It is estimated that in five years, AI will drive 55% of Australian consumer spending by 2030. This projection shows how AI will revolutionise retail in our country. As a retail and point-of-sale (POS) systems expert, it is essential to explore this transformation together and its implications for small brick-and-mortar Australian retailers.

So, we will create a new section in this blog, "AI Musings," to explore artificial intelligence's musing on modern retailing. This space will blend AI-generated insights (approximately 80%) with my thoughts (20%) to delve into the most significant technological revolution in retail today.

The State of Modern Retail in Australia

AI dominates discussions at every retail conference today, signalling its emergence as the new frontier in retail technology.

Adopting AI in retail is not just a prospect; it's happening now. Many retailers already implement AI solutions to enhance customer experiences, optimise inventory management, and streamline operations. For example, our clients have been using AI for years in stock control, but no one is talking about it, and we need to.

I heard about chatbots handling customer queries in a retail firm a few days ago. It was expensive, but as AI becomes more accessible and affordable for businesses of all sizes, we will soon see it in almost all stores.

How AI is Transforming Australian Retail

Personalised Customer Experiences

AI will revolutionise how retailers understand and cater to individual customer preferences, offering a more personalised shopping experience. And it will not take long. If such a system is live in 10,000 shops in one month, that AI will have 800+ years of experience at the end of the month.

Smart Inventory Management

AI is already in our POS system and crucial in predicting demand and optimising stock levels, helping retailers reduce waste and improve efficiency. It has proven vital for retailers who often struggle with inventory management. AI-powered systems can analyse every stock item in the shop with its historical sales data, seasonal trends, and even external factors, like weather.

AI-Powered Customer Service

Chatbots and virtual assistants are improving customer support across online platforms. Currently, 47% of consumers feel comfortable using AI for product selection, while 75% remain cautious about AI handling high-value purchases.

Enhancing In-Store Experiences

AI is set to transform the in-store experience. Retailers use emotional recognition tools to detect customer frustration and seamlessly transfer to human support. This blend of AI and human interaction could be a game-changer for small retailers looking to provide personalised service while optimising staff resources.

Practical Considerations

Cost vs ROI for Retailers

Implementing AI solutions today requires a significant investment, but this is rapidly changing. DeepSeek-R1 is roughly comparable to ChatGPT GPT-4 Turbo, and it is $2.19/128k token, while ChatGPT is $30/128k token, a cost savings of about 93%.

Future Trends in Australian Retail with AI

Looking ahead, the future of AI in retail is bright. By 2030, AI is expected to create 200,000 jobs and $115 billion in economic value, which presents enormous opportunities for retailers of all sizes. That is almost 10% of the Australian economy now.

Voice Commerce

The growth of smart speakers and voice-activated shopping is expected to continue, offering new ways for customers to interact with retailers. I know some clients who now use them in the shop as a translator, and I do, too here. It has helped.

Conclusion

AI is undeniably reshaping the landscape of Australian retail. It is now transforming shopping experiences, retail operations, and customer engagement strategies. We intend to explore this topic here. I encourage our readers to share their thoughts on how they see AI shaping their shopping experiences or what trends they're most excited about.

Let's see how it goes forward together.

I hope you enjoy the new section, "AI Musings."

The Australian retail landscape is in flux; we all know that what is essential with these studies is not just what they say but also what others, for example, banks that control the finances and prospective buyers and their accountants, are being told. These people control the inflow of money.

What we do know is that retailers face obstacles.

- We have a rising cost of living

- We have significant supply chain challenges

- Shifting consumer preferences

As everywhere, only those who are willing to adapt and evolve do well.

Let's dissect some critical insights from Roy Morgan's recent retail address and a lively discussion between retail experts Laura Deasi and Paul Zara, CEO of the Australian Retailers Association.

