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OPINION

Helping shops sell better with smart tech

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Of 161 highly cited AI papers in South-east Asia, 97 were derived from Singapore - outperforming the global average.

THE use of artificial intelligence in Singapore has been growing by leaps and bounds. According to a recent report on artificial intelligence in South-east Asia, more than 24,000 AI-related papers have been published in the South-east Asia region, with Singapore, Malaysia and Thailand accounting for 86 per cent of output. Of 161 highly cited AI papers in South-east Asia, 97 were derived from Singapore - outperforming the global average.

The big question is: can AI help Singapore's struggling brick and mortar retail stores compete with their e-commerce counterparts? The immense popularity of online e-commerce is forcing traditional retailers to explore new ways to attract customers.

Many stores have tried to recreate themselves by providing a "destination" shopping experience - from food tasting and cooking classes to computer-simulated wardrobe fittings. Others function as product showrooms to drive online sales. However, these activities add to the cost of goods sold and further increase the pricing gap between the retail and e-commerce stores.

According to the Ministry of Trade and Industry (MTI), the 26,596 retail establishments in Singapore generated S$45.5 billion in operating receipts contributing to 1.4 per cent of Singapore's GDP. How do these brick and mortar stores compete with the online behemoths?

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The state of brick and mortar stores in Singapore

On the surface, it is possible to conclude that the consumer retail sector in Singapore is thriving. Data from Singapore's Economic Development Board highlights that four out of the world's top five skincare giants, including L'Oréal Groupe and Unilever, have their regional headquarters here while four of the top five food and nutrition companies in the Asia-Pacific conduct R&D from Singapore.

However, stores are being closed (including long-established brands such as Gap and Banana Republic) and bankruptcies continue at a breakneck pace as many debt-laden retailers struggle to adapt to competition from e-commerce.

The latest figures from the Urban Redevelopment Authority (URA) indicate that prices of retail space decreased by 1.3 per cent in Q2 2018, while rentals of retail space decreased by 1.1 per cent in Q2 2018. According to a report from Savills, hypermarket chain Giant will shut its outlet at VivoCity in early 2019 after closing two branches at Junction 10 and Jalan Tenteram.

According to MTI's latest Economic Survey of Singapore Q3/2018, the economy is expected to expand by 3-3.5 per cent year on year in 2018, and grow at a slower rate of 1.5-3.5 per cent YoY in 2019.

In addition, the unemployment rate could climb further which may lead to weaker domestic expenditure. All these indicators mean that retailers have to emphasise the customer experience more than ever before, as they strive to differentiate themselves in a stagnant and crowded market.

In line with the Retail Industry Transformation Map (ITM), the government announced plans to accelerate the pace of transformation in the retail sector. For example, merchants in Kampong Glam, one of Singapore's traditional neighbourhood, now enjoy enhanced digital capabilities while the shopper's experience is enhanced through technology such as augmented reality.

This is a great start, but there is a lot that needs to be accomplished for brick and mortar retail stores to compete successfully with e-commerce stores.

Using artificial intelligence to level the shopping field

Today, consumers live in an "Easyverse", where they expect everything to be personalised, easy and seamless. One of the reasons for e-commerce's success is the wealth of information they have on their visitors and customers to provide a custom shopping experience. Brick and mortar retail stores simply have no data on what's happening in their stores.

Imagine the possibilities if stores had access to accurate and real-time data on visitors and then integrating it with transaction data. This will enable them to get insights on store staff effectiveness, power hours, conversion rate, and campaign effectiveness among others and not only provide a personalised experience, but also maximise operational efficiencies.

All of this and more can be achieved through smart data augmentation powered by computer vision and natural language processing which is the foundation of artificial intelligence.

For instance, a footfall- and people-counter powered by computer vision technology now becomes an intelligent people-tracking system. It captures the right age and gender demographic data which empowers stores to optimise inventory and predict customer preferences to maximise sales and conversions. A personalised analysis of each customer's needs, preferences and motivations create an "offline clickstream" of data. Retailers can then use this to provide relevant recommendations and engagement strategies for their customers, despite working with the limitations of the offline world.

Stores can combine this data with a smart communication strategy to alert the right customer with the right product at the right time with the right offer over SMS and e-mail. It is also possible to track if the customer who received a promotional e-mail or a discount coupon visited the store in the days that followed.

How can stores reach this state of nirvana

The exciting part of this conversation is that this technology is not some futuristic application of artificial intelligence but available now and many stores are already benefiting from it. However, the hype around artificial intelligence has also resulted in tremendous confusion over its applications.

With AI adoption in the retail industry still in its early stages, many stores lack the understanding of how the technology can add real value to their business. It is essential to have a clearly defined use case and seamless integration with workflows in the core business. An ideal AI solution should be cost-effective and let stores choose what's best for their business by not paying a premium for features which are not essential.

Offline retail has many inherent advantages - immediacy, better experience and human interaction. With the right technology to support them, there is no doubt brick and mortar stores can give e-commerce a run for their carts.

  • The writer is principal AI architect at Capillary Technologies.