10-6-17 8:10 AM EDT | Email Article

By Tonya Garcia, MarketWatch

Artificial intelligence, or AI, is growing in value as a customer service tool

Customers with questions about their online orders this holiday shopping season may think they're asking a seasonal worker for help, but artificial intelligence (AI) is likely giving them the information they need.

Technology of all kinds is being used on the back end of retail, to organize inventory and manage other operational functions. Whether it's chatting with a bot or with Alexa, AI is also increasingly becoming a part of the consumer-facing shopping process in ways that, at least for now, are about improving customer service.

According to the latest Accenture data, a majority of consumers are already using or would like to use a number of technologies that are powered by AI when shopping, including chatbots ("automated intelligent customer assistance," 65%), virtually trying on clothing (65%), and voice commerce systems like Google Home (GOOGL) (68%) and Amazon Alexa (71%).

See also: Off-price retailers are starting to cannibalize themselves (http://www.marketwatch.com/story/off-price-retailers-are-starting-to-cannibalize-themselves-2017-10-03)

And:How Nordstrom is changing the department store game (http://www.marketwatch.com/story/how-nordstrom-is-changing-the-department-store-game-2017-09-14)

Personalization, ease and convenience are key to better customer service in retail, whether that's through supply chain management and making sure items are in stock and can be sent to customers in a timely fashion, or through services designed to cater to the preferences of the individual shopper.

"Customers are running into it every day and probably don't know it," said Pano Anthos, managing director of XRC Labs, an accelerator program that's focused on innovation in retail and consumer goods. "You're on a site and a chat window opens and says 'hi,' it's probably natural language processing and that's AI."

To that point, a recent survey from Narvar, a company focused on helping retailers provide exceptional customer experiences, found that 38% of consumers didn't know whether a live chat or messenger app was a human being or AI. Only 10% knew it was not human.

Read:Retailers like Wal-Mart and Best Buy are coming up with new strategies to top two-day delivery (http://www.marketwatch.com/story/retailers-like-wal-mart-and-best-buy-are-coming-up-with-new-strategies-to-top-two-day-delivery-2017-08-31)

In part, that's because there are specialists training computers to learn nuance and context that can make interactions seem more human-like. For example, a computer can understand that every face has a nose. But, in a world full of noses of different sizes and shapes, "deep learning" takes it to the next level, according to Anthos.

"To strengthen the response, there has to be a comparison to many noses, a way for the machine to make inferences at a faster more complex level," he said.

Until recently, much of the retail sector's energy has been on getting items to the store rather than to the customer, Anthos said. Now that these companies have turned their attention to getting purchases into customers' hands, the way technology can be used to enhance the customer experience is of paramount importance.

There's even more urgency to get a handle on the customer service uses of AI in light of all the ways in which Amazon.com Inc. (AMZN) continues to make e-commerce the simplest and most personalized shopping experience around.

See also:20 years after IPO: How Amazon came to dominate books, electronics and the cloud (http://www.marketwatch.com/story/how-amazon-came-to-dominate-books-electronics-and-the-cloud-2017-05-12)

And:Every time this happens, Amazon crushes another legacy retailer (http://www.marketwatch.com/story/amazon-investors-should-pay-attention-to-this-two-digit-number-2017-05-12)

Still, according to Anthos, retailers are moving too slowly, in part because company leadership isn't used to thinking in terms of a "true digital experience."

"They're not sitting still, but they're not moving as fast as a startup," he said. "The problem we're facing now is the consumer is so far ahead of the retailer in terms of their expectations. Mall traffic is so far down, not because of the merchandise, but because the experience hasn't changed."

There's also a fear of failure, which Anthos says retailers and brands have to get over so they can test new things.

MarketWatch requested comment from a number of retailers, and none complied.

Meanwhile, there are startups that are stepping in to help retailers. Abigail Holtz is the chief executive of Affinity, a company that recently participated in the XRC Labs accelerator and uses technology to understand customers' needs, style and preferences. Executives there describe the company as "Stitch Fix-like."

Stitch Fix is a personal styling service that asks customers to fill out a profile before receiving specially selected items just for them, giving shoppers the option to keep what they like and send the rest back.

Affinity is focused on scale. Big retailers might want to offer a personalized experience, but without either the technology or the manpower, can't provide it. With technology, that "high-touch" personal shopper experience that has historically been exclusive to luxury shoppers is becoming available to the masses.

But many retail executives are reluctant to jump in too fast.

"Because retailers are resource-constrained and risk-averse, they're interested in what they can do incrementally," said Holtz, who worked at Google for a number of years before co-founding Affinity. "That's what we've designed."

As retailers see results, they're more enthusiastic about taking the next step.

"Every point is proving to them that it's delivering," she said.

Chatbots, which are relatively common nowadays, "are good at answering questions that aren't super nuanced," she said.

While the technology is charging ahead with greater capabilities, this holiday season will be focused on the ways in which AI can answer those simple questions that shoppers tend to have this time of year, like an update on an order, information about a new product and return policies.

"Customers don't call call centers to place orders," said Amit Sharma, chief executive of Narvar. "They're generally not happy with the information that's out there and they're calling for more service."

Don't miss:Everything Google announced at its Pixel event (http://www.marketwatch.com/story/everything-google-announced-at-its-pixel-event-2017-10-04)

Most customers who are upset or anxious would probably prefer to talk to a human being to make sure their holiday gifts get where they need to be on time. In that case, the best customer service AI could perform is getting shoppers to a live human being.

But ultimately, the more a machine can do to create a good experience, the better.

"If you think about it, there just aren't enough human beings in any organization that can push enough buttons to make the best experience without machine learning," said Michael Klein, Adobe's director of industry strategy for retail, travel and hospitality.

The SPDR Retail S&P ETF (XRT) is down 5% for the year to date while the S&P 500 index is up 14% and the Dow Jones Industrial Average is up 14.7% for the period.

-Tonya Garcia; 415-439-6400; AskNewswires@dowjones.com

 

(END) Dow Jones Newswires

10-06-17 0810ET

Copyright (c) 2017 Dow Jones & Company, Inc.
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