Director Client Data Solutions
Data & AI Evangelist
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Generative AI, once a concept from science fiction, is now a tangible force that is reshaping all industries across the globe, particularly retail. This transformative technology is driving a profound change, not just in the products on the shelves, but also in how we experience brands. Its potential is boundless, and it’s an exciting time to be part of this evolution.
Moreover, the potential economic impact of generative AI in the retail and consumer goods industry is nothing short of impressive. According to a McKinsey report, generative AI has the potential to generate between $400 billion and $660 billion in annual value for retail and CPG companies. This staggering figure presents a golden opportunity for businesses to significantly enhance efficiency, boost revenue, and redefine customer experience.
Before we delve deep into how generative AI is impacting the retail industry, let’s understand what exactly generative AI is.
What is generative AI and how does it work?
While many are now familiar with what is Generative AI, it’s useful to understand that Generative AI is a branch of artificial intelligence capable of creating new and realistic content. This includes diverse outputs, such as music, video, image, speech, software code, and more, from a wide range of trained and unlabeled data. If you’re curious about traditional AI vs Generative AI, it’s important to note that they serve distinct purposes. Unlike traditional AI, which primarily classifies or analyzes existing data, generative AI can generate original outputs that mimic human creativity in response to a written user’s prompt.
Generative AI algorithms are built on various foundational models. While Large Language Models (LLMs) are used for text-based inputs, other models like GANs (Generative Adversarial Networks) are employed for image generation. Large Language Models (LLMs) are highly advanced algorithms trained on vast amounts of text data. This extensive exposure enables them to generate human-quality text that sounds natural, accurately translate languages, write different creative content, and answer complex questions informatively. In other words, you can say that generative AI large language models work like the brains behind many generative AI systems, giving them the language skills needed to perform various tasks.
But, what do business leaders think about generative AI?
Results from a survey showed that almost 60% of business executives strongly advocate generative AI. Executives see the high potential of gen AI in enhancing customer experience with personalized product recommendations, creating creative content for marketing campaigns, and transforming customer interaction with chatbots – all through the power of data and AI.
What’s remarkable is how rapidly businesses are adopting generative AI. The launch of ChatGPT (which saw a remarkable surge in popularity in just five days) has supercharged interest in generative AI, and business leaders are eager to see how it can drive value for their businesses.
Across industries- from retail and healthcare to finance and manufacturing—companies are recognizing the value of integrating AI into their operations. Early adopters are seeing significant benefits, and this is driving a broader trend of AI adoption. But the question here is, what benefits drive rapid generative AI adoption? The answer lies in increased efficiency, innovation, and customer satisfaction.
Businesses are realizing they can do things faster, smarter, and better with generative AI. Whether it’s creating personalized marketing campaigns, optimizing supply chains, or accelerating product development, the possibilities seem endless. However, as businesses witness tangible advantages, more businesses are moving to implement AI solutions in their strategies.
Transforming retail: The impact of generative AI in retail
As we explore deeper into generative AI, it becomes evident that the impact of generative AI for retail is growing at an unprecedented pace. The retail sector, once defined by traditional models, is now undergoing a metamorphosis, driven by the power of generative AI to create, innovate, and personalize at scale. Considering the impact of generative AI in retail, 93% of retail CxOs are planning to scale up their investment in AI and generative AI over the next 3–5 years—in terms of time, money, and human capital.
Let’s now explore how generative AI in retail industry is helping retailers remain competitive with the transformative impact of generative AI.
Enhanced shopping experience
Generative AI is taking the shopping experience to the next level by making it more personalized and engaging. With gen AI chatbots acting as virtual shopping assistants, shoppers now have constant access to tailored recommendations, detailed product information, and support. These conversational bots use advanced natural language processing (NLP) and machine learning to interact with customers in a human-like manner. They provide personalized recommendations and even assist with completing purchases. This makes the shopping experience more efficient and enjoyable, leading to higher conversion rates over time.
Imagine browsing for a new phone online, and a gen AI chatbot instantly suggests models based on your preferences and previous purchases. AI analyzes customer behavior and preferences to offer personalized product suggestions. For instance, if a customer frequently buys home decor items, the system recommends complementary products or new arrivals in that category.
