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Before the recent explosion of generative AI into the mainstream, tech-savvy retailers had been using transformative technologies to automate tasks and understand consumer behavior for decades. Insights based on consumer and future trends and predictions gave retailers insight into how to improve the customer experience and become more efficient in sales and operations.
While AI is now being used in personalized recommendations and online customer service, many consumers still don’t fully trust AI. Salesforce is addressing this by ensuring trustworthy AI with a human at the helm, and by designing strong controls that let humans focus on the highest-risk AI outcomes.
This is crucial because many knowledge workers fear that humans will lose control over AI, and while people trust AI to do a significant portion of their work, they believe that more human oversight would increase their trust in AI. This lack of trust is a challenge that retailers must solve for AI to reach its full potential as a trusted helper.
Where does the retail industry stand in the space of AI? And how can retailers focus more on building consumer trust and developing AI responsibly to fully embrace this new era?
Area Vice President, Head of Retail, Consumer Goods, and Travel, Transportation & Hospitality at Salesforce.
Generative AI in retail
New research from Salesforce and the Retail AI Council shows the shift in how AI is influencing consumer behavior. It’s also changing how retailers engage with customers by offering personalized deals, suggesting products just for them, and using AI for chat services. Retailers are taking generative AI and making it a fundamental part of how they run their businesses.
Most (93%) retailers say they’re already using generative AI for some form of personalization, helping customers find products and make purchases faster using natural language interactions across retailers’ channels, such as digital storefronts and messaging apps. For example, a shopper could tell a retailer’s generative AI assistant that they need supplies for a camping trip. Based on existing customer data, such as location, preferences and past purchases, a recommendation to buy a waterproof and windproof tent in their preferred color could be generated, along with a link for immediate checkout and pickup in their local store.
By early 2024, the majority (92%) of retailers’ investment was going to AI technology. But AI isn’t new to the sector: two-thirds (59%) of merchants are already using it to help store staff make product recommendations, and 55% are using digital assistants to help customers shop online.
From demand forecasting to customer sentiment analysis, retailers are using AI to improve the consumer experience. Demand forecasting, a cornerstone of efficient supply chain management, uses AI algorithms to predict customer preferences and optimize inventory levels, reduce markdowns and improve operational efficiency. AI-powered recommendation engines are another key application transforming retail experiences. Online retail giants are using advanced algorithms to personalize product recommendations based on past order history and user profiles, encouraging cross-selling and improving customer satisfaction.
Barriers and ethical considerations
Despite its promise, the integration of generative AI into retail faces significant barriers, particularly concerns about bias in AI outcomes. The urgency for clear ethical guidelines for AI use 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 say they have the capability to fully comply with stringent data security and privacy regulations. This readiness underscores the industry’s commitment to protecting consumer data amid changing regulatory landscapes.
Retailers are increasingly aware of the risks associated with AI integration. The survey identifies bias as a top concern, with half of respondents expressing concern about AI algorithms delivering biased outcomes. Additionally, retailers identify hallucinations (38%) and toxicity (35%) as significant risks associated with implementing generative AI, highlighting the need for robust mitigation strategies.
A majority (62%) of retailers report that they have established guidelines to address transparency, data security and privacy concerns related to the ethical deployment of generative AI. These guidelines are intended to ensure the responsible use of AI, with a focus on trustworthy and unbiased outputs that uphold ethical standards in the retail sector.
These insights highlight the dual imperative facing retailers: they must leverage AI technologies to improve operational efficiency and customer experience, while maintaining high ethical standards and mitigating associated risks.
Consumer Perceptions and the Future of AI in Retail
As AI continues to redefine the retail landscape, navigating ethical considerations alongside technological advancements will be paramount. To combat consumer skepticism, companies can focus on communicating transparently about how AI is being used and making it clear that humans — not technology — are in the driver’s seat.
Whether a retailer is looking to grow revenue or increase efficiency, AI is an essential addition to a retailer’s technology stack. But to truly embrace AI, retailers must take their customers on their journey and earn their trust.
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