Creative and innovative ways leading retailers use AI

One of the most influential technologies for retail in 2024 will be AI. The speed at which AI tools emerged, like ChatGPT, this past year was nothing short of astounding. Likewise, the ease of use of these solutions contributed to their proliferation; regardless of technical proficiency, whether someone is a seasoned coder or marketer crafting an email campaign, various professionals can benefit from utilizing AI.

The use and propagation of AI will continue to increase this year. To stay competitive, brands must begin implementing AI while noting key AI use cases from industry leaders.

Here are some ways innovative retailers already use AI to enhance inventory management, enrich customer loyalty programs and drive personalized in-store and online experiences.

Enhance inventory management

One of the most game-changing benefits of AI is its ability to quickly analyze enormous amounts of data and extract valuable insights that empower retailers to make real-time, data-driven decisions. Previously, it was unheard of to actually find the needle of information inside the haystack of data — especially when considering how many channels and touchpoints retailers had to organize.

Now, thanks to AI, retailers can formulate answers from disparate information, make educated spending decisions and extrapolate data from one customer to larger cohorts.

Retailers can also leverage AI in the form of predictive analytics to collect insights from massive amounts of data for better inventory management. Specifically, AI-powered business intelligence tools can analyze industry, competitor and consumer data to forecast demands and trends. Retailers can use this information to make proactive changes and adjustments to optimize inventory levels, avoiding markdowns and stockouts. The retail giant Walmart uses its AI-driven systems to determine the quantity and timing of its inventory flow, including where specifically to distribute. Its AI solutions also help it identify customer demands in different geographic zones, down to the zip code.

Improve loyalty programs

Customer loyalty will be essential this year. In particular, those retailers that understand when, where and how to engage with customers will encourage loyalty, thereby increasing retention and boosting revenue. As such, AI can help retailers bolster loyalty programs by streamlining the collection and processing of customer data through behavior analytics and sentiment analysis.

These AI-driven technologies enable retailers to understand customer needs, preferences and demographics and create tailored loyalty programs that deliver individualized rewards, promotions and product recommendations.

Sephora's loyalty program, Beauty Insider, employs AI to greater effect, significantly improving the customer experience through tailored product recommendations and even personalized beauty advice. For example, through predictive analysis, Sephora can analyze if a customer has been looking at a certain product and offer them a discount.

Elevate online experiences

Despite the uptick in in-person shopping, online shopping isn't going anywhere. Since the pandemic, customers have come to value the convenience, objectivity and speed of digital experiences. AI is vital to enhancing these digital experiences, as it can help replicate some of the features and characteristics of in-store experiences. For example, based on customer purchase history, retailers can emulate in-store up-and-cross-selling opportunities by providing personalized recommendations. Similarly, Sephora's Virtual Artist feature, part of the Sephora mobile app, uses AI and facial recognition technology to give users a virtual makeover, allowing them to experiment with an endless library of choices from the convenience of their phone.

Augment in-store experiences

Retailers can also augment in-person shopping with AI — namely, generative AI (GenAI). GenAI's ability to quickly distill insights into bite-sized summaries could enable retailers to provide a GenAI-based app, which would serve as an in-store assistant. This assistant would analyze a store's layout, inventory data and the user's dietary restrictions to make real-time recommendations, generate curated shopping lists and provide alternatives to out-of-stock items.

Additionally, AI can enable retailers to deliver dynamic, real-time promotional content to in-store shoppers via digital signage. Rotkäppchen-Mumm, the largest German producer of sparkling wine, uses AI and many other technology solutions to ensure the highest quality shopping experience. Its in-store signage, for instance, will sync with sales data and other analytics to prevent out-of-stock items from appearing on displays and potentially misleading customers. Likewise, the digital signs will choose products based on the audience, time of day, time of year (holidays) and even weather conditions.

Keeping the customer first

The retail industry continues to undergo considerable change, and AI will undoubtedly contribute to this evolution in 2024. Regardless of what direction the retail sector goes, the consumer will remain.

To that end, it is paramount that retailers ensure the way they use AI always helps rather than hinders the shopping experience, whether that's preventing stockouts through inventory management or providing personalized product recommendations.