The retail landscape has undergone significant changes over the past few years, driven by shifts in consumer behaviour, technological advancements, and the impact of the pandemic. As retailers navigate this evolving environment, adopting customer-centric AI has emerged as a crucial strategy for staying competitive and meeting the heightened expectations of modern consumers. This article explores the urgent need for customer-centric AI in retail, its benefits to both customers and businesses and what a fully AI-driven company can provide in terms of experience and competitive advantage.
I cannot emphasize enough how important it is that retailers and, for that matter, other industries embrace customer-centric AI. And I do not believe that retailers have all the facts. This is a make breaking point for many businesses. The pattern is all too much the same as it was with the internet, smartphones, social media, e-commerce, digital marketing, and Omni channels. I believe retailers need to ask their advisors some very tough questions.
The retail sector is experiencing a profound transformation. Consumers’ shopping habits have shifted dramatically, with a significant increase in online shopping and a preference for digital-first experiences. Traditional brick-and-mortar stores are facing challenges in attracting and retaining customers who now expect seamless, personalized, and convenient shopping experiences. To adapt to these changes, retailers must leverage advanced technologies like AI to effectively understand and meet customer needs.
In no uncertain terms, we are seeing retail being bundled into a collection of brands held within a portfolio of other brands, reducing their cost structures through these acquisitions of mostly assets to keep them from failing. The reason is that a stand-alone brand that does not have scale in revenue, technological resources, and the ability to recruit the best talent has a very low probability of long-term success. I have worked on past deals where these brands are overvalued and overstated in their appeal and ability to survive; I have seen analysts giving glowing reviews and promises of revivals, many of which, within 12-18 months, fail or go under financial restructuring.
Before we get to the core of what needs to change and why, let me be very explicit about the root causes. Leadership with no cross-functional operational experience leads brands to a faster ending. The second is that promises of transformation are mostly on paper and never find fruition. Third, there is no adequate plan or capital investment for technology. This pattern persists in the retail sector. Perhaps this is why we hear more about culture and people than about vision; most businesses will perish without vision; there is no purpose or direction.
Consumers want a higher level of convenience. Spending more time at home and doing other things drives this desire, but I’m sorry to say that free time isn’t about spending more time in stores.
Search engines are old—at least twenty years old—and they haven’t changed much for users sifting through tons of data, whether from a desktop or a mobile device. It is time-consuming and as boring as the Yellow Pages.
80-90% of initial shopping decisions start with online searches. The average consumer spending after conducting searches is between $400-$600 monthly.
Advertising on search engines is in excess of $190 Billion annually, and if an AI search engine like SearchGPT launches, it will shift how that advertising is spent.
However, searches need to be simplified. The idea that consumers like reading sponsored ads tends to be self-serving. The competition for a consumer’s attention is very high, but it is getting far too monotonous for them.
Simplifying search engine queries will be revolutionary if AI can deliver what the developers promise. And if they do…it will lead to the next discussion on how retailers and other businesses that deal with consumers reach consumers.
Customer-centric AI uses artificial intelligence technologies to enhance and personalize the customer experience. By analyzing vast amounts of data, AI can provide insights into customer preferences, behaviors, and trends, enabling retailers to offer highly personalized and relevant interactions. For instance, AI-powered recommendation engines can suggest products based on individual customer preferences, while predictive analytics can anticipate future needs and behaviors.
Examples of successful AI implementations in retail include Amazon’s personalized product recommendations and Sephora’s AI-driven virtual assistant, which provides personalized beauty advice and product suggestions. These examples highlight the potential of AI to revolutionize the customer experience.
The adoption of customer-centric AI offers numerous benefits for both customers and retailers:
I have called the retail climate today hyper-competitive. Staying ahead of the competition requires leveraging AI to make data-driven decisions. Retailers that embrace AI can gain a significant competitive edge by better understanding customer needs, optimizing operations, and creating innovative shopping experiences.
Retailers like Amazon and Walmart have gained a competitive advantage by integrating AI into their operations. Amazon’s use of AI for personalized recommendations and inventory management has set a high standard for customer experience, while Walmart’s AI-driven supply chain optimization ensures efficient product availability and delivery.
Even so, I suspect that while the interest is high, the adoption will be slower and more cautious. Far too many still doubt that this is an important transformation to pursue.
Implementing AI in retail presents challenges. Common barriers include the high cost of AI technology, data privacy concerns, and integration issues with existing systems. However, with strategic planning and commitment, these challenges can be overcome.
Retailers can adopt a phased implementation approach, starting with pilot projects to test and refine AI solutions before scaling up. Partnering with technology providers and investing in AI talent are also essential steps to ensure successful implementation. Additionally, addressing data privacy concerns through transparent practices and robust security measures is crucial to maintaining customer trust.
I have already developed an organizational readiness chart to determine whether a company is ready for this transformation. It is not a reality without a customer-centric model.
The future of retail is bright with the widespread adoption of customer-centric AI. As AI technology continues to advance, retailers will be able to create even more seamless and immersive omnichannel experiences. AI will enable retailers to anticipate customer needs, provide hyper-personalized interactions, and streamline operations.
As I point out in my upcoming book “Predictive Leadership,” AI will unleash a new and different customer revolution.
Innovations such as AI-driven visual search, augmented reality (AR) for virtual try-ons, and voice-activated personal AI assistants will enhance the customer experience. Retailers that embrace these technologies will be well-positioned to thrive in the competitive landscape.
A Complete Customer-Centric AI-Driven Company
A fully customer-centric AI-driven company offers a superior shopping experience by leveraging AI at every touchpoint. Such a company provides:
As a reminder, the announcement that OpenAI plans to release SearchGPT prompted me to write this article. When this happens, a massive shift will happen, as searching the Internet with AI will be as dramatic as the shift from searching the Yellow Pages to searching the Internet. What we know is that this will create greater convenience for consumers, and ultimately, more disruptions will follow.
The importance of customer-centric AI in retail cannot be overstated. As consumer expectations continue to rise, retailers must invest in AI to stay relevant and competitive. By leveraging AI to enhance personalization, improve customer service, and optimize operations, retailers can create exceptional shopping experiences that drive loyalty and growth. The time to embrace customer-centric AI is now, and those who do will lead the future of retail.
CEO | MBA | Author | Advisor | Speaker | Business Visionary
George Minakakis is a Thought Leader and Keynote Speaker. His experience leading, developing, and reviving global brands make him a sought-after Executive Advisor.
