Why Does Your Retail Business Need AI Optimization Insights from a Real Business

Why Does Your Retail Business Need AI Optimization? Insights from a Real Business

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Artificial intelligence is transforming many industries, and retail is no exception. Today, 40% of retailers employ AI-powered solutions, and by 2025, this figure will leap to 80%. It is highly likely your competitors already benefit from AI-based optimization in forecasting, pricing, inventory management, supply chain, and customer relations.

If you ask yourself whether you should implement AI in your retail business today, the answer is a strong yes. AI adoption seems inevitable if you want to keep up with the market. But, trust us, it is a good inevitability. You will be surprised by all the advantages promised by intelligent tech. 

Let us start by reviewing a case study based on our recent successful cooperation with a top US beauty retail company. This is how AI solves real business issues.

This article is the first part of the “AI in retail” series, where we showcase all aspects of AI implementation for businesses. Other articles on this topic include:

CHI Software Case: An AI-Powered Solution for Retail

​​Our client is a US cosmetic retailer with a wide variety of beauty products, including skincare and make-up. The company runs physical stores across the country and an e-commerce portal.

How Did It Start? Business Environment Details

For beauty retail customers in the US, price is the main factor influencing shopping decisions. 67% of shoppers confess that price determines what they put into their shopping basket. 

Yet, personal recommendations change the rules of the game. 75% of customers say they are ready to pay more for beauty or skincare products if they get a personalized shopping experience. 

While personal recommendation is a strong sales driver, it takes a lot of time and money to train consultants properly, and you need a lot of personnel to serve every customer. 

What stops you from AI implementation? Let's talk about it!

Therefore, the client, a strong supporter of innovations, developed the idea of a mobile app with personal recommendations. The main purpose was to provide beauty shoppers with expert advice about beauty and skincare products and enable them to make well-founded purchasing decisions.

So, our client came to us with the idea of a smart automated app that provides personal recommendations about skincare and make-up and helps customers choose the right products.

The Solution a CHI Software Team Came Up With

Our team developed an AI-powered software product with photo face recognition based on computer vision and a recommendation system with a ChatGPT-powered chatbot. 

First, the app asks a user to take a selfie. Then, the system analyzes the photo, examines skin condition, and suggests optimal skincare and beauty products. 

Read our case study to learn the technical specifics of the project. 

Computer vision solution for retail | CHI Software

This AI-enhanced recommendation system is more efficient than human consultants, as it is perfectly trained to serve a customer, never leaves its workplace, always tracks product availability, and can offer numerous options in no time.

Considering AI for your e-commerce business? Start with these use cases Read more

What Are the Results Acieved?

As shoppers love personalization, the project’s results were remarkable:

  •  Improved customer experience: Personalized product suggestions enhanced customer satisfaction and led to a 5-7% customer retention growth.
  •  Cross-selling and upselling: Accurate recommendations led to greater consumer trust and enabled the client to offer more purchase options and more expensive products.
  • Growth in sales and revenue: Our client achieved a sales growth of 10%, as relevant product suggestions led to higher orders.
  • Customer retention growth: Higher customer engagement resulted in an increase of 10% in customer retention rates.
  • Inventory cost optimization:  Better analysis of customer preferences reduced out-of-stocks. Improved stock management resulted in a 5% inventory cost reduction.

If you’re seeking innovative solutions for intelligent conversational interfaces, our chatGPT development company stands ready to deliver cutting-edge and tailored solutions to meet your needs.

How Retail Businesses Do Well Out of AI

Modern retail is highly complex and competitive, so everyone seeks an innovative competitive edge. In 2023, the global AI in retail market is expected to reach 7.14 billion USD with a perspective to grow to 55.5 billion USD in 2030. 

AI benefits for retail businesses

Source: Statista 

But this graph only covers some of the practical benefits AI offers. Be it inventory management or security issues, or chatbots for retail and e-commerce, artificial intelligence is also here to help. Just check out these incredible opportunities:

How to use AI in retail?

AI Price Optimization

Artificial intelligence software supports and simplifies pricing decisions in a cost-sensitive market environment. It helps managers to determine the best pricing strategy for each product category and maximize profits.

