AI presents significant opportunities for retailers in 2024
Retailers in 2024 are diving headfirst into the world of AI, discovering its power to revolutionize the shopping experience. From interactive chatbots to personalized content, AI models are transforming the way retailers engage with their customers.
But here’s the catch: despite the hype, only about half of AI projects actually take flight from the drawing board to reality. According to a 2022 Gartner survey, only 54 percent of AI models make it to the production stage. In order to fully leverage the power of AI, retailers have groundwork to cover before we can bask in the full potential of AI-powered shopping.
So, what’s in store for retailers when it comes to AI this year?
Specialty Retail: AI-powered Customer Service:
Specialty retailers are already using AI-powered chatbots and call centres to handle simple customer inquiries. However, the next frontier for AI in customer service lies in generative AI. By humanizing chatbots and enabling more complex and emotion-driven conversations, retailers can provide a better customer experience. For example, IKEA’s AI bot “Billie” has successfully handled 47 percent of customer queries to call centres, allowing the company to train call centre workers as interior design advisors. AI can also elevate specialty services across sectors, such as home design consultations, makeup appointments, and jewelry fittings. Retailers like Sephora, Ulta, and Benefit Cosmetics are already using AI-powered visual tools to provide personalized recommendations and enhance the customer experience.
Apparel and Department Store Retail: The Generative AI Microchannel:
With the majority of consumers starting their product search on platforms like Amazon, retailers need to find ways to capture customer attention early in the customer journey. Generative AI plug-ins integrated into platforms like ChatGPT, Google Bard, Amazon, or Apple can help retailers engage customers and guide them through the shopping process. For example, Klarna’s ChatGPT plug-in allows shoppers to search for products across thousands of stores using natural language and provides live links to relevant products. Retailers in the apparel and department store sector can leverage these plug-ins to enhance the shopping experience and increase customer engagement.
Grocery Retail: Conversational Shopping Assistants:
Grocery retailers have a unique opportunity to leverage conversational shopping assistants to provide personalized recommendations and enhance the shopping experience. Customers are open to trying new brands, products, and ingredients that fit their diet, budget, and lifestyle. By implementing generative AI bots, grocery retailers can help shoppers create personalized grocery lists based on their preferences, history, and budget. For example, Instacart’s “Ask Instacart” feature allows shoppers to get personalized shopping recommendations through natural language questions. This channel can also become a key part of retail media networks, where CPG brands can sponsor products that fit customers’ needs.
B2B Retail: Virtual Selling Knowledge Assistant:
B2B retailers often struggle to meet customer expectations due to a lack of intelligent, connected sales support tools. Generative AI can help B2B retail employees access internal sales knowledge quickly and respond to customer questions effectively. For example, a prototype for a “colleague AI bot” can answer common sales-related questions and provide guidance to salespeople. This virtual selling knowledge assistant can be particularly helpful for B2B companies dealing with complex transactions and industry-specific jargon. By leveraging generative AI, B2B retailers can enhance their sales interactions and improve customer satisfaction.
Convenience Store Retail: Dynamic Pricing Optimization:
While generative AI may have a limited impact on convenience store (c-store) retailers in 2024, other AI applications like dynamic pricing algorithms can help improve margins. C-store customers are highly price-sensitive, and implementing machine learning for dynamic pricing can help retailers maintain customer trust and loyalty. By using electronic shelf labels, retailers can automatically discount products that are close to their expiration date, reducing waste and optimizing pricing strategies.
To turn these generative AI use cases into reality, retailers need to focus on creating a strong customer data foundation. By centralizing customer data and capabilities, retailers can gain a comprehensive view of their customers across stores, regions, and partners. This data-driven approach will enable retailers to make informed decisions and successfully implement AI projects.
AI presents significant opportunities for retailers in 2024. AI’s integration with retail isn’t merely about its introduction—it’s about honing its sophistication, refining its applications, and enhancing the personal connection in shopping experiences. As more retailers delve into this, they stand a better chance at gaining from impactful transformation with enhanced customer shopping experience, improved operational efficiency, and business growth.
(This article is authored by Rakesh Ravuri, CTO and SVP, Engineering, Publicis Sapient)
