Sustained macroeconomic pressures and uncertainty have created a volatile market for both retailers and consumers. Shoppers remain highly price conscious and diligently seek out the best deals and discounts, whether they are online, in-store or at any number of different marketplaces. Increased customer discernment, coupled with more purchasing options than ever before, has raised expectations for retail organizations. However, research shows that retailers are struggling to rise to the occasion. In fact, nearly 90% of U.S. consumers had at least one poor online shopping experience in the past year. With nearly half of all shoppers planning to tighten their budgets and spend less online in 2024 than they did in 2023, retailers must modernize their approach to improve in areas most important to their customers.

Consumer sentiment makes it abundantly clear that traditional strategies are lacking, and retail organizations must evolve to improve the customer experience. Thankfully, there is still time to evaluate operations, develop a specific plan surrounding automation and artificial intelligence (AI) that addresses areas ripe for innovation, and make strategic investments ahead of the peak shopping seasons. Let’s explore how retailers can leverage AI and automation to bolster operational efficiency and reduce costs, drive sales, and streamline business processes to make better use of resources during the most critical time of the year.

AI is widely considered to hold great promise for retailers, however organizations have struggled to realize its true potential because they are unable to connect the data necessary to make it effective. The first step to connecting that data is to integrate every application across all operations. This integration not only connects the data for proper AI analysis, but provides a foundation for process automation that will provide a more seamless customer experience. Connecting back-end processes like procurement, fulfillment, inventory management, shipping and returns enables retail organizations to fulfill and ship products without manual intervention or human error negatively impacting the shopping experience. This meets and exceeds customer demand in areas such as guaranteed shipping, access to a broader selection of desirable products and consumer-friendly pricing.

As the battle for wallet share becomes increasingly competitive, shoppers have indicated they want more personalized offers from retailers. More specifically, price-conscious consumers who are comparing products across multiple storefronts are most interested in deep product discounts and special deals that are available at the appropriate time. Retailers can use AI solutions to analyze data from multiple platforms where consumers have made purchases, asked questions, left reviews, or simply browsed products. After analyzing the data and getting a holistic view of the customer buying habits, AI can then help personalize pages and ads shown to shoppers, create customized offers on similar or related products, and suggest complementary products to increase the price per transaction and drive omnichannel cross-selling opportunities. Here again, this AI-enabled personalization is only made possible through the integration of platforms and data, providing a holistic view of each customer’s journey.

Customer service is a continual balance between customer satisfaction and the management of the costs to provide that service. The need to deliver excellent service across multiple channels presents unique challenges for retail leaders. While the human touch is often associated with white-glove customer service, a recent McKinsey survey revealed that modern AI tools and automation technologies, such as live chats, have reached high acceptance levels across generations. This includes more than 70% among Gen Z and Baby Boomers and greater than 80% with Millennials and Gen X.

While a popular approach is to use generative AI or Large Language Models (LLMs) to replace humans in customer-facing situations, companies should instead view those technologies as co-pilots or accelerators for the real people that will still be doing most of the direct interactions with customers. AI and LLM are a perfect solution to any situation where there is a large amount of information to review and summarize. Additionally, retailers can use automation to streamline internal communications, automatically escalate customer tickets and use predictive algorithms to know what a customer may want or need before they even know it themselves.

Investing in automation and AI will help improve the overall customer experience and deliver operational excellence to retail organizations. The forward-thinking organizations will begin the planning process well ahead of the peak shopping season to stress test systems, address potential logistical issues and ensure they are prepared to accommodate spikes in order volumes. This includes analyzing all customer-facing touchpoints, such as search engine results, digital marketplaces and third-party sites, and their own brand’s website to guarantee accuracy and a frictionless shopping experience. With holiday shopping periods getting pushed further forward into the spring and summer seasons, it is imperative for retailers to begin leveraging AI and automation today.