How are retailers and consumers experiencing AI?

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Before the recent explosion of generative AI into the mainstream, tech savvy retailers had been using transformative technologies for automating tasks and understanding consumer behavior for decades. Insights based on consumer and future trends, and predictions gave retailers a view of how to improve customer experiences and become more efficient in their sales and operations.

Even though AI is now being used in personalized recommendations and online customer support, many consumers still don't fully trust AI. Salesforce is addressing this by ensuring trustworthy AI with a human at the helm, designing powerful controls that enable people to focus on the highest-risk AI outcomes.

This is crucial because many knowledge workers fear humans will lose control of AI, and while people trust AI to do a significant portion of their work, they believe more human oversight would build their trust in AI. This lack of trust is a challenge that retailers need to solve so that AI can reach its full potential as a trusted helper.

So, where does the retail industry stand with AI, and how can retailers focus more on building consumer trust and developing AI responsibly to fully embrace this new era?

Navkinder Sanghera

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 change in how AI is affecting consumer behavior. It's also changing how retailers interact with customers by offering personalized deals, suggesting products just for them, and using AI for chat services. Retailers are adopting generative AI and making it a fundamental fabric of how they run their businesses.

Most (93%) retailers say that they are already using generative AI for some sort of personalization, allowing customers to find products and make purchases faster using natural language interactions on retailers’ channels like digital storefronts 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 existing customer data, such as location, preferences, and past purchases, a recommendation can be generated to purchase a waterproof and windproof tent in their preferred color along with a link for immediate checkout and local store collection.

At the start of 2024,most (92%) of retailers’ investments were going towards AI technology, however AI is not new to the industry; two thirds (59%) of merchants already use it to aid store assistants in making product recommendations, and 55% are utilizing digital assistants to assist customers who buy online.

From demand forecasting to customer sentiment analysis, retailers are harnessing AI to improve 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 enhancing operational efficiency. Recommendation systems powered by AI are another key application transforming retail experiences. Online retail giants use sophisticated algorithms to personalize product recommendations based on past order history and user profiles, driving cross-selling and enhancing customer satisfaction.

Barriers and ethical considerations

Despite its promise, the integration of generative AI in retail faces significant barriers, notably concerns surrounding bias in AI outputs. The urgency for clear ethical guidelines in AI utilization within retail is evident, highlighting a critical gap between adoption rates and ethical stewardship. Strategies emphasizing transparency and accountability are essential to foster responsible AI innovations.

Half of retailers indicate that they possess the capability to fully comply with stringent data security standards and privacy regulations. This readiness underscores the industry's commitment to safeguarding consumer data amidst evolving regulatory landscapes.

Retailers are increasingly cognizant of the risks associated with AI integration. The survey identifies bias as a top concern, with half of respondents expressing apprehension over AI algorithms producing prejudiced outcomes. Additionally, retailers identify hallucinations (38%) and toxicity (35%) as significant risks linked to generative AI implementation, highlighting the need for robust mitigation strategies.

A majority (62%) of retailers report having established guidelines to address transparency, data security, and privacy concerns associated with the ethical deployment of generative AI. These guidelines aim to ensure the responsible use of AI, emphasizing trustworthy and unbiased outputs that uphold ethical standards in the retail sector.

These insights underscore the dual imperative faced by retailers: leveraging AI technologies to enhance operational efficiency and customer experiences while upholding stringent 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 how AI is used, and making clear that humans — not technology — are in the driver’s seat.

Whether a retailer’s goal is top-line growth or bottom-line efficiency AI is a crucial addition to a retailer’s technology stack, but in order to truly embrace AI retailers must take consumers on the journey and earn their trust.

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Navkinder Sanghera is Area Vice President, Head of Retail, Consumer Goods and Travel Transportation & Hospitality at Salesforce.