Generative AI (GenAI) continues to dominate discussions within retail. While the term has become somewhat of a buzzword in some circles, retailers and brands are making considerable efforts to actively adopt AI solutions. There is growing interest from retailers to utilise GenAI solutions to optimise their operations, while consumers have their own set of expectations. The right moment for retailers to invest in GenAI, in order to remain profitable and provide the best consumer experience, is still a topic of active discussion. At ShopTalk Europe 2024, retailers shared both their successes and the challenges they have encountered since their initial implementation of GenAI solutions.
Consumers now demand more personalised experiences
Consumers are now more aware than ever of how the data they share can shape their interactions with brands. Almost half of digital consumers report that they want tailored products and services, according to Euromonitor International’s Voice of the Consumer: Digital Consumer Survey (fielded March to April 2024) – and in light of this, consumers are willing to provide information in exchange for personalised products and services; 43% are ready to share their email addresses, while 35% are open to sharing their phone numbers. Notably, one in five consumers is willing to divulge purchasing history and personal preferences, underscoring the growing demand for tailored experiences facilitated by GenAI advancements. However, this exchange of data is not without conditions.
44% of digital consumers are willing to disclose their phone locations to retailers and restaurants in return for discounts and other incentives, highlighting their preference for mutually beneficial strategies
Source: Euromonitor International’s Voice of the Consumer: Digital Consumer Survey (fielded March to April 2024)
Furthermore, consumer preferences indicate a leaning towards guided shopping experiences, with 41% expressing that ads based on their current phone location would assist them in making purchasing decisions.
All of this is driving the greater integration of GenAI into retail solutions, where the technology is playing an increasingly pivotal role in creating more personalised consumer experiences across various touchpoints, ensuring a seamless omnichannel journey and leveraging predictive analytics to deliver personalised messages and products. Consumers appear to be increasingly well-informed about the capabilities of GenAI solutions to enhance their experiences, and importantly, they are open to these advancements.
When it comes to brands and retailers, a majority recognise GenAI as a technology worth exploring, investing in, and continually researching to find the best applications.
49% of industry professionals indicated their companies are planning to invest in generative AI
Source: Euromonitor International’s Voice of the Industry: Digital Survey (fielded November 2023)
Despite initial enthusiasm, however, many retailers acknowledge that the hype around quick revenue-boosting solutions with GenAI may be overstated. Instead, successful implementation requires a long-term investment strategy aligned with retailers' specific targets and existing data assets. Effectively harnessing AI capabilities demands a solid data foundation and scalable technology to support personalised customer interactions. Collaboration between IT, business, and store teams is crucial for the successful integration of AI, enabling companies to leverage data and advanced technologies for meaningful customer engagement.
There is a risk that traditional retailers may feel pressured to adopt GenAI hastily or risk falling behind, even when they may not be fully prepared for such a technological shift. Overcoming challenges such as extensive employee training, ensuring AI models deliver quality results, and gaining organisational support are critical steps to achieving significant outcomes with GenAI.
Nevertheless, there are already some clear examples of successful GenAI solution implementation. At Germany-based fashion e-commerce retailer Zalando, a GenAI-powered shopping assistant offers hyper-personalised interactions with customers, managing millions of interactions concurrently. To date, it has logged over 500,000 conversations, with engagement times lasting three times longer than traditional search bar inputs. This assistant translates customer inspiration into actionable search queries, enabling live discussions such as "what to wear for my sister's wedding" to deliver tailored shopping experiences. Another illustration is Amazon's utilisation of GenAI to aggregate and analyse customer reviews. Through this technology, potential customers can interact with a GenAI-powered large language model (LLM) by asking specific questions and receiving personalised responses. For example, shoppers might inquire about the noise level of a washing machine in natural language and receive tailored information in response. This approach enhances customer decision-making by providing detailed, context-aware insights derived from AI-driven data analysis.
GenAI offers significant opportunities to reshape retail by enhancing core business functions, elevating customer service, and generating personalised content. However, this requires a strategic revision of priorities and methodologies. It is vital for retailers to develop a comprehensive roadmap that specifies goals, outlines the resources needed, and identifies the essential talent for implementing GenAI solutions to meet their business objectives. Forget the short-term hype; this approach demands long-term investment and strategic thinking.
To delve deeper into how businesses are utilising GenAI, read our New Concepts in Retail briefing for detailed case studies or listen to our Consumer trends webinar where intuitive commerce is a key topic on the agenda.