Have you noticed the changes in the way we have been shopping in the last couple of years? Sure, we’re talking about moving from a physical shop to the online space but what else? Our demand has shifted from discretionary items to essentials. We can live without shoes but not without a disinfectant. We demand home deliveries, we demand same-day deliveries, and more. A few years back, what seemed like a distant dream is now our reality.
So, the question here is, what did the pandemic change? Well, obviously everything! But more importantly, it changed consumer expectations and demand drastically. So much so that many businesses that couldn’t go digital overnight, perished.
But it is important to note that although online shopping increased in pace, the physical outlets still were important contact points for customers and played a key role in shaping digital strategy. Many retailers reimagined their physical store spaces as experience centers for customers who chose to visit and feel the brand.
Sales and service teams’ roles also evolved from handling just one part of their work to understanding the entire mechanism to build better connections with customers and create brand loyalty by leveraging digital technologies.
The many Challenges of Retail
According to a report by Blue Yonder, retailers were not quite convinced about seeing supply chain conditions in real-time or have contingency plans in place to respond more effectively when disruptions occur. After a year, the conditions haven’t improved much.
41% of retailers said they can monitor volume and add more when market conditions demand it, down from 56% in 2020.
40% of retailers can currently see the effect of bottlenecks and prioritize the ones that need to be addressed, down from 48% in 2020.
52% of general merchandise (GM) retailers said swiftly changing consumer demands that undermine the ability to buy big and lower costs was their chief concern.
67% of fashion/specialty/brands retailers think of the need to monitor and adjust the supply chain in real-time as their top challenge.
Can Demand Forecasting help Address these Challenges?
Demand forecasting has played a critical role across various functions in retail, including inventory management, supply chains, and customer service. By forecasting customer demands, predicting market trends, and more, demand forecasting has helped businesses achieve the next level of digital transformation. However traditional demand forecasting methods are finding it exceedingly difficult to keep up with the huge influx of data coming in from various sources (internal, external, and contextual) and generate accurate forecasts.
And since legacy systems and traditional methods can no longer get the job done, businesses are increasingly realizing the pivotal role Artificial Intelligence (AI) has come to play in enhancing these capabilities. Around 73% of retailers think that AI and Machine Learning (ML) can help them prepare for and adjust to severe demand fluctuations when compared to 35% of other retailers.
4 ways AI can help reshape Demand Forecasting in Retail
AI and Big Data analytics can be leveraged to understand the underlying patterns of the data from various sources for forecasting demand for products. Demand forecasts can drastically enhance the decision-making process and ensure timely replenishment of stores, along with resource and capacity planning. Retailers everywhere have benefited immensely from the hourly, daily, weekly, and monthly forecasts.
Here’s how AI-driven demand forecasting can help.
Improving supply chain capabilities
AI investment in the retail supply chain is expected to grow at a CAGR of over 45% and reach $10 billion by the year 2025.
By considering multiple factors influencing demand, including weather conditions, geography, customer reviews, and market conditions, AI can enhance the capabilities of traditional demand forecasting methods.
What about seasonal changes and risks involved? With data-driven solutions powered by AI, critical pain points,such as shipping delays, overstocking, and understocking can be mitigated.
With accurate demand forecasting, retailers can bridge the gap between supply and demand, adjust product replenishments, boost revenue, and much more.
Optimized inventory management
As per 47% of the respondents of a survey, AI can play a pivotal role in inventory management, ensure effective cost levels, and help businesses respond to customer demands better.
Keeping optimized inventory levels greatly determines the profitability of a retail business. Optimized levels of inventory ensure a consistent cash flow, reduce incidental costs incurred on holding/maintenance, and increase turnover.
AI-driven tools can easily and quickly sense variations in demand, predict the performance of new products, and keep you updated about relevant market trends to help generate accurate forecasts and update inventory.
AI-enabled demand forecasting solutions help you plan your inventory in a way that you can avoid understocking/overstocking situations.
Build successful marketing strategies
59% of trade promotions don’t make profits due to ineffective planning and overlapping events.
Your marketing strategies are crucial to the success of your product and your retail establishment. Traditional forecasting methods cannot analyze real-time data and account for sudden demand fluctuations as we observed during the initial stages of the pandemic.
This is where AI-enabled forecasts provide an advantage. AI-driven tools analyze a range of factors like customer behavior, correct promotion types, competitor offers, and more.
What do the numbers say?
AI and ML can be leveraged by retailers to maximize their marketing efforts and get the most out of their marketing budget.
Creating unmatched customer experiences
86% of consumers are willing to pay more for a better customer experience.
Ensuring an exceptional customer experience is the only way to ensure brand loyalty. AI-enabled forecasts can help you elevate your customers’ shopping experiences by ensuring the availability of the products they are looking for at all times.
AI-driven tools take out the guesswork completely out of the equation. With accurate forecasts, retailers can improve staff scheduling, estimate the fluctuations in demand by the month, day, or even hour.
Time to ditch the old ways
Implementing AI systems can seem overwhelming in the beginning, but it doesn’t have to be. With the right technology and team by your side, you can make the most of your AI investment and earn profits even during times of disruption.
With a technology partner like Monitor Pro, you will be supported and steered through every step of the process by experts. We will help you make sense of the technologies and how they can benefit your business.
Schedule a free demo with our team and experience the difference.