by Amber Hovious, VP of Marketing & Partnerships at Teamwork Commerce
Artificial intelligence (AI) has taken the retail industry by storm, empowering retailers to enhance their operations and performance across several sections of their retail ecosystem, from warehouse to in-store. According to Statista, retailers using AI and machine learning (ML) performed better than their competitors between 2023 and 2024, with an average revenue growth of 8.1%, compared to only 5.1% for retailers who did not use AI or ML solutions.
While AI is proving to be a game-changer in a number of areas within retail, its impact on customer experience is one of the key drivers of its adoption in the industry. In addition to helping retailers create highly personalised experiences, AI also plays a critical role in predictive analytics.
Predicting trends with AI
Consumer needs are ever-changing as technology develops, and retailers must adapt to stay ahead of the game. Amidst these evolving consumer demands, there are often common patterns that emerge, which can allow retailers to predict what trend will come next. The challenge for retailers lies in being able to spot these patterns. For example, analysing historical data helps retailers anticipate the demand for products at a specific time, enabling them to optimise their inventory levels. However, manual processes for analysis are time-consuming and do not guarantee accuracy. As a result, retailers fall at risk of missing sales opportunities.
To address this challenge, retailers have started to lean on AI. As per Statista, 60% of professionals stated that the most popular reason for using AI is to improve customer experience and predict customer behaviour and needs. By integrating AI-powered tools with their customer relationship management (CRM) systems, retailers can quickly and more accurately analyse historical data – such as customers’ purchasing habits, buying frequency, and preferences. As a result, they can predict trends and demand more efficiently and effectively, ensuring they have the right products at the right time to cash in on maximum sales opportunities.
The role of AI in personalising customer interactions
It is nearly impossible to provide tailored customer experiences to thousands of customers without the right technology. AI not only makes it possible but also does so seamlessly. AI-powered virtual assistants and chatbots are transforming the quality of customer service by answering queries or solving problems swiftly, tailoring each interaction in real-time. While AI is a game-changer in online customer service, its impact on the in-store customer experience is significantly valuable too.
Using AI-powered solutions, store associates can personalise their interactions with customers. If a customer often purchases items of a specific colour, AI will identify this pattern quickly and notify store associates, enabling them to make informed and personalised suggestions. This also enhances cross-selling opportunities for retailers, giving them extra knowledge of what their customers prefer.
AI-powered solutions can also alert associates about restocked items that were previously sought after by a customer, enabling them to deliver proactive assistance. This not only increases sales opportunities for retailers but also positively impacts the overall customer experience. Associates can create personalised interactions, making customers feel valued.
AI: what’s next?
Whether virtual assistants capable of personalising recommendations or chatbots offering real-time customer support, AI-powered solutions have redefined how retailers engage with their customers across online and physical stores. Over the next few years, the technology will become an integral part of retail operations, with 91% of retail IT leaders prioritising AI as the top technology to implement by 2026. As a result, AI-powered solutions are likely to dominate several areas of retail.
As AI becomes more sophisticated, its integration into retail operations will only deepen, facilitating seamless, efficient, and tailored shopping experiences for customers and empowering retailers to drive efficiency and accuracy alike.
While AI’s integration in retail is critical, the role of human value in the customer experience cannot be overlooked. Retailers must ensure they do not eliminate the human aspect of their customer experience. Those who can strike the right balance between humans and machines will pave the way for long-term success.
