Personalized deals and offers can be convenient, but they’re hard to come by.
Many consumers are wary about the extent of information that brands and retailers need to provide such relevant offers. But some may be willing to trade data for better deals.
However, many brands and retailers are employing artificial intelligence to influence everything from business operations to marketing in hopes of bettering their bottom lines.
According to the latest issue of the PYMNTS Intelligence “Generative AI Tracker®,” titled “What Generative AI Has in Store for the Retail Industry,” the rise of AI and machine learning represented by platforms like ChatGPT has ushered in a new era of retail personalization. Over 90% of companies now use AI to automate personalization efforts, offering real-time, tailored customer experiences. And while AI provides advantages, businesses must ensure that their models align with customer preferences and values.
Companies in the retail sector, such as Stitch Fix, are embracing personalized styling services to transform the way customers approach shopping.
Stitch Fix aims to stand out among other retailers by blending advanced technology with human stylists, providing customers with a convenient and tailored shopping experience. During the company’s quarterly earnings call in September, Stitch Fix CEO Matt Baer expressed his admiration for the strong bond between the company and its customers. Baer emphasized the significance of client relationships and expressed his commitment to strengthening and enhancing those connections in the future.
The observations came as the company reported a net revenue of $376 million in the fourth quarter of fiscal year 2023.
During the call, Baer said Stitch Fix’s success was rooted in its personalized styling approach. The company employs data science, AI, ML and personalization algorithms to assemble a collection of clothing items customized to each customer’s taste and preferences.
Baer also highlighted the significance of the relationships between Stitch Fix’s clients and their stylists as a crucial element in the company’s success. The connections based on service and trust cultivate brand loyalty, addressing the challenges associated with traditional shopping experiences.
Macy’s, meanwhile, has openly embraced the use of AI. The retailer has adopted the technology in various ways, such as providing smaller stores with streamlined inventory and adjusting stock levels based on holiday demand.
During its latest quarterly earnings call, Macy’s CEO Jeffrey Gennette stated: “We know our customers are looking for value. So, we have simplified our promotions. We are confident the strategic changes we have made will be well received by our customers.”
Foot Locker saw strong financial results over Thanksgiving weekend, and the sneaker and sportswear retailer decided to make a quick pivot in its full-year forecast, showing slightly improved sales trends attributed to its new approach to its retail stores, which aims to offer more than merchandise.
The outcomes originated from its transition to a more personalized strategy starting in Q1 2023 with its “Lace Up” approach. The initiative aimed to build stronger connections with customers and involved the strategic expansion of community-centric concept stores in areas frequented by sneaker enthusiasts.
In Q3, Foot Locker continued its efforts to change things up by moving away from regular malls and trying out newer store formats. Foot Locker President and CEO Mary Dillon said during a Q3 earnings report that the firm committed to give each store a unique identity. During the quarter, Foot Locker succeeded in opening or updating 30 new community and power stores around the world, making a total of 198 stores in these modern styles.
Dillon pointed out that these stores performed well, attracting more customers, achieving higher conversion rates, and having higher average sales compared to the rest of the stores.
While generative AI may be changing the way we shop online by introducing features like virtual showrooms and automated services, PYMNTS Intelligence found that about 39% of businesses struggle to effectively implement personalization technology.
Moreover, 42% of organizations are facing challenges due to a shortage of skilled staff and insufficient training, which hinders them from fully using AI. Another 36% mentioned legal compliance as an obstacle to leveraging AI.
Despite these obstacles, brands and retailers are actively trying to figure out the most effective ways to use AI for themselves and their customers — but they haven’t quite nailed it yet.
Given the rarity of achieving such a seamless experience, consumers are likely to view AI personalization as a unique aspect of their shopping interactions.
For all PYMNTS retail and AI coverage, subscribe to the daily Retail and AI Newsletters.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More