security across various environments, and its continuous development is expected to provide even better solutions. The advancement of AI technology will ultimately offer improved security and safety management solutions, having a positive impact on society as a whole.
The Surge in the 'Privacy Protection' Market Amid AI Expansion
AI personalization services offer benefits such as enhanced customer convenience and increased sales, but they can also lead to several side effects and drawbacks. On the positive side, personalized product recommendations and promotions can boost customer satisfaction and repeat visits while improving store operational efficiency. However, there are risks associated with privacy violations and filter bubbles, as well as concerns about excessive data analysis potentially infringing on customer privacy. Additionally, focusing on specific customer groups may exclude others, and incorrect data analysis could lead to decreased sales.
As AI-driven personalization services enhance store operations, attention must be paid to ethical issues and privacy protection. Companies need to implement data anonymization technologies to protect personal information while still utilizing useful data. For example, techniques such as blurring faces or replacing them with synthetic ones are commonly used. Recently, generative AI has introduced technologies that replace faces in videos with patterns resembling noise, effectively protecting privacy by preserving only minimal information.
With growing concern over privacy protection, companies are actively investing in data protection, and the market for data anonymization technologies is expected to grow rapidly. While AI technology offers significant benefits, ongoing efforts to address ethical responsibilities and privacy protection remain crucial.
The Rising Importance of Ethical AI Use Principles
Ethical use of AI has become a significant issue for both businesses and society at large. Major companies, including IBM, are establishing ethical principles that emphasize explainability, fairness, transparency, and privacy protection in AI. Big tech companies like Google, Microsoft, and Amazon are also building social trust through the establishment of ethics committees, AI ethics research centers, and responsible AI use guidelines.
Privacy protection laws, such as the EU's GDPR and California's CCPA, are being strengthened, and new regulations and legal considerations for AI use are being introduced. In October 2023, the Biden administration in the U.S. issued guidelines to ensure the ethical use of AI technology, while the EU has finalized the AI Act, which will come into full effect in 2026. This law provides a legal framework to regulate AI systems to ensure they do not infringe on individual rights.
With the advancement of AI technology, privacy protection and ethical use have become even more critical challenges. Companies must continue to advance their technology and adhere to ethical principles while aligning with global regulations.
What About AI for a Sustainable Future?
AI technology is enhancing shopping experiences by analyzing customer behavior and providing personalized services in offline businesses. It is also improving store operation efficiency through innovations in customer movement analysis, product placement optimization, real-time promotions, inventory management, and security management. These technologies contribute to increased sales and cost savings.
However, the use of AI can raise ethical issues such as privacy breaches and data bias. Solutions to these issues include data anonymization, establishing ethical AI use principles, and adhering to global regulations. Companies need to work on technology advancements while ensuring compliance with legal standards for ethical AI use.
In the future, AI is expected to drive innovative changes across various industries including retail, finance, and healthcare. It will enhance the ability to predict customer behavior and provide personalized services, optimizing store operations through autonomous decision-making. AI will also contribute to sustainability by improving energy management and supply chain optimization.
In conclusion, AI technology is set to become a crucial tool not only for innovating consumer services and store operations but also for supporting a sustainable future. Deeping Source plans to leverage AI technology to enhance customer experiences and operational efficiency while adhering to ethical principles and aligning with global regulations.
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