2024 survey results show that many retailers already use or are actively working toward adopting AI-powered tools.
The data reveals that one-third are assessing or piloting AI initiatives. However, larger retailers are outpacing smaller businesses, with two-thirds reporting AI adoption (55 percent higher than the industry adoption rate). Overall, over 60 percent say they’re planning to increase AI investments over the next 18 months.
The trend suggests a strong trajectory for AI usage in retail for the foreseeable future. Subsequently, businesses using AI-powered tools can expect transformative improvements to operational performance, decision-making, revenue capture, and customer experiences.
The data bears out this premise: AI investments are paying off, with over two-thirds of respondents saying the technology has contributed to increased revenue and lower costs. C-suite executives cite streamlined business operations as the most impactful driver, stating that these improvements are a catalyst for quantifiably stronger long-term business performance.
Streamlining Operational Efficiencies
AI-powered tools leverage machine learning (ML) algorithms to analyze key indicators, such as historical market trends, sales data, and customer behaviors. Using these technologies, businesses can identify correlations and patterns that would otherwise go undetected, improving the accuracy and timeliness of demand forecasting.
The technology can also predict future demand based on numerous factors, such as seasonality, promotions, and external considerations (e.g., weather, economics, and competitive activity). Because AI-powered tools can integrate data from multiple sources in real-time, retailers can make timely adjustments to align with current conditions.
Retailers are using advanced ML models to predict inventory requirements, and some are automating reorder suggestions based on current levels and forecasted demand. Using AI, they can optimize inventory distribution, adjust replenishment dynamically, and facilitate smooth coordination with suppliers.
Algorithms also provide real-time visibility into the supply chain by tracking shipments, inventory levels, and disruptions. When issues arise, the technology alerts affected parties and generates automated workarounds to minimize impact.
Some businesses use AI to analyze inventory metrics, such as turnover, aging, and sell-through. Using this data, retailers can automate promotions, markdowns, and other strategies to manage inventory health and glean incremental revenue.
Improving Decision-Making
Businesses that leverage AI are empowered to make better decisions faster.
For example, dynamic pricing models can adjust prices instantly in response to customer demand, competitor pricing, and market conditions. Because the technology makes continuous adjustments in real-time without human involvement, retailers can continuously maximize profit margins while remaining competitive.
Many businesses use AI-powered chatbots and virtual assistants to handle routine customer concerns. Using these technologies, retailers can respond to inquiries, answer questions, and resolve problems without the involvement of customer support staff. Because these technologies are available 24/7, businesses can provide round-the-clock support while reducing labor costs.
AI-powered tools can also detect transaction anomalies that indicate fraudulent activity. When businesses can get ahead of these nefarious activities, they’re better prepared to prevent fraud and chargebacks, which protects revenue.
Maximizing Revenue Capture
Some retailers use AI to uplevel visual merchandising and store layout. In this case, AI-powered cameras and sensors track customer movement patterns to create a heat map that identifies high-traffic areas and fallow zones. Applying this intelligence, retailers can optimize planograms for fast turn and increased revenue.
AI can analyze customer data to define segments based on preferences, demographics, and purchasing patterns. Because the technology can predict future behavior, such as purchase likelihood, churn risk, and cross-sell interest, retailers can boost revenue by proactively anticipating their needs and tailoring promotions and offers accordingly.
Others are applying AI to automate content creation for sophisticated cross-channel marketing campaigns. The technology can generate highly relevant and dynamic messages distributed across email, social media, text, promotions, and more. AI also automates and accelerates A/B testing outcomes to help optimize campaigns.
Using AI, retailers can attribute sales to specific marketing activities and channels with a high degree of confidence — this helps businesses better understand which campaigns and messages drive revenue. Applying this data, AI can forecast ROI for campaign variations, which helps businesses allocate their budgets for maximum benefit.
Enhancing Customer Experiences
Retailers are using AI-powered tools in a variety of ways to create richer experiences for shoppers.
For example, AI-powered visual search capabilities improve product discovery, suggesting relevant items that are likely of interest. Because the analysis is dynamic, recommendations adapt in real-time based on interactions and browsing patterns.
Applying natural language processing, AI can answer complex questions about products, delivering detailed and accurate responses. The technology can also recognize a customer’s voice to expedite reorder processing for frequently purchased items.
The technology also offers tools that improve navigation and filtering by extracting detailed product tags to enable more refined filtering options. AI prioritizes items likely to be of interest to individual customers, and if exact matches aren’t surfaced, the technology provides the closest possible alternatives.
Intelligent visual search capabilities enable customers to upload photos of products they want to purchase, and AI algorithms can recommend similar items in the retailer’s inventory. Some retailers offer AI-powered style matching, where the technology analyzes a customer’s selected products and recommends items that align with their preferences.
For customers that want a immersive experience, AI-enabled virtual try-on and augmented reality tools enable customers to visualize how products will look and fit before making a purchase. Some retailers offer AI-powered mirrors that can suggest alternative sizes or complementary products based on what the customer is trying on.
Using these AI-powered capabilities, retailers can deliver better experiences and stronger customer loyalty by creating more personalized, intuitive, and engaging product discovery experiences. When customers can find the items they want faster and more easily, conversion rates increase.
Moving Forward
The retail industry is embracing AI-powered tools with an increasing sense of urgency, and large retailers are leading the charge. As businesses move forward on their AI initiatives, the industry will experience significant advances in operational efficiency, decision-making, revenue generation, and customer experiences. As the industry rides this trend, it’s clear that AI will be a dominant factor in shaping the future of retail.
