Retailers say they must invest in generative AI to compete,
and many are already using it for fraud detection,
inventory management and personalizing the shopping
experience
TORONTO, May 24, 2024
/CNW/ - Canadian retailers are embracing generative Artificial
Intelligence (AI) technology, with many integrating it into their
organizations or planning to integrate in the near term to boost
productivity, predict demand and offer personalized experiences to
customers, new KPMG in Canada
research shows.
In a recent survey of executives from 135 Canadian retailers
across numerous sectors, more than eight in 10 respondents (81
per cent) said they must invest in generative AI to stay
competitive, and 81 per cent agreed they need to shift
to a generative AI operating model in the next 12 months to stay
competitive.
Nearly four in 10 (38 per cent) said they already have a
generative AI solution of some sort in place at their
organizations, and another four in 10 (39 per cent) are
planning to implement their first generative AI solution within the
next six months.
The most common uses for generative AI among retail
respondents include:
- Detecting fraud by raising red flags for
suspicious transactions (69 per cent)
- Predicting product demand, optimizing inventory levels (68
per cent)
- Offering personalized product recommendations in
customer-tailored conversation styles (67 per cent)
- Powering product search engines by making it easier to
understand customer search inquiries (67 per cent)
- Inbound and outbound Scheduling/Truckload Optimization (67
per cent)
"It is clear Canadian retailers see generative AI as critical to
their futures," says Kostya
Polyakov, partner and national industry leader of KPMG in
Canada's Consumer and Retail
practice. "The challenge is identifying use cases that add value to
organizations since there are a myriad of ways retailers can use
the technology to become more efficient, productive and
profitable."
"Generative AI is a natural fit for retail: it can personalize
the customer experience, allow more precise forecasting and improve
the supply chain. More than 80 per cent of Canadian retailers we
surveyed will be utilizing the tech this year. For the 20 per cent
not there yet, they face a huge competitive disadvantage that will
only grow as those using it find more and more ways to leverage its
powers. Generative AI is not something for the future – it is now
table stakes for Canadian retailers," adds Mr. Polyakov.
While uses of large language models will continue to grow, it
will be important for Canadian retailers to adopt a responsible use
of generative AI framework inside their businesses to ensure this
technology is used responsibly.
Key survey highlights:
- 38 per cent of respondents have a generative AI
solution already in place
- 39 per cent are planning to implement their first
generative AI solution in the next six months
- 17 per cent are planning to implement generative AI
in the next 12 months
- 90 per cent agree generative AI is helping to or
will help grow their company's revenue and/or market share
growth
- 39 per cent expect generative AI to boost revenue
by six to 10 per cent; 26 per cent see a 10 to 15 per cent
per cent revenue boost; and 23 per cent see a three to five
per cent gain
- 42 per cent expect generative AI to improve sales
return on investment (ROI) of between 10 to 20 per cent; 41 per
cent expect a boost of between 6 to 10 per cent.
Nearly nine in 10 (86 per cent) respondents
said generative AI can help to better inform their marketing
campaigns and personalize shopping experiences for customers, and
88 per cent agreed the technology can create stunning
visuals for product launches and reduce photography costs. However,
nearly eight in 10 (78 per cent) expressed concern about how
consumers would respond to AI-generated imagery, something Mr.
Polyakov says retailers need to be mindful of in addition to the
continually developing rules around intellectual property in light
of generative AI.
"Consumers are increasingly using generative AI tools
themselves, and many are savvy enough to be able to spot
AI-generated material. Retailers need to think carefully about
how they're using the technology, because it could create
reputational, legal and financial risks if not used properly and
responsibly. Having proper guardrails and controls around the
technology is a must," says Peter
Hughes, National Customer Experience Practice Leader, KPMG
in Canada.
Generative AI in the supply
chain
While respondents reported already using generative AI numerous
ways in their organizations, less than half (46 per cent)
have applied the technology within their supply chains, with 34
per cent of respondents planning to implement it in the
future.
Of respondents using or planning to use generative AI in their
supply chain, four in 10 (43 per cent) said their
primary reason is to unlock prescriptive analytic
capabilities for customer or sales order fulfillment, such as
tapping in-house and external data to identify SKUs and make
recommendations to category managers to adjust pricing, promotions,
assortment, and delivery and provide mitigation options. Other
major drivers include: the ability to analyze information across
disparate systems (35 per cent); generating accurate sales
predictions based on historical data, trends, seasonality (34
per cent); and inventory optimization (34 per cent).
"Generative AI has the potential to revolutionize supply chain
management, logistics and procurement, but only if it's underpinned
by reliable, quality data – that's where many organizations face
challenges. Their data is not managed and organized in an optimal
way," says Mr. Polyakov.
Indeed, two-thirds of respondents said one of the main
challenges to implementing AI is having non-validated, inaccurate
data inputs, which, if used to train the large language models that
underpin generative AI platforms, could potentially lead to
"hallucinations" or inaccurate or misleading outputs. Seven in 10
(71 per cent) of respondents said their inability to access
or leverage data is also a challenge in implementing generative
AI.
"Retailers have access to enormous amounts of data – including
customer data, sales data and supplier data to name a few – and
that data can be leveraged for using generative AI. But to make
that data useful for a generative AI system, retailers must make
sure it's clean, organized and structured. That's a crucial part of
any successful generative AI implementation," Mr. Polyakov
adds.
About the survey
KPMG in Canada surveyed
executive level C-suite decision makers at 135 Canadian retail
companies, using Sago's premier business research panel. The survey
was conducted between April 30 –
May 6, 2024. Thirty per cent of the
companies surveyed have annual gross revenue between $400 million to $599.9
million; 23 per cent have $1
billion or more; and 21 per cent have between $200 million and $399.9
million. No respondents under $200
million in annual revenue were included in the survey.
Twenty-nine per cent are in the grocery and supermarket sector, 22
per cent are in the health, beauty and drug sectors and 17 per cent
are in the clothing and accessories sector. Thirty-seven per cent
are based in Ontario, 24 per cent
in Quebec, 10 per cent in B.C, and
nine per cent in Alberta. The
remaining respondents are from other regions across Canada.
About KPMG in Canada
KPMG LLP, a limited liability partnership, is a full-service
Audit, Tax and Advisory firm owned and operated by Canadians. For
over 150 years, our professionals have provided consulting,
accounting, auditing, and tax services to Canadians, inspiring
confidence, empowering change, and driving innovation. Guided by
our core values of Integrity, Excellence, Courage,
Together, For Better, KPMG employs more than 10,000 people in over
40 locations across Canada,
serving private- and public-sector clients. KPMG
is consistently ranked one of Canada's top employers and one of the best
places to work in the country.
The firm is established under the laws of Ontario and is a member of KPMG's global
organization of independent member firms affiliated with KPMG
International, a private English company limited by guarantee. Each
KPMG firm is a legally distinct and separate entity and describes
itself as such. For more information,
see kpmg.com/ca
For media inquiries:
Alannah Page
National Communications and Media Relations
KPMG in Canada
(306) 934-6255
alannahpage@kpmg.ca
SOURCE KPMG LLP