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Retail is becoming Ret[AI]l. Fact. It’s undergoing a profound transformation, propelled by rapid advancements in AI. Some say it’s like the first iPhone introduction. Others liken it to the discovery of electricity (seriously). How much is real? How much is hype? What should we really expect and be prepared for in the future?
AI will likely impact nearly every facet of how we serve our customers, but I agree with those who say it will be a little like digital commerce—initially overhyped, with more challenges than anticipated, but with explosive value in the long term. Take a look at Adobe’s latest research, and you’ll see just how big this could be. Already, close to 60% of consumers say GenAI has enhanced their online shopping experience, helping them filter products, summarize reviews and even compare prices. And they expect more from brands in the future.
Some, like Amazon, are stepping up to lead in GenAI adoption. AI-based smart product recommendations are believed to drive up to 35% of Amazon’s current sales, and the company is spending billions to stay ahead on the technology front. Walmart, too, has been pioneering the use of AI, making big news at CES with multiple initiatives designed to enhance the shopping experience, optimize inventory management and improve customer service interactions. My personal favorite: Walmart’s Replenishment, powered by AI, which uses a personalized algorithm to predict customer needs and automatically deliver items straight to customers’ pantries and refrigerators — shades of “The Jetsons?” These big players may be jumping in with both feet, but smaller retailers don’t necessarily need to sit on the sidelines. Platforms like Shopify can level the playing field, enabling them to offer personalized experiences without in-house development and investment.
For marketers, where should the focus and investment be prioritized? Given the rapid pace and overwhelming number of AI advancements, it’s not an easy decision. I suggest zeroing in on these three pivotal areas where AI is already driving valuable return on investment:
• Personalization: One of the most noticeable impacts AI has had in retail is in the realm of personalized recommendations. With the right data analytics, brands can offer product recommendations, targeted promotions and customized shopping experiences uniquely tailored to each customer’s preferences and behaviors. Think your brand is doing this already? Not like this. AI doesn’t rely solely on past purchases; it recommends based on myriad data points — browsing history, social media activity, seasonal trends, real-time inventory levels and many others. Plus, there’s greater personalization possible in interacting with customers through AI-powered chatbots and virtual assistants. Watch out: Ensure you’re balancing personalization with privacy. Data security protocols are essential, as is transparency around data usage. The risk? Losing your customer’s trust.
• Customer Insights: AI is transforming how we understand and engage with our customers. Able to analyze enormous amounts of data, AI can uncover patterns that provide deeper insights into customer behavior, preferences and needs. The end result: Actionable insights that drive smart business decisions, more targeted messaging and campaigns reaching specific consumers. Watch out: Poor data quality can lead to inaccurate insights and misguided strategies. Ensure data is clean and reliable, and that you have advanced analytics expertise to uncover actionable insights.
• Operational Efficiency: We all know what a challenge effective inventory management can be. AI is optimizing and driving supply chain efficiencies that were once unthinkable. AI-driven predictive analytics allow for more accurate demand forecasting, reducing stockouts and overstock situations. AI can also help predict potential transit disruptions and optimize delivery routes, cutting costs and improving delivery times. So, your customer gets the right products at the right time. Watch out: Implementing AI successfully requires significant investment in technology and talent training programs, as well as an enterprise mindset that embraces innovation.
At the end of the day, harnessing AI’s power boils down to investing in robust data management, fostering a culture of innovation and upskilling, and prioritizing practical applications of AI that have the most potential. We may be in the early stages of AI exploration, but we’re already seeing the value it brings. Avoid getting caught up in the hype and instead invest in areas where AI can make a tangible impact. The future of retail is here, and it’s powered by AI. Ready to start your Ret(AI)l transformation?
Jason Reiser is president of omnichannel commerce for Market Performance Group; marketpeformancegroup.com.
