Evolving holiday shopping in the age of AI

The retail industry is experiencing widespread, fundamental change. Technology is reshaping customer behaviour and there’s a growing focus on key shopping moments like Black Friday and Cyber Monday sales, which generated record online purchases in the US for the 2023 holiday season, reaching $9.8bn and $12.4bn respectively[1].

This was the subject of a recent Industry Insider LinkedIn Live featuring Colm O’Brien, Global Consumer Industry Partner at IBM Consulting and Deborah Weinswig, CEO and founder of Coresight Research. Together, they discussed the evolving impact of AI during major sales events, as well as how retailers and consumers are responding to continued economic challenges.

Colm kicked off the session with a question for Deborah around the drivers for change.

“Consumers definitely feel more confident; we're seeing that across the board. There’s also the growing integration of online and offline shopping to create omnichannel or unified commerce. And there’s more information for consumers than ever before in terms of price transparency and product attributes. Consumers now feel like they’re in the driver's seat,” said Deborah.

“However,” she added, “habits picked up during recent years persist, such as a focus on price and an acceptance of own-label brands. These trends have combined to change the way people look at their expenditure.”

According to Colm, IBM’s consumer research underlines the importance of omnichannel approaches: “One in four consumers now sees themself as a hybrid shopper but the high street remains important as it provides hands-on retail theatre. However, 90% of consumers say they want a better experience when they’re in a store and a lot of that’s being influenced by what they've seen online.”

In terms of how this is being reflected on a day-to-day basis, Colm explained that consumers are looking for ratings, reviews and recommendations. “And if that's not at the shelf edge with some sort of digital content, they want it from the in-store staff. This means that shopfloor employees need to be equipped with mobile tools and data so that they can meet customers’ needs,” he added.

Deborah added that personalisation is key, as different consumers have different values in terms of what's important to them. “Younger consumers, especially, are likely to do a lot of research online prior to making a purchase – but the actual transaction will culminate in a physical environment,” she said.

IBM’s latest retail study highlighted strong interest among global consumers in using AI technology to enhance various aspects of their shopping. Most consumers (59%) said they would like to use AI applications as they shop and 4 in 5 consumers who haven't?used the technology for shopping reported an interest in trying it. Personalization and targeted offerings are in demand, with 52% of consumers surveyed interested in receiving information, advertisements, and offerings from stores that are relevant to their specific interests.

For the year ahead, Colm believes that AI will become an increasingly important tool in the sales arsenal, as it supports highly targeted personalisation, but there are still questions in the minds of retailers about where to start with the technology.

“The development of large language models and generative AI is driving uptake and results. It's a massive opportunity for retailers to differentiate and for consumers to have an amazing experience. We're rapidly moving beyond individual use cases, to applying generative AI at scale, right across an enterprise,” Colm explained. ?

Deborah highlighted that Coresight formed an AI council last summer to bring together like-minded individuals in a closed door setting, enabling retailers and brands to talk about what they’re trying out.

“What we found were two areas of significance,” she said. ?“First, people were really interested in how chatbots could deliver a better customer experience. And second, there was an awareness around how AI could deliver major improvements in the supply chain, in areas such as store allocations and inventory optimisation.”

What’s clear from IBM’s experience is that the benefits of AI are significant, but the technology remains a bit of a black box in terms of awareness around how it actually works.

“Part of our role in 2024 will be to help the retail sector better understand what AI is, how it works and the importance of good governance,” Colm concluded.

To discover more about this fascinating topic, tune into the full discussion here .

Recently at this year’s NRF conference, IBM announced its latest advancements in generative AI aimed at bridging the consumer expectation gap through unified, integrated shopping experiences. As a part of this, IBM unveiled a comprehensive study, ‘Revolutionize Retail with AI Everywhere’, which involved surveying almost 20,000 people across the world to analyze customer preference and behavior.

The study highlights the evolving demands of consumers for personalized and seamless shopping journeys, both in store and online. Read the full reporthere .

[1] Adobe Analytics: November 2023