AI IN RETAIL

Impact of Artificial Intelligence in Retail Industry

 THE TEAM

GNLS PAVAN KUMAR RAHUL M AKHIL G

 RETAIL INDUSTRY IN INDIA

• Online retail sales are forecasted to grow at the rate of 31 per cent year-on-year to
reach US$ 32.70 billion in 2018.
• India is expected to become the world’s fastest growing e-commerce market, driven
by robust investment in the sector and rapid increase in the number of internet
users.
• India is the world’s fifth-largest global destination in the retail space.
 Investment Scenario
• The Indian retail trading has received Foreign Direct Investment (FDI) equity inflows totalling US$ 1.66 billion
during April 2000–March 2019, according to the Department of Industrial Policies and Promotion (DIPP).
• With the rising need for consumer goods in different sectors including consumer electronics and home
appliances, many companies have invested in the Indian retail space in the past few months.
• India’s retail sector investments doubled to reach Rs 1,300 crore (US$ 180.18 million) in 2020.
• Walmart Investments Cooperative U.A has invested Rs 2.75 billion (US$ 37.68 million) in Wal-Mart India Pvt Ltd.
Government Initiatives
• The Government of India may change the Foreign Direct Investment (FDI) rules in food processing, in a bid to
permit e-commerce companies and foreign retailers to sell Made in India consumer products.
• Government of India has allowed 100 per cent Foreign Direct Investment (FDI) in online retail of goods and
services through the automatic route.
Road Ahead
• E-commerce is expanding steadily in the country. Customers have the ever increasing choice of products at
the lowest rates.
• E-commerce is probably creating the biggest revolution in the retail industry, and this trend would continue
in the years to come.
• India's e-commerce industry is forecasted to reach US$ 53 billion by 2018. Retailers should leverage the
digital retail channels (e-commerce), which would enable them to spend less money on real estate while
reaching out to more customers in tier-2 and tier-3 cities.
CURRENT SCENARIO

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STATISTICS

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ARTIFICIAL INTELLIGENCE

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AI in Retail Industry

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PORTER’S FORCES

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COMPETITIVE STRATEGY

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Retail Format
Store
location
service
Pricin s
g

merchandis
e
Advertising and
promotion

Visual
merchandis
Interior and Store e
exterior layout
design
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 WALMART

Founded in 1962 by Sam Walton in Rogers, Arkansas, Wal-Mart centred its early growth on rural areas, avoiding direct
competition with supermarket giants like Sears and Kmart. As it expanded, the company developed new retail models, including
Wal-Mart Supercenters (1988) and Sam's Club discount warehouses. Within a decade of opening the combination grocery and
merchandise Supercenters, Wal-Mart had become one of the largest grocers in the United States.

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 WALMART

SWOT
ANALYSIS

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• Economies of scale
• Efficient and effective use of
resources;
• Huge gains from
implementing best practices;
• Experimenting with less risk
• Market power

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• Overdependence on sales
from the U.S. market
• Thin profit margins
• Easily copied business
model

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• Expected Rise in e-
commerce market (forecast
to reach US$4.5 trillion by
2021)
• Expansion in developing
countries

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• Healthy lifestyle trend
• Aggressive competition
• Online retailers of various
sizes
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 STRENGTH
Economies of scale
Efficient and effective use of resources
Huge gains from implementing best practices
Experimenting with less risk
Market power
WEAKNESS
Overdependence on sales from the U.S. market
Thin profit margins
Easily copied business model

Expected Rise in e-commerce market Healthy lifestyle trend

(forecast to reach US$4.5 trillion by 2021) Aggressive competition
Expansion in developing countries Online retailers of various sizes

OPPORTUNITY THREAT

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 SO Strategies
• Wal-Mart can take advantage of it’s strong reach by
allowing customers to go for bargain and offers
discounts as well while other retailers don’t do this so
often.
TOWS • As the trend of online shopping has grown more over
the years, Wal-Mart can keep its customer up to date
and allows them to order online by offering customer
ANALYSIS oriented products.
WO Strategies
• Wal-Mart has to set a clear mission statement as
there is lot of potential increase in retail business in
the future and this is one of the reasons, Walmart
could not achieve profits in other countries like India.
• Since customer buying patterns are similar across
the world, Wal-Mart can update its customers about
its new products and policies on internet as well.
• European and Asian markets are still unexposed to
retail shopping; Wal-Mart can make use of this
advantage by market expansion in other locations of
the world by offering products at cheap prices
specifically at the time of economic instability.
• Wal-Mart can also widen its distribution worldwide by
exploiting countries unlike its domestic competitors.
ST strategies
• Wal-Mart can avoid the massive competition from its
rivals by offering differentiated products at affordable
prices.
• Wal-Mart has been able to develop a brand value
that is able to sustain itself even at the time of
economic/political instability in the country which they
are operating by introducing differentiated products
and satisfied guaranteed programs to create goodwill
with the customers
WT Strategies
• To avoid any tough competition, Wal-Mart should
focus on existing product line or to remain above the
competition by investing more on advertising
campaign to keep its competitors always on pressure
(W2, T1).
• Make a thorough study of the foreign market and
adapt according to their culture to establish itself in
the Asian/European market
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 RELIANCE RETAIL

Reliance Retail Limited is a subsidiary company of Reliance Industries Limited. Founded in 2006, it is the largest retailer in India
in terms of revenue. Its retail outlets offer foods, groceries, apparel and footwear, lifestyle and home improvement products,
electronic goods, and farm implements and inputs. The company’s outlets also provide vegetables, fruits, and flowers. It focuses
on consumer goods, consumer durables, travel services, energy, entertainment and leisure, and health and well-being products,
as well as on educational products and services

