Home improvement giant Lowe's Cos. has two fleets of stores: its brick-and-mortar locations and their digital twins.
That means an executive sitting in the chain's headquarters in Mooresville, North Carolina, can see what's happening in Lowe's stores nationwide by using an artificial intelligence-powered virtual version of each location. Store managers, able to access the digital twin of their site on a variety of devices — including desktop computers and headsets — can be alerted to boxes falling down in an aisle and have employees tend to the situation. Or, workers can essentially spot when a certain product is flying off the shelf and should be restocked.
Lowe's has vastly expanded its rollout of these virtual siblings — interactive, three-dimensional replicas of physical stores for managers and employees that depict the locations in a photo-realistic manner — since it debuted its first two in 2022. Now, the chain has created digital twins for each of its 1,700 stores using technology from Nvidia, the AI powerhouse and chip giant.
Retailers, including Lowe's and other early adopters in the industry, see AI as breakthrough technology that the chains need to be competitive, and they're looking to expand their investments in years to come. Retail behemoths Amazon and Walmart have been leaders in the field and continue to spearhead innovation both online and in their supply chains. In fact, Walmart just struck a big deal to develop an enhanced AI-driven system to automate fulfilling online orders from its stores, making them serve as micro warehouses.
But a wide array of chains have turned to AI. In part, they view it as an avenue to deliver a top-tier experience to ever-more-demanding consumers. The technology can answer customer questions, ensure in-demand merchandise remains in stock, and get online orders to shoppers quickly. AI is also seen as a cost cutter. Tailored Brands, owner of Men's Wearhouse and Jos. A. Bank, uses AI to better predict how many rental tuxedos it needs stocked in different stores at different times of the year, thereby reducing shipping expenses, according to Scott Vifquain, the company's chief technology officer.
Lowe's uses the digital twins, virtually updated with new inventory and operational data several times a day, for a variety of purposes. For example, the retailer can use a digital interaction to try out different layouts for a store before implementing any expensive changes, according to Azita Martin, Nvidia's vice president and general manager of its retail and consumer goods division. And the same AI technology can simulate storage configurations and improve productivity in warehouses before any brick-and-mortar changes go into effect.
"We all know that optimizing layout in the physical world is very, very capital intensive and very disruptive," Martin said at the National Retail Federation's annual conference this month in New York, where about 125 AI companies were exhibitors.
Using digital-twin technology will ultimately improve sales and lower costs at stores, according to Martin and Seemantini Godbole, Lowe's executive vice president, and chief digital and information officer.
But make no mistake: AI is no simple solution — and it can be difficult to figure out what you want that technology to accomplish, said executives at the NRF's annual conference, where AI was the main topic. Some attendees voiced concerns about the best way to use the technology, while speakers advised conferencegoers to first identify a problem they needed to solve and then try to find a way for AI to tackle it.
At the same time, Godbole warned retailers against doing endless pilot tests and "dying a death of a thousand prototypes." And Doug Herrington, CEO of Worldwide Amazon Stores, said that mistakes will be made rolling out AI but risks must be taken, a business philosophy that Amazon founder and Executive Chairman Jeff Bezos embraced.
"Jeff was always very clear," Herrington said. "He just had this lesson which was, in the history of business, more value had been destroyed by companies that failed to try something new — [that] they should have — than by people who tried things that failed. And that advice always stuck with me ... especially right now during this AI transformation that we're going through."
Even so, retailers and analysts expect AI to play an even bigger role in the business. Most commonly now, the technology has been rolled out at cutting-edge distribution centers, driving automation and enabling robotics to be deployed to increase efficiency on the supply-chain side, according to company officials.
Retail landlords are also turning to AI to monitor and study foot traffic at their malls, providing information to use during lease negotiations, and keeping track of when contracts are about to expire, according to Jesse Michael, senior vice president and co-founder of JLL's digital retail unit, and an adviser to about 120 firms on new technology.
AI is also being used to sift through and analyze multiple data sources quickly and is being employed to enhance interactions with customers. Discount giant Walmart is testing an AI-powered shopping assistant for its mobile app while Amazon has its own assistant, Rufus, to answer online shoppers' questions.
Saving money
E-commerce juggernaut Amazon is already saving hundreds of millions of dollars using AI technology, according to Doug Herrington. AI's future impact on the retail industry will be far-reaching, he said at the NRF event.
"AI is becoming transformative for our business," Herrington said. "And we really haven't had a technology revolution as large as this since the start of the internet. ... It's going to touch all of us, all of our businesses. It's going to lower costs. It's going to improve quality. It's going to help us develop new customer experiences and it may even spawn new retail formats."
