Before the recent explosion of generative AI, tech-savvy retailers had been using transformative technologies to automate tasks and understand consumer behavior for decades. Insights based on future and consumer trends, and predictions, gave retailers insight into how to improve customer experiences and become more efficient in their sales and operations.
While AI is already being used in personalized recommendations and online customer service, many consumers still don’t fully trust it. Salesforce is addressing this problem by ensuring trustworthy AI with a human at the helm, designing powerful controls that allow humans to focus on the highest-risk AI outcomes.
This is crucial because many knowledge workers fear humans losing control of AI, and while people trust AI to do a significant portion of their work, they believe that more human oversight would build trust in AI. This lack of trust is a challenge retailers must address so that AI can reach its full potential as a trusted helper.
So where does the retail industry stand with regards to AI and how can retailers focus more on building consumer trust and developing AI responsibly to fully embrace this new era?
Area Vice President, Director of Retail, Consumer Goods and Travel, Transportation and Hospitality at Salesforce.
Generative artificial intelligence in retail
A new study from Salesforce and the Retail AI Council shows the shift in how AI is impacting consumer behavior. It is also changing the way retailers interact with customers by offering personalized offers, suggesting products just for them, and using AI for chat services. Retailers are embracing generative AI and making it a core element of how they run their businesses.
The majority (93%) of retailers say they are already using generative AI for some form of personalization, enabling customers to find products and make purchases faster through natural language interactions across retailer channels such as digital stores and messaging apps. For example, a shopper can tell a retailer’s generative AI assistant that they need supplies for a camping trip. Based on the customer’s existing data such as location, preferences, and previous purchases, a recommendation can be generated to purchase a waterproof, windproof tent in their preferred color along with a link to make immediate payment and pick up the product at the local store.
By early 2024, the majority (92%) of retailers’ investments were going into AI technology, however, AI is not new to the industry; two-thirds (59%) of retailers are already using it to help shop assistants make product recommendations, and 55% are using digital assistants to help customers shopping online.
From demand forecasting to analyzing customer reviews, retailers are leveraging AI to improve the consumer experience. Demand forecasting, a cornerstone of efficient supply chain management, leverages AI algorithms to predict customer preferences and optimize inventory levels, reducing markdowns and improving operational efficiency. AI-powered recommendation systems are another key application transforming retail experiences. Online retail giants use sophisticated algorithms to personalize product recommendations based on users’ previous order history and profiles, driving cross-selling and improving customer satisfaction.
Barriers and ethical considerations
Despite its potential, the integration of generative AI in retail faces significant barriers, particularly concerns related to bias in AI outcomes. The urgency of establishing clear ethical guidelines for the use of AI in retail is evident, highlighting a critical gap between adoption rates and ethical governance. Strategies that emphasize transparency and accountability are essential to foster responsible AI innovations.
Half of retailers indicate they have the capacity to fully comply with strict data security standards and privacy regulations. This readiness underscores the industry’s commitment to protecting consumer data in an ever-evolving regulatory environment.
Retailers are increasingly aware of the risks associated with AI integration. The survey identifies bias as a top concern, with half of respondents expressing apprehension about AI algorithms producing biased results. Additionally, retailers identify hallucinations (38%) and toxicity (35%) as significant risks linked to the implementation of generative AI, highlighting the need for robust mitigation strategies.
The majority (62%) of retailers say they have established guidelines to address transparency, data security and privacy issues associated with the ethical use of generative AI. These guidelines aim to ensure responsible use of AI, emphasizing trustworthy and unbiased results that respect ethical standards in the retail sector.
These insights underscore the dual imperative facing retailers: leveraging AI technologies to improve operational efficiency and customer experiences, while maintaining strict ethical standards and mitigating associated risks.
Consumer perceptions and the future of AI in retail
As AI continues to redefine the retail landscape, it will be critical to take ethical considerations into account alongside technological advancements. To combat consumer skepticism, companies can focus on transparently communicating how AI is being used and making it clear that humans, not technology, are in charge.
Whether a retailer’s goal is revenue growth or bottom-line efficiency, AI is a crucial addition to a retailer’s technology stack – but to truly embrace AI, retailers must bring consumers along on the journey and earn their trust.
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