AI is Flourishing in Modern Merchandise Planning

The scale, speed and complexity of modern retailing has created the conditions for the current boom in the use of artificial intelligence (AI) in Merchandise Planning. These increased challenges have been accelerated by the impact of COVID-19, as seamless multichannel shopping is now expected by customers, making assortment planning a far more complex and unpredictable process. The adoption of AI and process automation has grown substantially over the last few years and it is safe to assume that this trend will continue. Investing in AI and orchestrating wholesale changes to legacy planning systems is by no means a simple process for retailers. It is however an option that has been embraced by 50% of North American Bricks and Mortar retailers and, according to an article published by Forbes in 2019, is a strategic priority for 83% of retail executives going forward.

There are two primary reasons for Merchants embracing AI. Firstly, it helps empower their teams to succeed in this new challenging retail environment and second, it improves bottom line financial results.

Speed and simplicity

The best of the AI analytical tools coming to market simplify the mountains of data and complexity. They provide Merchants with near time “what if" scenarios along with extremely precise forecasts. To accomplish this, AI considers hundreds of variables and millions of scenarios, automating what have historically been core merchandising activities that were performed manually. Handing pricing, promotions, and inventory replenishment activities over to AI may have seemed unthinkable only a few years ago but that is quickly becoming the reality out of necessity to compete. An important component of reduced time required on historical manual tasks is that it enables the merchant organization to focus on the more important tasks of long-term planning and innovation in a rapidly shifting retail environment.

Improved bottom line

Retail-margin pressure is intensifying, driven by pressures to invest in e-commerce and increase wages, plus more intense competition, especially with the growth of online shopping. Many retailers who have already exhausted traditional cost-reduction levers are adopting AI and automation to reduce cost, improve margins, and increase sales. The reduced cost largely comes directly through replacing up to 40% of merchant manual labor activities, though typically most of this labor is reassigned to tackle new roles and challenges. The biggest contributor to the bottom line is not the reduced labor costs, but rather the improved performance that comes with enhanced item and pricing decisions that lead to efficiencies throughout the supply chain, and result in a better experience for the customer, whose loyalty is gained and retained.

The boom in AI-powered Merchandise Planning is well under way as retailers confront the ever more competitive, complicated, and shifting marketplace of the future.