AI for Retail

CHAPTER 3How AI Will Automate and Optimize Retail

As I showed in the previous chapter, I believe “automated B&M retail” will be the winning business model for many key categories, including DIY, grocery, mass merch, and convenience. But why does retail need to be automated? What in these stores will be automated? And how will it be automated?

For the first question, wage pressure continues to outpace sales growth by a large margin. Here are some examples of announcements just this year on increasing entry pay:

• Amazon hikes average US starting pay to $19/hour.
• Target sets its new starting wage range to $24/hour for many roles.
• 1/2023 Walmart average wage will rise to $18/hour, exceeding $19/hour if you take all benefits into account.

As the graph in Figure 3.1 shows, average hourly pay in grocery retail in 2017 was $9.48/hour. Just five years later, average hourly pay in grocery retail is now $19.31/hour. That is a 104% increase. And this trend is not stopping. Over that same period, sales have only risen 16%. That is a 6.4x difference in rate of growth.

This means that retailers will have to achieve the same level of performance with far less labor.

For the second question, what will be automated? Many people create a lot of hype around very small point solutions such as automating out‐of‐stock scans or automatic cake decorators. This misses the big picture. That is like Billy Beane getting excited about using AI for classifying balls vs. strikes instead of using it to create ...