2017 Buzzword of the Year: Artificial Intelligence

12/13/2016

By Joe Skorupa

Artificial intelligence is on a trajectory to reach buzzword utopia in 2017, but the groundwork was laid in 2011 by the appearance of IBM Watson on the TV game show “Jeopardy!” The artificial intelligence (AI) computing platform made headlines by easily beating its human competitors.

More recently, Google’s DeepMind, christened AlphaGo for a tournament of Go (a board game described by aficionados as exponentially more complex than chess), beat a human champion from Korea in a well-publicized tournament.

Why am I supposed to care? Well, one approach is to make wisecracks about how natural stupidity beats artificial intelligence every time. Another is to start paying attention to what competitors like Nordstrom, Macy’s, Starbucks, Staples and Amazon are already doing with AI in the retail marketplace.

Watson World Headquarters
 
In the fall of 2014 I attended the launch of IBM Watson Group’s headquarters in New York’s Silicon Alley. It is a 12-story building designed by celebrated architect Fumihiko Maki that contains 120,000 square feet of space used by 750 IBMers who work on Watson projects. At the time it was fueled by a $1B corporate investment.
 
The futuristic headquarters is an incubator for developing a Watson ecosystem, a cloud-based analytic platform that is cutting-edge in three significant ways: 1. It can read 20-million documents in three seconds, 2. It can read and learn natural, unstructured language (which was proven on Jeopardy!), and 3. It gets smarter through repeated use by tracking feedback and learning from successes and failures.

It is the combination of these three capabilities that makes AI the marvel it is. Without these three elements working together AI would just be advanced computing. But when all three are combined it becomes something the world has never seen before, something with significant implications for retail.

Alexa, Send My Groceries

The Amazon Echo and its Alexa virtual assistant is a good example of AI in action. Think of millions of shoppers all over the world uttering these words to Alexa every day:

• What is a tasty dinner menu, Alexa, and where can I buy all of the ingredients?
• Which apparel retailers have the hottest fashions for Millennials and also have same-day delivery?
• Let me send you a photo of items on my gift list so you can recommend where I can buy them.

Alexa is the only game in retail right now that can do all of these things and it is owned by Amazon. This power to influence shopper behavior using the coolest technology on the planet must send chills down spine of traditional retailers...and not in a fun way.

Leveraging AI as a personal shopping assistant or using it to take over customer support functions using chatbots will inevitably spread throughout retail, but they are not the only opportunities to use AI as a commerce enabler.

Real-World Retail AI

Although it is still early in the dawn of the AI age, some recent retail use cases include:

• The North Face: The specialty outdoor retailer created an interactive online shopping experience for desktop shoppers using IBM Watson to power an intuitive recommendation engine. North Face customers engage in a question and answer session that relies on natural language analysis to receive personalized outerwear recommendations. North Face later expanded this capability to a mobile app.
• 1-800-Flowers: In the second quarter of 2016, the flower and gift e-retailer became the first third-party retailer to leverage the Amazon Alexa voice-activated AI platform. If you can’t beat Amazon, why not join it?
• Macy’s: The nation’s largest department store chain began using IBM Watson in two distinct scenarios. In five store locations shoppers are able to use their Macy’s mobile app to interact with a shopping assistant. Two of the locations are in Miami and the shopping assistant will be available at these locations in Spanish. In five different locations shoppers will be able to use the mobile app for interactive self-service within the store.
• Staples: For the back-to-school season the office products specialty retailer used AI to analyze photos of shopping lists uploaded to a mobile app, make recommendations to match the list, and then enable shoppers to purchase the items.
•  Starbucks: Although not rolled out yet, the coffee shop giant has announced plans for the My Starbucks Barista app, which will allow customers to place orders via voice command.  It also announced plans to use AI to power a suggested-selling, voice-command recommendation function that will offer item pairings or add-ons.
• And most recently, Nordstrom launched a chatbot for the holiday season that is available until December 24. Shoppers who engage with the chatbot will be asked several questions about who they are shopping for and the bot will respond with tailored gift ideas based on the answers.

Clearly many of these forays into AI are intended to be tests or proof-of-concept pilots. They are aimed at demonstrating the value of the technology to enhance the shopping experience and deliver ROI. Looking ahead to 2017 you can expect to see AI hype continue to build and tests continue to roll out. Or to paraphrase the great Yogi Berra, “AI’s future is clearly ahead of it.”