Personalized marketing
Personalization holds great potential in the retail sector, particularly by customizing marketing messages. Gartner predicts that by 2025, 30% of the marketing messages will be generated synthetically to feel more organic and personal.
A significant benefit arises when customers interact with generative AI-based chatbots on websites, as their queries help build detailed customer personas. This, in turn, enhances personalized marketing efforts and product recommendations. The result? More effective marketing, from personalized emails to dynamic website content and social media posts that truly resonate with customers, keeping them engaged and driving higher conversion rates.
For example, a retail brand can send personalized product recommendations or special offers based on a customer’s past purchases and browsing history.
Improved customer service
Customer service is another area where generative AI is doing great wonders. Generative AI-powered chatbots and virtual assistants are transforming how businesses handle customer interactions by addressing a wide range of queries. Gartner reports that by 2027, about a quarter of organizations will rely on chatbots as their main way to handle customer service, making them the go-to solution for helping customers.
For instance, a retail company can implement a Gen AI-powered virtual assistant on their website and mobile app. This assistant can handle a variety of tasks, such as:
- Answering common questions
- Assisting with order tracking
- Processing returns and exchanges
Read more: The retail revolution with generative AI for gaining competitive edge.
New product development
Generative AI is revolutionizing product development in retail by accelerating innovation and reducing costs. By leveraging AI, retailers can streamline the research process, rapidly extracting insights from diverse data sources to identify successful product concepts more efficiently.
Generative AI enhances internal consumer research through advanced querying, summarization, and insight generation, allowing for quicker adaptation to market trends and consumer preferences. It also simplifies the creation of copy concepts and product claims for testing, as well as generating visual concepts for product and packaging designs. This technology enables faster iteration and refinement, helping retailers bring new products to market with greater agility.
Conversational commerce
Retailers are increasingly leveraging generative AI for conversational commerce to boost sales and enhance the shopping experience. By implementing virtual stylists, retailers can offer real-time, personalized assistance to customers. These AI-driven assistants can suggest products based on size, style preferences, and even provide style inspiration through influencer images.
Generative AI helps address common issues like search abandonment, which costs retailers over $2 trillion annually. Many consumers struggle to find what they need using traditional search functions, with only 1 in 10 finding exactly what they’re looking for.
Generative AI use cases: Real-world applications in retail
As generative AI moves from theory to practice, its impact on the retail sector is becoming more apparent every day. The generative AI use cases and real-world applications are clear evidence of the profound impact this technology can have. It enables businesses to innovate, personalize, and operate more efficiently than ever before.
Let’s walk you through the top use cases of Generative AI from leading retailers to show how this groundbreaking technology is driving innovation in different industries.
Amazon: The right product at the right time
Let’s begin with one of the prominent Generative AI use cases in retail by looking at Amazon, the world’s largest retail giant. Amazon with its gen AI shopping assistant analyzes customer preferences, purchase history, and browsing behavior to offer personalized product suggestions to customers. This AI-driven experience ensures that shoppers see products they’re likely to be interested in, making their shopping journey smoother and more enjoyable.
Walmart: Shop as fast as you talk
Walmart, the world’s largest retailer, has developed a generative AI-powered search engine across its website and iOS and Android devices to understand the context of a shopper’s query and generate personalized responses. In addition to that, Walmart Voice is another convenient feature, allowing customers to connect their mobile devices and smart speakers to their Walmart account and speak out loud what they want to order. This makes it easier for shoppers to reorder their most common purchases without a hitch.
Join the generative AI revolution with Confiz
As generative AI continues to evolve, its potential to revolutionize the retail industry is limitless. Businesses that embrace this technology early on will be well-positioned to thrive in the future. However, as more businesses recognize its potential, the adoption of generative AI will likely accelerate, opening new avenues for growth and transformation across the industry.
Not sure where to start with Generative AI? Our Gen AI Kickstart Program is the perfect place to begin. Over an 8-week journey, you’ll work closely with our team of experts to explore the potential of Generative AI. You will establish the feasibility of a Gen AI-powered conversational chatbot and develop your first Gen AI use case for your business.
Have more questions? We’re here to help! Reach out to us at marketing@confiz.com to learn more about our services or kickstart your Gen AI journey.
