While the global economy has grown more extensive, accessible, and competitive, AI has significantly transformed the retail industry. Specifically, generative AI in retail is the driving force behind better customer experiences, more personalization, and more intuitive and machine-generated marketing.
Generative AI models draw on millions of bits of data and compute content – text, audio, video, or still images – based on user inputs and instructions. The capacity to create quality content at scale and in a much quicker timeframe than humans could ever achieve can, therefore, bring significant business savings that could contribute to competitive advantage. This blog will discuss the five primary ways it can specifically aid change in retail.
Top Advantages of Generative AI for Retail
First, look at where Generative AI in retail is most impacted. Based on our work with multiple retailers and their GenAI deployments, they’re growing in three key areas:
Streamlining Operations and Cutting Costs
Automating routine tasks and managing inventory effectively will eliminate waste and unnecessary expense. Using the latest market dynamics and customer trends also streamlines and directs product discovery without relying on actual trials or prototyping.
Enhanced Customer Loyalty and Retention
Giving individual customers personalized shopping and recommendations can drive customer satisfaction. Even in a world where maintaining long-term customer loyalty is more complicated than ever, this can be essential to generating robust, steady long-term revenue.
Advancement in Product Creation
The quicker you determine consumer trends, the better you anticipate and refine product development and ideas. From apparel to electronics and beyond, it’s a way for retailers to get high-demand, new goods into the marketplace earlier than others and gain an early first-mover advantage.
The Five Key Areas of Change
What are these benefits doing practically for retail and consumer companies like yours? Listed below are the five key change areas:
1. Improving Customer Experience
Generative AI in retail is improving customer experience and adapting to today’s customers' ever-changing needs in many ways. It’s no longer just virtual shopping assistants that help the customer navigate the sales process that is becoming mainstream – GenAI can do a lot more.
Among them are AI-based shopping assistants that can buy products through chat, virtual try-ons for online clothing shopping, increased customer-centric messaging during the customer journey, and even virtual reality showroom mirrors.
2. Transforming Marketing Strategies
Consumers need relevant content that speaks to their tastes and desires and relies on their purchasing power. Generative AI aids this by bringing a new layer of understanding to the consumer journey and trend and sentiment insights, enabling marketing teams to act more intuitively and intelligently while reducing their overall workload.
To indicate what can be done, IBM Watson AI is being applied to build bespoke marketing campaigns backed up by fine-grained automated content production. Using Watson, some marketing teams have improved click-through rates by as much as 2.5x over standard industry practices.
3. Optimizing Inventory Management
Combining information, past sales, and market trends, Generative AI is already helping accurately predict product demand. As CapGemini reports, the technology is already improving the accuracy of demand forecasts by as much as 10% and giving retailers more control over inventory and supply chain decisions.
Amazon has already tested a GenAI-enabled shopping assistant named Rufus, proving that GenAI is changing how retail works. Though it’s primarily intended to improve the customer experience by displaying personalized product information and recommendations for customers based on previous purchases and browsing, it can also reduce administrative costs. The customer data collected enables you to predict product demand, plan stocking schedules in advance, and improve supply chain management.
4. Enhancing Supply Chain Efficiency
Concerning the above, Generative AI can also be used to make better decisions regarding the logistics of extended supply chains.
GenAI, for instance, will react to unpredictable weather, traffic, and order priority to alter delivery times and routes automatically and ensure efficient delivery. AI insights are also helping us determine where suppliers can improve and clean up third-party waste in the supply chain. These two use cases emerge in the face of extreme disruption, minimizing the impact on customers and providing robustness over the product lifecycle.
5. Implementing Automated Customer Service
One of the biggest causes of customer disappointment is time-consuming, inefficient, or disorganized service. Generative AI is fighting these problems in various channels so that customers get a solution conveniently and on the platform they want.
AI-powered customer service chatbots are perfect for handling the most mundane and relatively simple customer problems without needing a human. Unlike human customer care agents, AI tools can be operational 24/7, so customers don’t have to wait for regular business hours to get the correct answer.
The food company Hello Fresh found that its chatbot “Freddy,” used for customer engagement, targeted marketing, and offers, had been transformative: Generative AI has reduced customer service response times by 76%.
Seize the First-Mover Advantage
Businesses are slowly awakening to the potential of Generative AI. According to a KPMG survey, 65% of US leaders believe that GenAI will significantly impact their companies over the next three to five years. That number, however, drops to 30% for consumer and retail organizations. Therefore, implementing GenAI in today's retail industry can give retailers a significant competitive advantage.