Revolutionizing Retail: How AI Can Power Demand and Revenue

Businesses are constantly deciding how to maximize their product sales and revenues. We are witnesses to different innovative marketing strategies every day, with international stars, models and athletes promoting products and services in the media. In a market where over 5,000 products compete for attention on supermarket shelves, businesses in Mexico are constantly seeking new ways to attract new buyers and increase revenue. Despite the MX$100 million (US$5.3 million) spent on product campaigns in 2021, many large-budget efforts still fail, impacting profits and sales growth.

Enter artificial intelligence (AI), the game-changer that is transforming the retail sector in Mexico. By using AI tools to identify the attributes that can increase sales, such as price, presentation, logo, quality, aroma and more, businesses can more effectively position their products. AI has proven to be a great support in identifying such attributes and creating strategies to increase our sales. 

As the first wave of AI-based solutions establishes itself in the market, it is becoming increasingly obvious that businesses are using AI technology largely to optimize tasks that previously required more time and resources.

In an age where smart technology has been adopted by private and public players, digitalization has created the circumstances for AI applications to thrive and generate revenue for an array of industries, with retail being one of the most crucial. So how precisely does AI assist retailers in doing this?

We can start by recognizing how quickly AI in retail is changing the customer experience and journey. The basic stages of purchasing have not changed over time: walk into a store, pick out the perfect product, and pay for it. Yet with the disruptive arrival of artificial intelligence, many tasks have been rewritten to support personalization, automation, and improved efficiency, making it feasible to radically renovate an otherwise typical shopping experience.

In 2022, the use of AI tools for product placement and revenue increase had great benefits. According to a study by McKinsey & Co, the use of AI tools for product placement and revenue increase in 2022 saw benefits, with a 3.8% increase focused on robotic process automation and computer vision. The study identified that businesses used AI tools mainly for service operations optimization (24%), creation of new AI-based products (20%), customer service analysis (19%), customer segmentation (19%), and new AI-based enhancements of products (19%). The adoption of these technologies resulted in a strong relationship between cost reduction and revenue growth for companies.

Despite this, fewer than 20% of executives have attempted to generate revenue growth from AI. By improving accuracy of forecasts and enabling real-time decisions, AI tools alone can increase revenues. For instance, using accessible AI tools, a company discovered that higher-priced products placed at eye level had low sales, but a discounted product placed in the entrance area had higher sales due to customer inflow through the south door.

However, one of the main questions that companies have is how to identify these attributes to boost sales and revenues through AI tools. For example, a company that sells different types of grains chooses to arrange its products and is placing the higher-priced products at eye level. This company identifies that the sale of these products is very low, even though the supermarket charges the company a higher percentage for the product placement of these products. But thoughtful product placement alone is not enough to increase sales.

Through the use of today’s accessible AI tools, we can recognize that the consumer is buying a product with minimal differences at a discounted price that was in the entrance area of the store. This shows that the pricing and position of the goods are what make a difference, as measurement devices discovered that the bigger inflow of customers entering the business by certain entrances increases the likelihood that a customer will purchase the product.

This case clearly illustrates that with AI tools we can identify attributes, such as price and demand, that help to position our products, the number of consumers of our product in the market, anticipate the needs of our consumers by positioning the products with the highest demand within reach, as well as the availability of substitute products in the market. And all of this in a timeframe that is up-to-date and demand-oriented.

AI tools are essential for understanding customer demands and anticipating patterns in demand. This is particularly important in a market like Mexico, with over 120 million people and demand for a balance of quality and low prices, and where the business ecosystem is expanding with international competitors offering excellent quality products at competitive prices.

By adopting AI tools, businesses can evaluate massive volumes of data and derive the appropriate conclusions to improve income in relation to local demand. With AI, businesses can separate themselves from competitors and position themselves for success in Mexico’s growing market.