How Generative AI Is Reinventing Retail

There is a lot of global interest in generative AI these days. And for good reason. Generative AI is already creating countless new opportunities for retailers and consumer brands. It represents a step change in capability because it’s both incredibly powerful and incredibly flexible. And it’s that adaptability that will help leaders reinvent the way they run their businesses, serve their customers, and get work done.

Until recently, few people outside of cutting-edge artificial intelligence had even heard of large language models or generative AI. In late 2022, OpenAI revealed ChatCPG. A few months later, companies like Google, Microsoft, and Meta have created their own large language models.

From the dining table to the boardroom table, it seems everyone, everywhere are talking about how generative AI is going to change everything.

They’re not wrong.

Retailers are taking notice

For retailers, generative AI presents limitless opportunities.

 For retailers and brands, the question is not whether they should embed AI into their organizations digital core – it’s about how and when. 

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 10 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.

By embedding it into the organization’s 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.

It’s not hard to see why the industry is so excited. Here are a few of the opportunities retailers can put into action.

New ways to engage with customers

Every role in every retailer has the potential to be reinvented, with people working with “AI co-pilots” becomes the norm.

For instance, we have seen some of the ways ChatGPT can be effective at conversing, answering questions and summarizing information in a natural, engaging and relevant way. By extending generative AI to retail customer support, the technology could help respond to queries, explain products, offer product recommendations, and more.

On the flipside, we can also expect new tasks for people to perform, such as ensuring the accurate and responsible use of AI systems. Organizations that invest in training people to work alongside generative AI, will have a significant advantage.

We are already seeing early examples of retailers 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.

And 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.

It’s going to be even 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

Generative AI is ideally suited to tasks like demand forecasting and inventory management as the technology excels at summarizing insights from a wide variety of unstructured data sources.

By 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. This will help minimize stockouts, reduce excess inventory, and improve operational efficiency.

There is also great promise in areas such as 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 also presents an opportunity to allow customers to customize their own products on demand.

Enhancing stores

Generative AI promises to radically enhance the ability for retailers to blend physical and digital experiences in their stores.   

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, being guided around your local store using a generative AI based app that proactively recommends 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. 

Responsible AI

We’ve only had a taste of the true impact generative AI is having 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.

It won’t be long before having strong generative AI capabilities will be a baseline requirement for any retailer that wants to keep pace with its peers. Successful retailers will be those who lean in strongly on this exciting new technology — and start exploring how it can reinvent every part of their business.