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AI Revolutionizes Retail: Personalizing the Shopping Experience Amid Rapid Adoption

The retail shopping experience is changing fast — and in big ways, thanks to artificial intelligence, generative AI (GenAI) and predictive AI. From pricing and personalization to marketing and merchandising, it’s a retail gamechanger.

But what’s driving the need for this innovation? In a recent report from IBM’s Institute for Business Value, researchers said the “retail landscape is undergoing a transformation, propelled by changes in consumer preferences and advancements in new technologies.”

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The report’s authors said today’s shoppers are discerning and “expect a tailored shopping journey, complete with the convenience of product choices, detailed information, diverse payment methods and a seamless integration of in-store and online experiences that cater to their individual preferences.”

“Generative AI can help address these expectations, creating retail environments as intuitive and unified as they are finely tuned to individual needs,” IBM said.

In a separate survey of consumers from tech provider Intellias, researchers found that shoppers are using AI in different ways every day. The company said U.S. shoppers polled “are increasingly expecting retailers to leverage AI to improve their buying journeys.”

The poll also showed generational differences in its use. The report’s authors said that of the U.S. consumers surveyed in the study, 33 percent said they’re using GenAI tools (programs that create new content based on user prompts), with 60 percent of millennials and 49 percent of Gen Z doing so.

“This widespread and fast-growing adoption of GenAI is prompting consumers to recognize where they encounter AI within their buying journeys — with 41 percent of consumers currently aware of retailers using AI in shopping experiences — and where they expect retailers to leverage AI capabilities to improve customer experiences,” the report stated.

Coming in at 28 percent, pricing and promotions top the list of how AI added value to the shopping experience and was followed by loyalty and rewards at 23 percent. Online product discovery also came in at 23 percent, which was followed by product validation and product recommendations — both at 19 percent.

However, there was skepticism among the respondents — especially regarding data security. “With the speed at which GenAI has been adopted by retailers and consumers in 2023, perhaps it is inevitable that the pace has led to some wariness among shoppers, with 44 percent of those polled saying that they are mistrustful of brands and retailers using AI in their shopping experiences,” the report’s authors said, adding that 66 percent of those polled said they are concerned “about how their data is used after an AI interaction during their shopping journey; and a further 65 percent are concerned that retailers and brands hadn’t put in place sufficient compliance/data safety procedures when using AI.”

Still, 57 percent of those surveyed said “they didn’t mind retailers using AI in their buying journeys as long as they were transparent about it.” For millennials, that sentiment rose to 66 percent.

Alexander Goncharuk, vice president of retail at Intellias, said the “hype-curve surrounding GenAI will continue to accelerate” this year and will be driven “both by the consumer who will become even more used to AI interfaces in their day-to-day lives, as well as by the retailers innovating and exploring different use cases that drive efficiencies and enhance customer experience across the value chain.”

During the NRF show in early January, Salesforce came out strong by rolling out one of its biggest suites of solutions ever. Powered by the company’s Einstein 1 Platform, the innovations “aim to transform every shopping experience.” Salesforce said with generative AI built into its Commerce Cloud and Marketing Cloud, “retail merchandisers and marketers can tap into generative tools with a real-time understanding of customer behavior and preferences to optimize every customer interaction — increasing loyalty, driving revenue and boosting employee productivity.”

While that sounds like a monumental task, the Einstein 1 Platform seamlessly integrates shopper and retail data — and does it while ensuring a high level of security.

To address the “why does all this matter?” question, Salesforce, using its own surveys, said 83 percent of global retailers have seen operational efficiency improvements with AI. “And 63 percent of marketers say that trusted customer data is important to implementing generative AI in their businesses,” Salesforce said. “Retailers need a solution that can bring all of their customer data together into one trusted platform and use it to power the most efficient, AI-driven retail experiences.”

The complete integration of its solution includes several e-commerce features such as Salesforce “Page Designer,” which allows retailers and brands to customize and design pages more quickly.

“Return Insights in Order Management” is also available and helps brands analyze data to look at patterns in return activity. It uses AI “to prompt retailers to make product display changes that minimize future returns,” the company said in a statement.

Michael Appel, managing director at Getzler Henrich & Associates, walked the Expo Hall at NRF and was astounded by how much AI was on display and was discussed.

“AI was the No. 1 topic at the show, but do people really understand why?” Appel said. “Here are actual questions I heard: What the heck does AI mean? How will it affect our business? How can we use it? Companies are talking about how to use AI and machine learning and integrating it into their business. But the real question they need to be asking is: Which AI-based and other technologies are right for us?”

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