When it Comes to GenAI, Retail Can’t Put ‘Fun’ Before ‘Fundamentals’

Jessica Binns
·5 min read
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Artificial intelligence was all the rage at last week’s NRF 2024 “Big Show.” But exactly why vendors, visitors and media alike were buzzing about a decades-old technology reveals valuable clues about the retail industry’s priorities for this year and beyond.

AI ambitions

AI is no stranger to retail. It’s the secret sauce behind the computer vision that closely guards cashier-free self-checkout systems, and it powers predictive analytics, giving retail merchandisers a sort of “crystal ball” to strategize smarter future plans. It’s the digital brains that quickly sifts through consumer sentiment, mining actionable insights from treasure troves of customer data. Retail’s love affair with AI positions this market to eclipse $55 billion by 2030. That would make for explosive growth over 2022’s $5.5 billion value, says Forbes Business Insights.

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Even though AI has had its fingerprints all over retail for decades, the technology got an indisputable glow-up when ChatGPT burst into the mainstream near the end of 2022 and made generative AI, better known as GenAI, part of the popular parlance. Virtually overnight, AI—long beloved as an efficient, automating enterprise workhorse—inspired new visions of a technology with the capability to create, not just learn from the models used to train it.

We’re now in the era of artificial intelligence that can predict, and produce—text, video, music and so much more. But is retail ready to make the leap?

For many, the answer is a resounding “no,” or at least “not yet.” Now that they’re gotten a taste of what GenAI can do, however, retailers have a bigger incentive to get their house in order. Failure to do so means they can’t match the rising expectations of consumers who demand next-gen experiences.

Amazon and Apple deserve credit for raising the bar on what everyday consumers believe they should get when interacting with big brands. Millions of people around the globe are comfortable asking Alexa and Siri, the tech giants’ respective disembodied digital helpers, to check the weather, create shopping lists and respond to common question-and-answer queries.

Retail wants to bake a version of this functionality into their websites, turning the e-commerce chatbots of yesteryear into chatbots on steroids that humanize online shopping. Imagine the possibilities if someone browsing your site can tell it, in her natural voice, that she needs a dress to wear to a spring wedding in Napa, replacing her usual process of ticking boxes for color, size, product type and more to filter through an uninspiring static product results page, says Michelle Evans, global lead of retail and digital consumer insights at Euromonitor. GenAI will move retailers closer to delivering on the personalization promise, once and for all.

Research suggests that GenAI will have a massive impact on revenue in the retail and CPG industries, impacting up to $660 billion, according to McKinsey data published in June. Bain says GenAI could automate nearly 30 percent of the labor time in retail. Pwc calls GenAI the ‘“missing link” for data; it can work wonders, but first it needs something to work with.

And that’s why Aptos Retail vice president of strategy Nikki Baird believes 2024 won’t produce much by the way of meaningful GenAI adoptions and deployments. Retail, best known as an industry trying to shake its long-held and well-deserved reputation as a technology laggard, may want to put the cart before the proverbial horse, but there’s no GenAI “fun” without first nailing the fundamentals, says Baird.

D is for data

Many retailers lack the organizational data readiness to make good on impact-driving GenAI investments. Instead, companies in retail will test the waters this year with limited pilot projects, experimenting to see where generative AI can unlock new opportunities while they spend much-needed time sorting out their data warehouses.

The good news? The directive to move quickly on GenAI, and whatever the business needs to make it happen, is often happening at the board level. If there’s friction between business leaders and their peers in IT, top-level leaders will cut through the noise to ensure they’re not left behind in the race to grab a competitive edge with new GenAI-powered features and business models.

Because striving for perfection with data readiness may be a fool’s errand, when new data is created virtually every nanosecond, retailers can ill afford to wait for the stars to align before they explore game-changing GenAI strategies.

Companies like AI leader Microsoft have launched and fine-tuned chatbot toolkits that retailers can use to infuse their e-commerce sites with natural-language utilities. The software giant’s Microsoft Cloud for Retail arm recently updated its “copilot” chatbot with a suite of features aimed squarely at transforming the shopping journey. Canadian Tire Company, one of Canada’s biggest retailers, is putting the finishing touches on an AI shopping assistant chatbot powered by Microsoft’s Azure OpenAI Service. When it launches this spring it will give customers a more intuitive way to evaluate product options when shopping for car tires.

The bottom line

GenAI promises a dazzling world of potent new capabilities. It has the potential to revolutionize various aspects of the retail industry by providing advanced analytics, improving operational efficiency, and delivering highly personalized and engaging experiences for both retailers and customers. Chatbots alone were expected to drive $12 billion in worldwide retail spending last year, according to a Juniper Research report released in June. Those numbers will only grow as GenAI permeates every retail organization around the globe, unleashing a new wave of productivity and possibility in what’s shaping up to be a $30 trillion global retail market, per Statista’s 2030 projections.

As it stands right now, retail’s just getting started.