Artificial intelligence (AI) is reshaping numerous industries, and retail is no exception. A notable 69% of retailers have seen revenue spikes thanks to AI adoption. Analysts project AI-powered commerce solutions to become a $16.8 billion market by 2030.
If you’re thinking about adding AI to your tech stack, this article will help you understand the potential opportunities, pitfalls, and how to get started.
What is AI in Retail & Commerce?
AI is software that’s coded to learn and improve as it works. The technology has been around for a while, but “generative AI” has been making waves since ChatGPT was introduced in late 2022.
While traditional AI could perform specific tasks based on predefined rules and patterns, generative AI does much more. Given a simple text-based prompt, it can create entirely new data that resembles human-created content.
AI has exploded in the last year and is fundamentally changing the way that people shop. The following examples highlight several key retail applications:
- Personalization for customers
- Purchasing and inventory management
- Content creation
- Chat-based customer service
- Webshop optimization (pricing optimization, custom discount codes)
- Product recommendations
Because retail is so multifaceted, the options for incorporating AI into your company’s strategic approach are seemingly innumerable. So what are the best opportunities for retailers right now?
What Are the Biggest AI Opportunities for Retailers?
Given the vast array of AI implementation strategies, you should ask yourself where it will have the greatest impact and ROI. We have pinpointed a few areas with great opportunities for retailers.
Better Personalization for Your Customers
Personalization means adapting the shopping experience to suit the needs and tastes of the customer. This can be beneficial because a personalized experience encourages customers to buy. For example, AI can analyze the products that customers view and purchase, then create an automated feed of personalized product recommendations. The eCommerce giant Temu has done exactly that in their app – with great success.
Enabling a Reverse-Manufacturing Model
For years now, retailers have been looking for ways to lower overproduction and reduce waste. It’s good for the environment – and the bottomline. Experts have lauded reverse manufacturing as a solution to this for some time.
So what is reverse manufacturing? In essence it’s producing products as and when customers want them. However, it comes with some serious complications. If you manufacture a product just as a customer orders, it can take weeks – or even months – for them to receive their item.
With AI, companies are taking a new approach to overcome this challenge.
Retailers are ordering small batches from the manufacturer – AI then analyzes customer response and immediately orders more high-potential products. Because AI can easily analyze a huge amount of data very quickly, it is ideal for this kind of work. This is another tactic that Temu uses to cut costs and boost sales.
Creating Retail Marketing Content With AI
Could AI make your marketing more creative and efficient? Although it’s not perfect yet – any quick scroll on Facebook will show you that – with the right approach AI could supercharge output and cut production costs.
AI-Generated Imagery: Imagine skipping the time and cost of photoshoots. AI can now create stunning, lifelike images of your clothes, perfectly styled for different audiences. It’s important to ensure the images remain authentic and don’t misrepresent your product.
Automated Ad Copywriting: AI can craft personalized ad copy that speaks directly to your customers’ tastes. You’ll still want human oversight to maintain brand tone and creativity – but AI can do a lot of the heavy lifting for you.
Video Creation: Virtual models and AI-generated videos can showcase your collection in different settings—all without needing a studio. But keep in mind, video is still the weakest aspect of AI content creation. It often lacks emotional connection and realism that human-led content can offer.
While AI opens exciting, creative possibilities for fashion marketing, balancing automation with authenticity is key to keeping your campaigns effective and genuine. The key is to feed your AI tool lots of your own content, so it can effectively mimic your own style and tone. Detailed briefs and exacting human oversight are essential – otherwise your customer could clock something being off and lose trust in your brand.
Better Chatbots
Chatbots have been around for ages, but the next generation is powered by generative AI.
AI chatbots can offer customers a better user experience and a new level of personalization. Because they use natural language, they can answer more complex questions and formulate detailed responses based on their training.
AI chatbots also make it easier to localize a website. Because it can function in multiple languages, a chatbot can be used on a multilingual website without needing to be translated.
AI-Powered Voice Commerce
Voice commerce is big business. Some of the most recent analysis showed that in 2021, it was already generating $4.6 billion in revenue worldwide, and that number is forecasted to grow to $19.4 billion by 2023. A survey of global consumers found that 41% regularly bought products using a smart home voice assistant.
AI is driving this technology, offering many of the same benefits as sophisticated AI chatbots. As voice assistants get smarter, it will create an ever-growing number of opportunities for brands.
Voice commerce is already being used in many creative ways. For example, there is a growing TikTok trend of people filming themselves while using their Alexa to order free samples. This video has 13.5 million views, and the comments section is flooded with people asking for an unboxing. And as AI develops, brands will undoubtedly be able to create on-brand voice assistants that better reflect their company’s personality.
Building Trust: Is AI in Retail a Benefit or a Blocker?
The holy trinity in marketing is getting customers to “know, like, and trust” a brand. In most cases, trust is essential to getting the sale.
How AI Can Build Customer Trust
AI can build trust in many ways – mainly by optimizing customer experience and service.
- AI empowers brands to craft targeted content that resonates with their audience
- It can assess content and support emails to ensure they align with the brand’s voice and values
- AI suggests topics that customers might want to hear about, along all stages of the customer journey
- It helps retailers to optimize content for SEO, which increases brand awareness and, by extension, trust in the brand
Generative AI can also be used to improve customers’ brand experience. It can offer targeted product suggestions, serve as a sophisticated chatbot, and more. By doing so, it builds trust as customers get exactly what they want without waiting for a customer service agent.
How AI Can Kill Customer Trust
AI’s ability to provide personalized communication is great, but only up to a point. If the webshop or chatbot knows too much about the customer, it can feel intrusive. Brands need to find a balance between helpful and creepy.
AI still feels scary to some consumers. They are worried about how their data and shopping history are being used.
80% of US consumers say they are concerned about their personal data being used to train AI models. Brands should be mindful of data privacy, especially in Europe where the GDPR is in force.
Moreover, people have many fears about AI in general, questioning whether it might impact them personally or be used in sophisticated scams and fraud attempts. So while people may appreciate the convenience that AI-powered retail offers them, they are wary of the technology itself.
AI in Retail: Balancing Innovation with Integrity
Retailers who adopt AI technologies are positioned to thrive in an increasingly competitive market.
AI adoption can enhance customer experiences, streamline operations, and help companies develop innovative business models. However, it is essential to use AI responsibly.
While AI offers unprecedented opportunities for personalization, efficiency, and growth, it brings with it data privacy challenges and ethical considerations.
As a retailer, you need to carefully balance the need to innovate with the need to protect consumer data and maintain your customers’ trust. If you’re unsure about how to best implement AI technology in your company’s eCommerce stack, you might consider teaming up with an experienced partner who can guide you through the process and ensure that you follow industry best practices.
Want to learn more about the latest tactics of eCommerce giants?
Read the guide “A New World Order: A Guide Temu & Shein – And the Best Practices You Should Steal”.