Ret(ai)l Revolution: A Digital Marketer’s Primer

The retail landscape is undergoing an exhilarating transformation with AI as the catalyst. It promises a future where personalized digital experiences enrich the art of shopping and serve consumers' ever-growing expectations.

Crafting Tailored Shopper Journeys

Personalization is nothing new to digital retail. Veterans among us remember the barely perceptible "flicker" that used to haunt personalization tools when they clumsily adjusted a site's un-cached content from what everyone was seeing to what they guessed you wanted you to see. Very broad, sometimes binary market segments determined by your system's cookies informed these guesses. Pity the shopper who shared a browser with their spouse and kids as they were doomed to an endless cycle of irrelevant recommendations populating the home page and, even worse, their inbox.

Broadband and CDNs have almost eliminated the flicker, but human-driven segmentation optimizations are still painfully slow. Although disciplined testing of multiple experiences could improve conversion rates over time, today's relatively inexpensive personalization tools make these predictive experiences look like algorithmic tarot cards. AI now fuels automated content tools with the ability to act upon predictive analytics in real time across thousands of behavioral cues.

As OpenAI's biggest shareholder, Microsoft is at the forefront, embracing AI to devise shopping experiences that cater uniquely to each customer based on oceans of first-party data. With it, ecommerce steps one rung closer to exceeding the customer's pre-Internet retail experience. The problem for the dying breed of retailers still thinking about single channels is that customers continue to demand more variety, speed, and personalization at lower costs.

Retail's Growth Accelerated by AI

Deb Marotta from Hitachi Solutions says, "…digital transformation in retail is simply setting successful businesses apart from unsuccessful ones," highlighting AI's indispensable role in retail's evolution.

The retail sector thrives behind insatiable consumer demand, while true generative AI is still only a twinkle in your e-commerce platform's eye. However, it will inevitably become the most powerful commercial growth engine in history, exceeding $45 billion by 2032 in retail alone. Brands like Simons and Zara are riding the AI wave with the help of vendors like Retalon, skillfully applying AI to forecast demand and streamline supply chains, setting new benchmarks for efficiency and customer service.

Amazon has introduced Rufus, an AI shopping assistant that enables shoppers to remain within the Amazon app to research and compare product information, including details, reviews, and other information available to its specialized shopping LLM. This is, of course, meant to insulate Amazon from Google's Search Generative Experience (SGE), which is designed to be more conversational and prescriptive of an abundance of Amazon alternatives.

Even on a merchant's DTC site, deeper pools of data across thousands of engagements per second can be instantly interpreted by merchandisers and marketers for prescribed strategy adjustments on a macro level. level of optimization was limited to the e-commerce channel only a short time ago. With point-of-sale systems integrated with CDPs, behavior can be hashed and shared across brands (via ShopPay, PayPal, and GooglePay, to name a few).

Ananda Chakravarty from IDC Retail Insights envisions a dynamic future in retail where AI manages SKUs and fluctuations in pricing while orchestrating highly tailored marketing efforts. Such a strategy could revolutionize the way promotions are tailored and distributed.

Messaging and content can be delivered, measured, and improved across a chain of multi-brand touchpoints limited by the customer's tolerance for privacy invasion. With this power, brands can simulate an almost omniscient associate wherever the customer wants to engage, deciding the appropriate next step, message, and timing within the shopping journey to maximize transactions, cart size, retention, and, by extension, lifetime value.

Analyst Jeremy Bowman points out that Amazon, Google, and the usual suspects, Target and Walmart, are embracing AI's increasing influence on business models. From predicting consumer preferences to optimizing inventory management and analyzing customer feedback, AI's capabilities are transforming retail operations.

The Human Element in the AI Equation: Consumer Choice

AI analytics and personalized marketing are tools for managing inventories and serving customers with agility and flair. But Geoff Williams at the NRF points out the enduring necessity of the human element amidst AI's ascension. Retail moguls tactically integrate AI to bolster, not replace, human ingenuity. A case in point: Levi Strauss & Co. employs AI to foster inclusivity, responding to customers' calls for greater diversity in styling and sizing.

The journey to embracing AI goes beyond mere technological adoption; it is also about enhancing marketing precision, smart merchandising, and operational excellence of human design. Businesses are positioning themselves for a future where AI improves staffing efficiencies and inventory management and creates temporal and financial bandwidth to enrich personal customer relationships.

Customers are not entering this relationship for free. By and large, shoppers continue to increase their willingness to share personal data as currency for more utility across multiple verticals. For example, there was a time when even asking customers to provide body measurements for better clothing fit spurred snickers from brand execs. As spatial computing and the metaverse redefine how we engage with each other and what we buy, full 3D body scans may become as accessible as a trip to the mall. In the end, a perfect-fitting pair of jeans may be the by-product of having a perfect digital twin, accessible with a vCard stored in a pocket near you.

Embracing the AI Future Responsibly

As the retail community prepares for this AI-charged phase, there's a palpable sense of pragmatic optimism. Recognizing the potential for technology to streamline operations and deepen customer connections is exciting for futurists and capitalists alike. However, customer privacy, IP authenticity, and the enhancement, not replacement, of humanity must be foundational. At its current pace of deployment, it may be a messy road fraught with missteps, but the reshaping of retail is inevitable.