Seizing AI Opportunities in Retail and eCommerce in 2025

Artificial intelligence (AI) continues to reshape the retail landscape, driving significant transformations across multiple fronts. Today, retailers are increasingly harnessing AI's power to innovate marketing strategies, unleash operational efficiencies, and improve customer experiences.

This blog post explores the key areas where AI is making a substantial impact in retail and eCommerce, and how businesses can seize these opportunities to stay competitive in the evolving market.

The Rise of Generative AI in Marketing

One of the most exciting developments in retail AI is the emergence of generative AI (GenAI) for content creation and marketing. As retailers push for better content and creative, GenAI has become hugely imperative to save time and money on costly and time-consuming video, image, and text campaigns.

According to a 2024 eTail Insights research report on generative AI in retail and eCommerce, 85% of retailers surveyed currently use generative AI for customer service, while 83% use it for marketing and promotions. This widespread adoption underscores the technology's potential to revolutionize how retailers approach content creation and customer engagement.

Michael Wieder, CEO of LALO, shared an exciting development in this area during an eTail Boston 2024 panel discussion:

"We're piloting a new TV ad AI tool that allows us to turn some of our user-generated influencer content into hundreds of ads in minutes. This is far more efficient than spinning up new concepts and spending large sums of money. It allows us to think about our creative budget in a different way and to make it go even farther."

This innovative approach demonstrates how AI can significantly reduce the time and cost associated with creating marketing materials while maintaining quality and relevance.

Personalization Through AI-Powered Technologies

The integration of AI-powered technologies, such as recommendation engines and virtual shopping assistants, enables personalized product recommendations tailored to individual preferences and purchase histories. This level of personalization is becoming increasingly important for retailers looking to enhance customer experiences and drive sales.

For example, another eTail Insights research report, this one on advanced personalization, reveals that 24% of retailers had already implemented AI-driven eCommerce personalization technology in 2024, with another 58% in the process of implementing it. This trend highlights the growing recognition of AI's value in creating more targeted and effective customer experiences.

In another example, Sada Kshirsagar from Tractor Supply Co. shared an innovative use of AI for in-store personalization during an eTail Boston 2024 panel:

"We built a capability that leverages LLMs (large language models), generative AI, and our massive catalog to bring personalization options to the forefront for our team members. If a customer walks in and asks the team member for more information about a product, or they have a problem, we have the capability to send that information through an earpiece to a generative AI solution, which then provides a response back to the team member."

This application of AI not only enhances the customer experience but also empowers store employees to provide better service.

The Resurgence of AI-powered Chatbots

As we head into 2025, there is a renewed focus on chatbots, a tried-and-true AI method for retailers that many are revisiting to save costs on customer service. The advancements in natural language processing and machine learning have significantly improved the capabilities of chatbots, making them more effective in handling customer inquiries and providing support.

Kate Huyett from Bombas shared an experience with AI-powered customer support at eTail Boston 2024:

"As our catalog has continued to grow, it's become harder for our customer support agents to provide good product recommendations to people. That’s why we’re piloting an AI tool for our customer support agents, so they can make better and faster recommendations."

This application of AI not only improves the efficiency of customer support but also enhances the quality of product recommendations, potentially leading to increased sales and customer satisfaction.

Optimizing Inventory Management with AI

AI algorithms are revolutionizing inventory management, ensuring retailers meet demand while minimizing excess stock. This optimization is crucial for maintaining profitability and reducing waste in the retail sector.

The 2024 eTail Insights research report on generative AI shows that 80% of respondents were already leveraging AI for inventory management at the time of the study. This high adoption rate indicates the significant value that retailers see in using AI to streamline their supply chain operations.

Key Benefits of AI in Retail

As noted by the example above, there are almost limitless applications of AI in retail and eCommerce environments. However, the implementation of AI in retail and eCommerce offers several key benefits, such as the following:

• Improved Efficiency: AI automates many time-consuming tasks, allowing retailers to focus on strategic initiatives.
• Enhanced Personalization: AI-driven recommendations and experiences lead to higher customer satisfaction and loyalty.
• Cost Savings: By optimizing operations and reducing waste, AI helps retailers improve their bottom line.
• Data-Driven Decision Making: AI provides valuable insights that enable retailers to make more informed business decisions.

Achieving these benefits is dependent upon how AI I used, in what context it is used, and what goals the retailer or eCommerce company has set for its AI implementation. They are also dependent upon the organization’s ability to overcome common challenges with AI.

Challenges and Considerations of AI in Retail and eCommerce

While the benefits of AI in retail are clear, there are also challenges to consider. The "2024 eTail Insights Research Report on Generative AI" highlights that 66% of respondents cited data privacy concerns as their biggest challenge in implementing AI. Retailers must ensure they have robust data protection measures in place and are transparent with customers about how their data is being used.

Additionally, the integration of AI technologies with existing systems can be complex. Jaysen Gillespie from RTB House noted during eTail Boston 2024:

"AI is your secret weapon to fight against giant tech companies, which want to minimize your ability to directly reach even your own audience. If you can reach an audience that's just as powerful or just as in-market for your specific products, that would be an awesome use of generative AI."

This statement underscores the potential of AI to help retailers overcome challenges posed by changes in the digital advertising landscape.

Other common challenges include AI adoption among staff, acceptance of new AI capabilities among customers, identifying promising use cases for AI, and ensuring data is prepared in governed in such a way that it can be used by AI. While none of these challenges are impossible to overcome, eTail Insights studies have demonstrated that every organization experiences at least some of them on their path toward AI implementation.

AI is Shaping the Future of Retail and eCommerce

AI will continue to play a crucial role in shaping the future of retail and eCommerce. By embracing these technologies and addressing the associated challenges, retailers can position themselves for success in an increasingly competitive and dynamic market. The key lies in strategic implementation, continuous learning, and a commitment to using AI to enhance rather than replace the human elements of retail.

To learn more about how you can leverage AI, don’t miss eTail Palm Springs 2025. It’s from February 24 to 27 at the JW Marriott Desert Springs, in Palm Springs, CA.

Download the agenda and get tickets today.