Alan is CEO & Founder of AI company Everseen, whose technology is eliminating the global retail industry’s $45B/year shrinkage problem.
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In a world of razor-thin margins, retailers are grappling with persistent shrink caused by a combination of theft, operational errors and shoppers’ honest mistakes that chip away at profits. In fact, retailers are confronting a staggering $112.1 billion in annual losses due to shrinkage, and as self-checkout usage rises, so do the complexities of handling loss prevention and customer experience.
Amid this, the promise of AI looms large, bringing with it the potential to revolutionize store operations, drive efficiency and bolster the bottom line. There is plenty of AI hype, but for many, the question remains: Can AI truly deliver on its promise of measurable ROI?
Increasingly, the answer is yes. For retail leaders seeking to harness AI’s potential, understanding how to correctly operationalize vision AI and focusing on shrink reduction can yield measurable results. It’s a multifaceted process, but retailers can make significant progress by addressing loss at checkout, on the shelf and in the stockroom.
Measurable Results: Reducing Shrink At Checkout
Tech-savvy retailers are seeing the greatest impact in the checkout lane—where they are tackling loss prevention head-on.
Store executives and managers may have some directional knowledge of how much shrink is occurring, but AI systems can fill in the gaps, transforming directional knowledge into actionable insights that drive measurable results.
On a recent podcast, McKinsey senior adviser Mark Ibbotson talked about how smart cameras at self-checkout can spot unusual behavior or malicious intent and send a message to a store employee to step in and help. “I’ve seen a big U.S. grocer deploy that, and it actually saw an increase in sales because there were a lot of genuine mistakes whereby people missed scanning something. And if somebody is being dishonest, they quickly learn that this store has deployed a piece of technology that will make it difficult to steal, and they generally choose not to try that again.”
Enhanced Customer Experience and Improved Operations
When done right, AI can also deliver value by supporting a seamless process for self-checkout. Expert AI systems are achieving high accuracy rates and minimal false positives, so customers aren’t frustrated by interruptions during the checkout process. Systems are designed with simple prompts to enable customers to self-correct scanning errors quickly and easily.
But the impact extends far beyond the checkout counter. AI systems can transform operations across the entire retail ecosystem. In inventory management, for example, computer vision can help maintain optimal stock levels and improve on-shelf availability. In supply chain operations, AI analytics can help retailers better predict demand and optimize delivery schedules.
Key Strategies For Optimizing AI Investments
To fully capitalize on the operational improvements AI offers, leading retailers are adopting these best practices to optimize their investments and drive ROI:
• Establish clear baselines. Before implementation, measure shrink rates and staff productivity to create a benchmark for AI performance and impact.
• Prioritize key areas. Identify key areas like self-checkout where AI has been shown to deliver results. Focus on one key area and begin tracking for measurable gains.
• Commit to ethical AI. Ensure AI solutions respect customer privacy and build trust—essential for sustained success and customer satisfaction.
• Operationalize vision AI. Leverage hyper-scaled systems coupled with infrastructure management systems that continuously learn. These systems can manage “drift”—from subtle environmental changes to significant behavioral shifts like new theft techniques or product offerings.
• Expand beyond loss prevention. AI can address more than shrink reduction— enhancing inventory management, streamlining supply chains and improving queue management. A robust AI platform delivers multifaceted benefits across store operations.
AI Impact: Retail And Beyond
Well-implemented AI is delivering measurable ROI across retail environments. My company’s recent study conducted by Forrester showed that, over a three-year period, grocery retailers could experience more than 300% ROI and the ability to achieve break-even in under six months.
Reaching this level of success requires more than just advanced technology. It demands a strategic approach to implementation, ongoing optimization and partnerships with AI providers who truly understand the unique challenges businesses face. As the landscape continues to evolve, AI will play a pivotal role in helping retailers reduce shrink, improve margins and enhance the customer experience—delivering both immediate and long-term value.
The success in retail serves as a powerful example of AI’s broader potential. The ability to empower process evolution holds significant promise for many industries. As more sectors adopt AI-driven solutions, the opportunities to boost efficiency, enhance customer experiences and unlock new value will continue to accelerate—driving innovation and potentially reshaping industries.
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