Generative AI: The Key to Reinventing Retail and Optimizing Growth, Say Industry Experts

9 Feb 2024

Citing the firm’s global chief executive officer survey, analysts at PwC said their poll confirms “that executives are turning to generative AI as a critical tool to reinvent their businesses. That innovation, which took the world by storm in 2023, shows no signs of slowing down.”

Indeed. Generative AI was all the talk at the NRF show last month, and it is expected to be the talk de jour at the upcoming Shoptalk event. But why all the buzz?

According to the PwC report, generative AI “can provide the engine for nearly every growth lever that CEOs want to pull, from optimizing costs to creating new revenue streams to improving the customer experience.” Of those polled, 61 percent of CEOs expect the technology to improve the quality of their services and products.

To help retail and brand executives make better-informed decisions before investing in generative AI, WWD presents the second installment of a series of stories on AI, generative AI and predictive AI, and related technologies.

AI investments: wait and see?
Tom Taulli, author of “Generative AI: How ChatGPT and Other AI Tools Will Revolutionize Business,” told WWD that the temptation “is to take a wait-and-see approach to generative AI. But this would be a big mistake. Just look at how this strategy backfired during the early days of e-commerce.”

“Besides, customers want better experiences,” Taulli said, adding that a recent IBM study showed that 59 percent of consumers said they want AI applications for shopping. “They also are interested in relevant/personalized offers and advertisements.”

Taulli said this is where generative AI can make a big difference. However, there needs to be a strategy behind implementation. “A key advantage for retailers is that they generate huge amounts of data,” the author said. “However, there still needs to be a well-thought-out data strategy. If not, the generative AI will not get the best results. There can be [AI] hallucinations and inaccuracies.”

Taulli also said there will be a need “to ground the models with the data. This is not easy. This requires sophisticated expertise from data scientists. But, of course, this talent is expensive. Yet there are emerging many good off-the-shelf solutions, such as from Microsoft and Google.”

Another key consideration is where to implement the technology. Taulli said retailers should focus “on those areas where generative AI will move the needle. These include virtual assistants, which can track orders, place orders and find the nearest store; intelligent order management (for handling return requests); personalized offers and recommendations, customer insight, such as with sentiment analysis.”

Lastly, Taulli said data security and privacy policies should be strengthened.

Legal and security considerations
Eugene Klimaszewski, founder of Mammoth Security Inc., said data privacy and security are paramount. “Retail executives must ensure that the massive volumes of data that generative AI systems require are handled correctly. Adhering to privacy legislation and putting in place strong data protection procedures are essential for safeguarding consumer information as well as for preserving credibility and trust.”

Gai Sher, attorney at Greenspoon Marder, said as AI tends to rely on existing or user-generated data to train and strengthen its algorithms, “a retailer must ensure that neither the inputs nor the generated outputs infringe on any third-party rights, specifically intellectual property, and privacy rights. This requires a company to diligently survey its data sources, the nature of its algorithms, and its outputs to remain compliant.”

Compliance is essential, but from a legal perspective, retailers and brands need to do more. Sher said since AI is supported by the volume of its data and the frequency of user inputs, “retailers should consider their collection, storage, handling and processing protocols in the context of their own data and consumer privacy policies, including established privacy regulations like the GDPR in Europe and the CCPA in California.” Sher said companies should also “establish clear and transparent disclaimers regarding their use of AI in their services and products, including its compliance with consumer protection laws.”