What Generative AI Means For Retail
What a difference six months makes. Until late last year, few people outside of cutting-edge artificial intelligence had even heard of Large Language Models or generative AI.
Now, of course, it’s a different world. When OpenAI revealed ChatGPT in late 2022, it created an explosion of global interest and excitement on a scale we’ve rarely seen before.
Since then, companies like Google, Microsof, and Meta have created their own large language models.
It seems everyone, everywhere — from school students to seniors to C-suite executives — is talking about how it’s going to change everything.
They’re not wrong. Generative AI represents a step change in capability because it’s both incredibly powerful and incredibly flexible. And it’s that adaptability which means it’s going to reinvent the way companies run their businesses, serve their customers, and get work done.
Retail is right at the center
For retailers, this is a once-in-a-generation opportunity. Embedded into the enterprise digital core, generative AI will transform their ability to optimize tasks, manage data, create faster insights, innovate with new experiences, augment front-line workers, and connect and communicate with customers.
Accenture’s Technology Vision 2023 research found almost all (96%) retail executives are saying they’re very or extremely inspired by the new capabilities offered by foundation models (the technology that underpins generative AI applications like ChatGPT).
The same research found more than nine in ten executives saying foundation models will play an important role in their retail strategies in the next three to five years. And over half of those surveyed already have their eyes on generative AI experiments in areas like customer support and process automation.
It’s not hard to see why the industry is so excited. Let’s consider just a few of the ways retail will be impacted.
We’ve all seen how effective ChatGPT can be at conversing, answering questions, and summarizing information in a natural, engaging, and relevant way. It’s easy to see how this could be extended to retail customer support — responding to queries, explaining products, offering product recommendations, and more.
Just think, every role in every retailer has the potential to be reinvented, with people working with “AI co-pilots” becomes the norm. We can also expect a large number of new tasks for people to perform, such as ensuring the accurate and responsible use of AI systems. It’s why organizations that invest in training people to work alongside generative AI will have a significant advantage.
Leading brands are already pushing ahead with this kind of AI-backed digital experience. Macy’s, for example, uses AI-powered shopping assistants to improve customer experiences by allowing shoppers to have their questions about product availability and location automatically answered.
What about personalization? Brands like Starbucks and others have been using AI algorithms to suggest personalized product recommendations for several years now. But generative AI’s ability to crunch vast amounts of data and provide insights in real time will take this to a whole new level.
That’s all the more important given how difficult retailers have traditionally found it to bring together all the disparate insights they have on their customers in a coherent way. Generative AI will be the key that unlocks that vision — long talked about but as yet unrealized — of providing hyper-relevant retail suggestions to each customer in each moment.
New ways to run the business
One of the things generative AI excels at is summarizing insights from a wide variety of unstructured data sources. This makes it ideally suited to tasks like demand forecasting and inventory management.
Using sources like historical sales data, market trends, weather conditions, and social media sentiment, retailers will be able to get a much more accurate picture of upcoming demand, enabling them to minimize stockouts, reduce excess inventory, and improve operational efficiency.
There’s also great promise in areas like product design. By fine-tuning generative AI on existing designs and other data sources, retailers will be able to generate brand-relevant and on-trend designs instantly. The technology even opens up the prospect of customers customizing their own products for their own needs on demand.
Stores, too, will be transformed
In recent years, retailers have been focused on blending physical and digital experiences in their stores. This is another area that generative AI promises to radically enhance.
Take merchandising. By analyzing product attributes, historical sales and customer preferences, generative AI will be able to suggest optimized store layouts and product placements, as well as provide enhanced personalized wayfinding experiences to shoppers.
Imagine, for example, a generative AI-based app that guided you around your local store, proactively recommending products relevant to your unique preferences and needs in each moment — whether that’s a sandwich that fits your current dietary regimen or the latest assortment from your favorite fashion brand.
And what about virtual try-ons? With generative AI able to produce extraordinarily lifelike images on demand, apparel and beauty retailers will be able to provide “magic mirror” experiences that show how different products, styles and colors would fit a customer — and even predicting how that fit would change over time.
Infinite possibilities
We’re only at the start of the generative AI revolution. And we’ve only had a taste of the true impact on retail. But the technology is advancing incredibly fast. It’s why it’s critically important to ensure AI is used responsibly. That means setting guardrails for acquiring, refining, and deploying data. It also means thinking through cybersecurity operations. Managing regulatory and privacy risks is a good start, and retailers can take it a step further by making certain the technology they’re using is responsible by design.
There’s little doubt that, soon, strong generative AI capabilities will be a baseline requirement for any retailer that wants to keep pace with its peers.
It’s why I think retail leaders should lean in strongly on this exciting new technology — and start exploring how it can transform the way they run their businesses and serve their customers. It’s an overused phrase but this time ‘test and learn’ can be a true strategy for how to lean-in and keep-up with the latest AI trends.