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 Reliance Retail

SWOT
ANALYSIS

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• 900+ stores in 80 cities in India
• It owns various private label brands
• It has strong distribution network-
1600 channels in villages
• Strong backing of the parent company

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• Product variety is available but more
SKUs are not present due to inefficient
back end infrastructure
• Poor inventory control at certain
locations is a concern

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• Sourcing directly from farmers; no
middlemen could earn more profit as
number of farmers will increase five
times in next 5 years
• Leveraging on brand name and
entering into Reliance saloon
• Large potential to reduce operation
cost in cities using strong supply chain

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• Strong competition globally from
Carrefour, Metro A.G., Tesco
• Operating costs are too high
• Walmart is biggest competitor when it
comes to sourcing/ backward
integration
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 STRENGTH WEAKNESS

• It has 4000+ stores across 750 cities in India • Product variety is available but more SKUs are not
• Strong distribution network channels in villages present due to inefficient back end infrastructure
• Strong backing of the parent company • Poor inventory control at certain locations

• Sourcing directly from farmers

• Leveraging on brand name and • Strong competition globally
entering into untapped fields • Operating costs are too high
• Large potential to reduce operation cost in • Walmart is biggest competitor when it comes
cities using strong supply chain to sourcing/ backward integration

OPPORTUNITY THREAT

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 Forces of Disruption
&
Transformation IN RETAIL INDUSTRY

The undeniably high rate of rise of e-commerce,

new forms of payment, and collaborative consumption has transformed the
relationship between consumers and retailers, creating
opportunities for new business models and creating uncertainty for traditional ones.

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THE INTERNET

The internet is the biggest disruptor in retail business right now. Its influence
is evident across lengths and breadths.

• Fashion and lifestyle

• Departmental stores
• Food business
• Travel Agencies
• Pharma
• Many other retail domains where the impact of internet is high

Despite the development of digital, physical stores remain important,

particularly for the grocery market where the online demand for food has yet
to be a big success

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ARTIFICIAL INTELLIGENCE

• Augmented Reality
• Autonomous vehicles/ Drones
• Digital traceability
• Virtual Reality
• IoT

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AUGMENTED
REALITY
Augmented Reality is a major disruptor which is expected to
be a major player in impacting the industry. It may impact the
retail industry in the following ways: • Store/ experience related Apps/
webpages
• Increased efficiency in retail shopping
• Changing conventional ways of appliance installation • Using AR sets to promote products
• Moving products from stores to homes virtually

AUTONOMOUS VEHICLES (AV)/ DRONES

• Autonomous vehicle essentially becomes a marketing
tool for brands that want to sell products to passengers. • Primary development : Door Delivery
• They can also be used in delivery process using drones

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DIGITAL TRACEABILITY
Digital traceability helps trace the shipment with accuracy and • Track order option in courier
ease thus enhancing the customer experience. This will be a services/ e-commerce stores
major factor affecting the competence.

VIRTUAL REALITY (VR)

VR helps in bringing the store to the customer. This will cut off • Virtual product experience
the time wasted for searching the required products in the
store.

Internet Of Things (IOT)

• Improving flow management in-store • Predictive maintenance
• Better inventory traceability • Attracting customers
• Allowing the delivery of coupons and promotions on time

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Analysis of Technology and Industry Trajectories
The Empowered consumer

 The expanded consumer equation

Historical equation: Consumer Value = Cost + Choice + Convenience

Future equation: Consumer Value = Evolved Cost + Evolved Choice + Evolved Convenience +
Control + Experience

 Low- versus high-engagement experiences

 Consumer influence on the value chain

 Trends Driving Digital

Internet of Things (IoT)

Autonomous vehicles (AV)/ drones 3D printing
Machine learning Augmented reality (AR)
Robotics Virtual reality (VR)
Digital traceability Blockchain

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Changing
Business Models

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Trajectory of AI:
Reshaping the Innovation Process

See-Think-Act Cycle of Artificial Intelligence powered systems

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• Digital Racks for Fashion and Apparel products
• Virtual Trial Rooms for Swift Decision Making
• Robotic/Digital Assistance
• Behavioural Analytics powered by AI backed surveillance
• Better Customer support via chatbots
• Predictive technologies

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Glide path for the players

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 Road Ahead
Organizational structures and ways of working must be transformed

Redeployment of labor is a strategic opportunity missed by most

Retailers must prepare for skilling and reskilling at scale

P A G E 41
 Are you meeting the consumers where they are
– both physically and virtually?

 Are technology and Analytics working for you?

 How will you compete with a nonretailer

retailer?

 Are you positioned to win war for talent?

 Are you prepared for local impact of global

risks?

Key
Questions to
ponder
. P A G E 42
 Future Capabilities Required

The Partnership Mindset

Intra-industry ecosystem
Extra-Industry ecosystem

Considerations for business, regulators and

policymakers

A Culture of Collaboration
Governance and resourcing
Market and consumer alignment

P A G E 43
 Last Mile
Delivery
Considerations for business, regulators and
policy-makers

Establish macro-aggregators

Invest to put containerization at the heart of

delivery infrastructure

Determine who absorbs the cost of last-mile

delivery

P A G E 44
Advanced data
sciences

Considerations for business,

regulators and policy-makers

Data ownership

Data security

Data-driven supply chains

P A G E 45
 THANKS FOR
YOUR ATTENTION

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