African retailers are increasingly leaning into artificial intelligence for competitive advantage

The retail industry in Africa is set to transform at an accelerated pace. With a unique landscape marked by diverse consumer needs, burgeoning youth population, increasing levels of technology adoption and a rapidly changing economic environment, Africa’s retail sector is ripe for innovation.

Retailers across the continent are looking for innovative ways to stay ahead and are increasingly leaning into artificial intelligence as a pivotal technological asset to carve out competitive advantages.

A prime illustration of this is a South African large grocery chain that deploys AI for automating marketing campaigns, scaling personalisation and refining ad targeting. This strategic use of AI has enabled the retailer to improve operational efficiencies, elevate customer engagement and tap into new revenue opportunities.

While the discourse on AI has gained significant momentum following the launch of ChatGPT in November 2022, its integration into retail predates this. A McKinsey survey highlights that over 70% of commercial leaders mention they are already using AI capabilities in some capacity. As an early adopter of AI, the retail industry is well positioned to expand the deployment of AI capabilities significantly across the value chain.

With diversity in languages and varying levels of digital literacy, combined with infrastructural limitations, the African retail landscape presents its own set of operational challenges and opportunities that demand that AI solutions be both sophisticated and adaptable. The critical question is: how can retailers get started and operationalise these capabilities?

Operationalising AI in retail

There are two broad approaches retailers can take. The first is a “blue sky” approach where retailers explore relevant use cases and prioritise the ones most aligned with their business objectives and organisational context.

The second is a targeted approach by which retailers identify one or more specific use cases to address relevant and urgent business challenges or opportunities and then build capabilities around those use cases.

However, to operationalise and realise the benefits of AI, retailers have certain fundamentals in place. These include clearly defined business objectives and requirements, a cross-functional team comprising IT and business professionals, access to relevant business data, well-defined KPIs to measure adoption and outcomes, and a trusted and experienced solution partner.

Transformative potential of AI in retail

The acceleration of AI adoption in retail is driven by the promise of greater efficiency, enhanced customer experiences and improved decision-making. According to Deloitte, AI technologies are redefining customer interactions and operations in the retail sector, offering insights and capabilities previously out of reach. McKinsey further highlights the potential of AI to unlock value across several areas in retail, from supply chain optimisation to personalised marketing.

Recognising the transformative power of AI, SAP has been at the forefront of incorporating AI capabilities into its solutions for several years. With more than 24 000 customers already leveraging AI capabilities across more than 150 use cases, SAP is dedicated to bringing value to retailers through its AI-driven innovations. The company is investing over US$1-billion in AI and has adopted a holistic approach to provide comprehensive AI capabilities in three key areas:

1. 1. AI services through SAP’s Business Technology Platform (BTP) that enables retailers to leverage AI services and foundation models, extending the capabilities of SAP solutions; and
   2. Partner solutions, which draw on SAP’s vast partner ecosystem to introduce industry-specific and deep AI capabilities such as conversational AI and personalised search.Embedded AI including AI use cases and capabilities as part of SAP’s solutions across its wide portfolio from core ERP to line-of-business or functional solutions;

SAP’s unique advantage: combining business expertise with AI

SAP is further committed to upholding the highest standards of data privacy, data protection and security, ensuring customer data remains compliant with dynamic local regulations as well as global standards. SAP’s AI capabilities are infused across the entire retail value chain, empowering retailers to drive innovation and efficiency at every step.

Current use cases covered by SAP in the retail industry include:

• Customer engagement: Dynamic personalised product recommendations, predictive contextualised search capabilities and automated natural language-based customer conversations.
• Merchandising: Optimised assortment planning, dynamic pricing and markdown optimisation.
• Supply chain: Machine learning-based forecasting and replenishment, optimal product placement in warehouses, and AI-powered document processing for goods receipts.
• Store operations and e-commerce: Autonomous stock-taking on shelves, frictionless checkout and virtual try-ons to minimise returns.
• Finance: Automatic extraction and validation of invoice data, automatic matching of invoices and payment notes and automated error explanation and guided resolution in financial closing.
• Sustainable retail: As African consumers become increasingly eco-conscious, it is critical that retailers adopt sustainable practices in their operations. SAP’s AI can facilitate this through optimised logistics and resource management, minimising waste and reducing carbon footprints. By embedding sustainability best practices into its solutions, SAP enables retailers to not only comply with international standards but also appeal to the growing proportion of environmentally aware consumers.

It’s important to note that while AI is a key enabler deployed within these use cases, it is not the sole capability driving their success. For instance, in the case of personalised product recommendations and descriptions, granular and transactional data must be available in a centralised cloud ERP (such as SAP’s market-leading ERP S4/HANA). Analytics capabilities then analyse historical data to identify relevant patterns, while machine learning predicts personalised preferences and generative AI creates tailored product descriptions.

In Africa’s rapidly evolving retail sector, AI stands as a pivotal technology for businesses aiming to differentiate themselves and cater to the digitally savvy African consumer. Through its comprehensive AI offerings, SAP is poised as a pivotal partner for African retailers on their transformative journey, promising a future where technology not only drives efficiency and profitability but also inclusively addresses the unique needs of the African market.

By leveraging SAP’s AI-powered solutions, retailers can unlock new opportunities, drive innovations and deliver exceptional customer experiences, solidifying their competitive edge in the years to come.