How AI Is Transforming Retail This Holiday Season and Beyond

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Artificial intelligence is transforming most industries by enabling automation, delivering new insights, and creating new services. While AI is being deployed nearly everywhere, it’s having a particularly significant impact in retail. This holiday season, we’ll see firsthand how technology is changing the way retailers and e-commerce companies are running their businesses and serving customers. 

Here are a few key AI use cases and trends we’ll see in 2023 and beyond that will impact how retailers staff their stores, plan for inventory, and even how consumers engage during the buying process.

AI Equips Retailers With Groundbreaking Insights and Capabilities

This holiday season, we’ll see a strong pivot back to brick-and-mortar shopping with the pandemic and lockdowns fully in the rear-view mirror. E-commerce sales will still be strong, but proportionally, they won’t represent as much of the pie as in the past few years. 

Many retailers’ forecasts will prove inaccurate because of that, as they will overestimate online demand and underestimate in-store demand. However, retailers that employ AI models capable of forecasting shorter-term trends will get this right and reap the business benefits.

Retailers will use AI to precisely accommodate labor demands. Of course, high demand during the holiday season drives a need for hiring additional workers (this year, economists expect retailers to add 410,000 seasonal jobs). 

The challenge is determining exactly how many workers and where they’ll be needed in the supply chain. If retailers hire too few workers, they won’t be able to fulfill orders, and if they hire too many, they’ll waste money on redundant labor. 

Moreover, businesses must allocate these resources accurately — in warehouses, distribution centers, brick-and-mortar storefronts, etc. AI will give retailers the insights to correctly predict these needs and make staffing decisions accordingly.

On a similar note, AI will deliver retailers predictive insights without having to wait for information to make its way through the supply chain. In today’s global economy, supply chains are long and highly complex. It can take months for signals to travel from a consumer to a business and back.

For example, imagine a scenario where consumers express sudden interest in a product that’s gone viral on social media, such as Dyson Airwraps or Stanley Tumblers. By the time the brand receives that information, manufactures more of the product, and ships it to storefronts and e-commerce distribution centers, consumer tastes may have changed completely and that product could now be obsolete. It’s like a traffic jam at a busy stoplight: Once the light turns green and the first few rows of traffic start moving, there’s a significant delay until the cars stuck in the back can actually begin moving forward. 

AI can be used to anticipate these trends before they happen, helping retailers and brands avoid missed opportunities and disruptions.

Finally, we’ll see some use of AI by the consumers themselves. Leveraging chatbots or conversational AI, consumers will let AI do shopping for them. They’ll feed data into a digital twin, giving it information about budget, item categories, preferred brands, etc., and the bot will track down the products and create a shopping list. The consumer will be the expert human in the loop here. First, the retailers will offer these chatbots, each only working on a single platform. Later, we’ll see third-party chatbots that’ll shop across multiple e-commerce platforms.

A New World in Retail

AI is revolutionizing retail at an incredible rate. This year, retailers will have insights and capabilities that were nearly unthinkable just a few years ago. Ultimately, the biggest winner will be the consumers, who will benefit from better service, more reliable delivery, improved recommendations and a streamlined shopping experience. 

— Devavrat Shah, Co-CEO and Co-Founder, Ikigai Labs

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