Inventory Management Improvement

Efficient management of inventories demands analyzing multiple factors which impact planning, warehousing, and delivering goods. Integrating AI-powered solutions into the workflow can significantly reduce the number of errors and help businesses prevent losses and optimize costs.

What business goals do you want to achieve with AI? We will tell you how to make them real. Book your free call with our team

Personal Recommendations and AI-Based Marketing Optimization

A personalized approach enables retailers to establish strong relations with their audience, increase loyalty, and prevent churn behavior. AI algorithms help analyze customer actions and segment audiences for accurately targeted recommendations and marketing content.

Supply Chain Transformation 

Supply chain management involves supply and demand planning, transportation, warehousing optimization, etc. – any retailer knows the drill. And there is finally a solution to manage all these operations with maximum efficiency. AI-powered tools help provide the right products in the right stores at the optimal price and on time. 

Enhanced Security

AI prevents fraud by quickly detecting suspicious patterns in online transactions. Anti-theft in-store tools, at the same time, help minimize losses due to shoplifting and other malicious activities.

AI-Powered Location Optimization

AI helps analyze the quality of location spots in terms of transportation, population density, and other features and identifies the best places for future stores and warehouses, optimizing real estate investments for retail businesses.

Get more info about retail AI trends and challenges it solves Read more

Sentiment Analysis 

AI algorithms inspect customer feedback, product reviews, and social media posts to measure customer satisfaction and react to complaints to prevent a reputation crisis. Also, sentiment analysis tools can summarize consumer opinions for future clients and simplify shopping decisions for first-time visitors.

Document Flow Automation

An extensive document flow accompanies nearly every business operation in retail. Contracts, invoices, notes of consignments, and waybills need to be registered, clustered, and processed. AI-based solutions can read, group, process, and analyze documentation, enabling retailers to save dozens of hours of human labor for strategic work.


Considering innovations for your retail business? You are surely on the right path because your competitors are doing exactly the same. 

AI can optimize and simplify nearly every process in the retail business, from supply chain management to merchandising and processing customer reviews. AI adoption is no longer a competitive advantage but a necessity to keep up with the growing competition. No, we are not trying to scare you – rather, we are here to offer a helping hand.

AI is not a business luxury. It is an indispensable tool to reach your individual needs and boost your business performance. Share your goals with our team, and we will gladly help you rapidly transform your business, big or small. Productivity boost through innovation is right in front of you.


  • How are chatbots used in retail? arrow

    Chatbots for the retail industry serve as virtual assistants helping customers navigate through product selections, providing information, and answering queries. They are available 24/7, can manage multiple inquiries simultaneously, and provide personalized shopping experiences.

  • What are the benefits of AI chatbots in e-commerce? arrow

    AI chatbots for e-commerce offer instant customer service, personalized recommendations, and handling routine inquiries, which frees up human resources for more complex tasks. Chatbots also help with gathering customer data for targeted marketing and better inventory management.

  • How can I use ChatGPT for retail? arrow

    ChatGPT in retail can be used for answering customer queries, providing product recommendations, assisting checkout, and offering post-purchase support. GPT-based chatbots can be integrated into retail websites and apps to enhance the overall shopping experience with their conversational capabilities.

  • What are ChatGPT use cases in retail? arrow

    ChatGPT in e-commerce and physical retail helps guide users through the purchase process, provides personalized shopping assistance, manages inventory queries, and even assists in resolving complaints or processing returns. Its ability to understand and respond in natural language makes it ideal for enhancing customer interaction and operational efficiency in retail.

  • How is AI conversion optimization used in retail? arrow

    AI leverages machine learning and data analytics to analyze customer behavior and preferences. Doing so helps retailers personalize each customer's shopping experience, which can lead to increased engagement and higher conversion rates.

About the author
Alex Shatalov Data Scientist & ML Engineer

Alex is a Data Scientist & ML Engineer with an NLP specialization. He is passionate about AI-related technologies, fond of science, and participated in many international scientific conferences.

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