Key Takeaways from the Roy Morgan Address

• Population growth is vital: Australia's growing population has been a lifeline, somewhat shielding us from a full-blown recession. These people have been a big help to retailers.
• The cost-of-living bites: Rising costs disproportionately affect young families with children. However, some sectors and demographics still have spending power. The traditional pattern in such circumstances is that men's products go down, followed by kids' and women's products.
• Changing spending patterns: Consumers are reducing spending in some categories but increasing in others. There's a surge of interest in bargain hunting and sustainable options.

The Rise of Online Giants

• Amazon's Dominance: Amazon is rapidly expanding its customer base and is now one of Australia's top five non-food retailers. Their vast stock and focus on fast delivery pose a significant challenge to brick-and-mortar retailers.
• Ultra-Cheap Challengers: Shein and Temu have entered the scene with rock-bottom prices. However, concerns about quality and ethics may turn some consumers away in the long run.

What Does This Mean for Aussie Retailers?

Paul Zara and Laura Deasi offered valuable advice and considerations:

• Value is the New Currency: Price matters more than ever, but it's not just about the cheapest deal. Emphasise quality, durability, and your product's long-term benefits.
• The Ethics Factor: Consumers are increasingly conscious of your company's ethics. My advice still applies: Do not fall into this trap as whatever you do many will not like it.
• Online presence: I do not know how or why anyone would want to escape without an online presence.  Offer something and have "click-and-collect" options. A modern and robust online presence is essential for meeting the expectations of today's shoppers.
• Tech to the Rescue: Your point-of-sale (POS) system can be your best ally.
  • Streamline operations: Automate tasks to reduce overhead and free up time for customer service.
  • Personalise experiences: Use our CRM features to provide recommendations and targeted promotions.
  • Data-driven decisions: Track sales patterns and inventory levels to optimize your offerings and minimise waste.

Your Competitive Edge: The Human Element

Retail has always been a people-powered industry. While tech upgrades are vital, the exceptional in-store experience remains a decisive advantage for brick-and-mortar stores:

• Become an expert: Offer valuable product knowledge and tailored recommendations that online giants can't replicate. Coles has even little things like greeting cards, but I will not get any advice there on the sort of card I need.
• Build relationships: Friendly, personalised service creates loyal customers who become your advocates.
• Community connections: As Paul Zara emphasizes, physical stores are the heart of local communities. Support community causes to show that your values extend beyond sales.

The Future of Retail – Adapt and Thrive

The retail landscape is constantly evolving. Businesses with the foresight to adapt have a chance to excel:

• Embrace innovation: New technologies can transform your operations.
• Test and learn: Experiment with new products, displays, and promotions. If they work, double down. If they fail, be ruthless and get rid of them. Do not reinforce a defeat.
• Partnerships matter: Collaborate with as many people as you can.

To do well in 2024, we need to focus. 

Share your thoughts in the comments below!

I went to the Small Business Week Conference and talks last week.

Maybe something to keep in mind for the elections tomorrow.

This is what the retail experts thought about the next six months in bullet form:

- Overall Retail outlook is healthy and looking good. Don't count on the growth we have seen in the last twelve (12) months which was up by 9%. Much in the short-term they expect will be fueled by the existing high household saving. What happens when that saving runs out is unclear.

- There is a wide range here in the retail outlook across sectors, e.g. some sectors like travel are down, others like second-hand goods are up.

- Shops in the CBD are expected to have continuing problems.

- Staff hiring is expected to be difficult, they suggest looking at mature staff.

- Supply challenges to continue throughout 2022. I know this is hurting my clients now.

- Inflation is up, and goods now take six (6) months from the factory to get to the public. Much of the price rise is on the way as costs suppressed over COVID are now coming.

- Studies have shown that most people prefer to buy products that they can taste, smell and touch. They suggest applying this if possible, e.g. have music in the shop. This is where they see the big plus shops have over the internet. Today 80% of households spent something online last year, yet 85% of goods were brought in shops.

- They thought it was important to realise that most of Generation Z is now in the workforce and a significant chunk of the consumer market.

- Public today is less loyal than before. In a survey, 86% put stock availability over loyalty. If you do not have it, they will go elsewhere.

These are the problems that they see we face.