Lowe's teamed up with Santa Clara, California-based Nvidia and Dell Technologies, headquartered in Round Rock, Texas, to become one of the first U.S. retailers using the digital twins. These virtual replicas of a store fuse "spatial data with product location, historical information, and data from advanced in-store sensors," the retailer said.
A digital twin is designed to be "a real representation of what's happening in the physical world," Godbole said at the NRF gathering. "You could be sitting in headquarters and actually walk into any [Lowe's] store without traveling or being there in person."
Lowe's declined to provide additional comment to CoStar News.
Walmart U.S. CEO John Furner compared a digital twin to a video game at the NRF gathering.
"It's an idea in your head and it's a reality," he said. "You create it. You simulate and play in it. We can do the same thing in business, and it prevents or enables us to not have to move things around physically or with capital investment."
Trying layouts
In terms of virtually testing different store layouts, retailers can gain insight into how changes would impact foot traffic and sales, according to Martin and Godbole. For example, workers can replace or move products that aren't selling well with those that are. Or a twin can be used to determine how to best stock certain shelves or to evaluate how merchandise in a particular aisle is selling.
This type of AI is particularly helpful to a retailer like Lowe's, according to Martin.
"A digital twin is basically physics AI," she said. "It's AI that understands physics, and so it understands the weight of those packages. It understands the depth of those packages. And especially for an industry like home improvement, the depth and the size of the product really matters. And so this is a way to really look at and optimize ultimately merchandising, which, you know, will have an incredible impact on revenue."
The technology now also plays a critical role in the supply chain of retailers, as well as other backend functions, according to Amazon's Herrington. Customer service, for example, is "getting touched by generative AI in some form or another," he said, as is logistics.
"On our supply chain, oh, boy, it's just everywhere right now," Herrington said. "It's improving our robotics, for our arms [to] kind of see and grasp things. It's helping manage traffic with our big fleets and mobile robots."
Walmart has a deep involvement with, and commitment to, AI in its logistics operations. The retail giant has worked with Wilmington, Massachusetts-based Symbotic, creator of AI-enabled robotics technology for supply chains, since 2017. Walmart is now rolling out the company's platform across all 42 of its U.S. regional distribution centers.
Most recently, Walmart chose Symbotic to develop, build and deploy an advanced AI system to automate its accelerated pickup and delivery centers at stores, with an initial order covering 400 retail locations. Walmart is increasingly using its stores as last-mile fulfillment centers. The giant chain will pay Symbotic $520 million for the new assignment. In turn, Symbotic is acquiring Walmart's advanced systems and robotics business for $200 million in cash and up to $350 million in addition for any systems the retailer orders from the tech firm.
JLL's Michael, who is based in Toronto, spent 15 years in the technology industry and is advising companies — including retail landlords — on innovation and AI. A big part of his consulting involves vetting the wide array of vendors in the AI industry on behalf of clients. For brick-and-mortar retail, data gathering and managing leases are top uses for AI, Michael told CoStar News.
Mining data
"When it comes to retail real estate, the applications for me that I've seen right out of the gate have been around data and data mining, and data sources and really the ability to sift through multiple data sources very quickly," Michael said.
That can entail creating a master dashboard that combines information from various vendors, according to Michael.
In terms of leases, a landlord trying to keep tabs on hundreds of store leases and the deal terms within them, like their renewal dates, is hard-pressed to do so using something like an Excel spreadsheet, Michael said. With an AI platform, 100-page-plus leases can be uploaded with their details, from rents to expiration dates, archived and flagged. So retail landlords can easily track which leases are coming up for renewal and have their teams take action, Michael said.
Mall landlords are also using AI technology to measure foot traffic and to identify customer flow at their properties, according to Michael. Vendors such as Placer.ai track and analyze such data.
"From a leasing perspective, you can start to get insights using this data," Michael said.
Apple, Lululemon and Starbucks are all proven to drive heavy foot traffic at malls, and other tenants want to lease neighboring space. That means landlords can seek a premium on rents for properties next to an Apple store, Michael explained.
He, and retail executives like Amazon's Herrington and Walmart's Furner, aren't the only ones who said they think AI is an important part of the industry's future.
"Retailers need to embrace technologies like artificial intelligence to deliver a better customer experience and to optimize pricing to remain relevant and avoid ongoing closures,” Coresight Research CEO Deborah Weinswig said in a recent statement, commenting on projected store closings for 2025.
This story was updated Jan. 29 to correct the year given for a rendered image of a Lowe's Cos. digital twin.