Putting the ‘AI’ in Retail Could Give Firms Next-Generation Wins

Perhaps no industry has been upended more by the world’s ongoing digital transformation than retail.

Walmart said on a Thursday (Aug. 17) earnings call discussing its second-quarter  earnings results for fiscal year 2024 that weekly active digital users grew by more than 20%.

Meanwhile, Target reported in its Q2 2023 earnings results Wednesday (Aug. 16) that digital comp sales were down 10.5%.

Now, generative artificial intelligence (AI) has been thrown into the mix, providing retailers with tools to augment and maximize their workforce while driving an increasingly optimized customer experience, ideally leading to increased sales and profitability.

The twinned trends of digitization and evolving customer expectations and behavioral norms have created a need for retailers in today’s environment to pay greater attention to enhancing and differentiating their omnichannel customer experience with personalized and often digital touches.

Emergent technologies and innovations are allowing today’s leading retailers to deliver increasingly personalized experiences, improve inventory management and prevent fraud, and more generally optimize their operations.

Enhanced Customer Satisfaction Leads to Increased Sales and Profitability

The growing adoption of digital channels by consumers to do their shopping, including across third-party marketplace offerings, provides a landscape for retailers to leverage today’s innovations, including AI, to enhance customer experience and capture next-generation efficiencies.

“We’re taking large language models developed by our partners and by the broader tech community and adding retail context to create models that are uniquely suited to the needs of our customers, our associates and our supply chain,” Walmart CEO Doug McMillon said to investors on the Thursday earnings call. “We’ll unlock value for shareholders through the combination of our physical automation work, with our data, and increasingly intelligent software.”

Generative AI can wear many hats in retail. It can be used in concert with machine learning (ML) and computer vision (CV) tools to automate and support tasks such as order picking and scheduling, support customer service with 24/7 chatbot-driven assistance, create personalized reward programs and other marketing efforts, or integrate into forecasting dashboards to improve inventory management.

“There is a great opportunity for us to be more anticipatory and to be more relevant to [customers] and communicate in a way that shows that we know who they are in a healthy way while protecting privacy,” McMillon said on the call. “So, having that data go to work with our own large language models and using large language models from others presents a tremendous opportunity. And I think it’ll unlock a lot of use cases on the customer and member side.”

“Ultimately, the power of generative AI or any technology is only as good as the data that powers it,” he added. “Our data assets are unique, and we’re excited about the potential to leverage them in new and impactful ways.”

Read also: Albertsons, Other Grocers Expand Digital Offerings to Boost Omnichannel Adoption

Enhanced Personalization Through AI and ML

Data-driven insights captured from digital engagements enable retailers to recommend products tailored to each customer’s unique tastes, increasing the likelihood of conversions and customer satisfaction.

For instance, AI-powered recommendation engines can suggest complementary products based on a shopper’s previous purchases.

PYMNTS’ study “ConnectedEconomy™ Monthly Report: The Urban-Rural Health Divide Edition,” revealed that digital participation in the grocery sector is increasing across all income brackets, with low-income consumers (those who earn less than $50,000 a year) growing their engagement the most, up 8% year over year.

From enhancing personalization and providing frictionless shopping experiences to streamlining supply chain operations and creating personalized marketing strategies, innovative technologies empower retailers to not only meet but exceed the demands of their customer audience.

As technology continues to advance, the collaboration between retailers and these transformative technologies is expected to drive the industry forward, reshaping the way we shop and interact with brands.

For all PYMNTS retail coverage, subscribe to the daily Retail Newsletter.