Alan is the CEO and founder of the company AI Everesenwhose technology eliminates the shrinking problem of the $45 billion/year global retail industry.
In a low-margin world, retailers are struggling with a persistent shrink caused by a combination of profit-eroding theft, operational errors and honest shopper mistakes. In fact, retailers face a staggering $112.1 billion in annual shrinkage losses and as the use of self-pay increases, so do the complexities of dealing with loss prevention and the customer experience.
Within this, the promise of artificial intelligence looms large, bringing with it the potential to revolutionize shop operations, increase efficiency and boost bottom lines. There’s plenty of hype around AI, but for many, the question remains: Can AI really deliver on its promise of measurable return on investment?
Increasingly, the answer is yes. For retail leaders seeking to harness the potential of AI, understanding how visual AI works and focusing on reducing shrinkage can yield measurable results. It’s a multi-faceted process, but retailers can make significant progress in addressing cash register, shelf and inventory loss.
Measurable results: Reduction of shrinkage in the treasury
Tech-savvy retailers are seeing the biggest impact at the checkout lane, where loss prevention comes head-on.
Executives and store managers may have some prescriptive knowledge of how much shrinkage is occurring, but AI systems can fill in the gaps, turning prescriptive insights into actionable insights that lead to measurable results.
In a recent one podcastMcKinsey senior consultant Mark Ibbotson talked about how smart cameras at the checkout can detect unusual behavior or malicious intent and send a message to a store employee to step in and help. “I’ve seen a major US grocer use it, and it actually saw an increase in sales because there were a lot of real mistakes where people missed scanning something. And if someone is dishonest, they quickly learn that this store has developed a technology that will make it harder to steal, and they generally choose not to try it again.”
Improved customer experience and enhanced features
When done right, AI can also provide value by supporting a seamless process for self-checkout. Expert AI systems achieve high accuracy rates and minimal false positives, so customers aren’t frustrated by interruptions in the checkout process. The systems are designed with simple prompts to allow customers to fix scan errors themselves quickly and easily.
But the impact extends far beyond the cash register. AI systems can transform operations across the entire retail ecosystem. In inventory management, for example, computer vision can help maintain optimal inventory levels and improve 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 take full advantage of the operational improvements offered by AI, leading retailers are adopting these best practices to optimize their investments and increase ROI:
• Establish clear baselines. Before implementation, measure attrition rates and staff productivity to establish a benchmark for AI performance and impact.
• Prioritize key areas. Identify key areas, such as self-monitoring, where AI has been proven to deliver results. Focus on one key area and start tracking for measurable gains.
• Commit to ethical AI. Ensure that AI solutions respect customer privacy and build trust—essential for ongoing success and customer satisfaction.
• AI vision function. Leverage hyperscaling systems in conjunction with continuously learning infrastructure management systems. These systems can manage “movement”—from subtle environmental changes to significant behavioral changes, such as new theft techniques or product offerings.
• Expanding beyond loss prevention. AI can address more than just shrinking—by improving inventory management, streamlining supply chains, and improving queue management. A powerful AI platform offers multi-faceted benefits across all store functions.
AI Impact: Retail And Beyond
Well-implemented AI delivers measurable ROI in 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 break even in less than six months.
Achieving this level of success requires more than advanced technology. It requires a strategic approach to implementation, continuous optimization, and partnerships with AI providers who truly understand the unique challenges businesses face. As the landscape continues to evolve, AI will play a central role in helping retailers reduce shrinkage, improve margins and enhance the customer experience, delivering both immediate and long-term value.
Success in retail serves as a powerful example of AI’s broader potential. The ability to power process evolution holds significant promise for many industries. As more sectors adopt AI-based solutions, the opportunities to boost efficiency, improve customer experiences and unlock new value will continue to accelerate, driving innovation and potentially reshaping industries.
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