ShopTalk Europe 2024: Generative AI – Overhyped or Underhyped?

Generative artificial intelligence (GenAI) continues to dominate retail discussions. While the term has become trendy in some circles, retailers and brands are making significant efforts to actively implement AI solutions. There is growing interest among retailers in leveraging GenAI solutions to optimize their operations, while consumers have their own set of expectations. The right time for retailers to invest in GenAI to remain profitable and provide the best consumer experience is still a topic of active discussion. At ShopTalk Europe 2024, retailers shared both their successes and the challenges they have encountered since first implementing GenAI solutions.

Consumers now demand more personalized experiences

Consumers are now more aware than ever of how the data shared with them can shape their interactions with brands. According to the Voice of the Consumer: Digital Consumer Survey (conducted March to April 2024) by Euromonitor International, almost half of digital consumers say they want customized products and services – and in light of this, consumers are willing to provide information in exchange for personalized products and services; 43% are willing to share their email address and 35% are open to sharing their phone number. Notably, one in five consumers are willing to disclose their purchase history and personal preferences, underscoring the growing demand for tailored experiences enabled by GenAI’s advances. However, this data exchange is not without conditions.

44% of digital consumers are willing to disclose their phone locations to retailers and restaurants in exchange for discounts and other incentives, highlighting their preference for win-win strategies

^{Source: Euromonitor International’s Voice of the Consumer: Digital Consumer Survey (March to April 2024)}

Moreover, consumer preferences indicate a tendency towards guided shopping – 41% said that ads based on their current phone location would help them make purchasing decisions.

All of this is driving greater integration of GenAI into retail solutions, where technology is playing an increasingly key role in creating more personalized consumer experiences across touchpoints, ensuring a seamless journey across multiple channels and leveraging predictive analytics to deliver personalized messaging and products. Consumers appear to be becoming more informed about the ability of GenAI solutions to improve their experiences and, importantly, are open to these improvements.Retailers must take a strategic and long-term approach when investing in AI solutions

When it comes to brands and retailers, most recognize GenAI as a technology worth exploring, investing in, and continually researching to find the best use cases.

49% of industry professionals indicated that their companies plan to invest in generative artificial intelligence

^{Source: Euromonitor International’s Voice of the Industry: Digital Survey (conducted November 2023)}

However, despite initial enthusiasm, many retailers admit that the hype surrounding GenAI’s quick revenue boosts may be overblown. Instead, successful implementation requires a long-term investment strategy tailored to retailers’ specific goals and existing data assets. Successfully leveraging the power of AI requires a solid data foundation and scalable technology to support personalized customer interactions. Collaboration between IT, business and store teams is critical to successful AI integration, enabling companies to leverage data and advanced technologies to meaningfully engage customers.

There is a risk that traditional retailers will feel pressured to rush into implementing GenAI or be left behind, even if they are not fully prepared for such a technological change. Overcoming challenges such as extensive employee training, ensuring AI models deliver high-quality results, and gaining organizational support are key steps toward achieving meaningful results with GenAI.

Nevertheless, there are already some clear examples of successful GenAI implementation. At German online fashion retailer Zalando, a GenAI-based shopping assistant offers hyper-personalized customer interactions while managing millions of interactions. To date, more than 500,000 conversations have been recorded, with engagement times three times longer than traditional search bar entries. The assistant translates customer inspiration into actionable queries, enabling live discussions on “what to wear to my sister’s wedding” to provide a tailored shopping experience. Another illustration is Amazon’s use of GenAI to aggregate and analyze customer reviews. With this technology, potential customers can interact with a GenAI-based large language model (LLM) to ask specific questions and receive personalized answers. For example, shoppers can ask in natural language about the noise level of a washing machine and receive customized information in response. This approach improves customer decision-making by providing detailed, contextual insights from AI-based data analysis.

GenAI offers significant opportunities to reshape retail by improving core business functions, elevating customer service, and generating personalized content. However, this requires a strategic revision of priorities and methodologies. It is important for retailers to develop a comprehensive roadmap that defines goals, identifies needed resources, and identifies the necessary talent to implement GenAI solutions to achieve their business goals. Forget about short-term buzz; this approach requires long-term investment and strategic thinking.

For a deeper dive into how companies are using GenAI, read our Emerging Concepts in Retail briefing for in-depth case studies, or listen to our consumer trends webinar where intuitive commerce is a key topic on the agenda.