share this article
When was the last time you had poor service at a store or restaurant? I bet you can think of more than a few instances. Now think of the last time you experienced truly exceptional service. If this is harder to think of, you’re not alone. Retailers’ shift toward operational excellence during the pandemic has caused many retailers to leave us underwhelmed by our retail experiences.
One troubling statistic is that one in every three customers will walk away from a brand they love after bad service. On the other hand, consumers are willing to pay up to 16% more for great service and up to 18% more for luxury services, not to mention increased loyalty to retailers who get it right. Exceptional service can drive impulse purchases too, with 49% of buyers making spontaneous decisions after a personalized experience.
Biz Tech shared insight from the IBM Institute for Business Value report that “From slow checkout lanes to absent associates, in-store shoppers are still struggling with the same headaches they’ve always faced.” They go on to point out, “that means that only 9 percent of 20,000 customers in 26 countries report satisfaction with their in-store shopping experiences, the report says. For e-commerce shoppers, the number is only slightly higher, at 14 percent.”
Investing in customer experience makes sense. So why isn’t every brand doing it? And can the integration of AI in retail help?
Challenges in Retail CX
Despite advancements in retail technology, many brands have prioritized operational efficiency over customer experience post-pandemic. A study by SAP found that over 60% of marketing leaders acknowledge the digital shift in CX strategy, yet nearly two-thirds lack confidence in their CX strategy’s ability to retain customers in this new environment.
Yet, consumer loyalty declines as CX declines, and almost half of consumers think CX is getting worse. Most retail leaders believe that investment in technology, including AI, is the way forward, but struggle with the uncertain ROI. They are investing, though. The Global AI In Retail market size is expected to reach $24.1 billion by 2028. Investing in technology to improve CX is necessary.
“What’s becoming clear is that customer-centricity is proving key to retailers’ improving fortunes. The stores that are thriving are the ones building on strong, digitally driven and adaptable omnichannel foundations, supporting customers to shop when, where and how they want.” – Retail Week
AI can help improve CX. It can be very good at engaging with customers to make product suggestions based on historical purchases; it can approximate human interaction to a high degree of success. But – and it should not be surprising – it can also create disastrous consequences, especially large language model (LLM) hallucinations. LLMs can “hallucinate” facts and make mistakes in reasoning.
To avoid disaster, KPMG recommends that companies “develop a ‘responsible AI’ framework to govern all your AI applications” and “ensure that the technology is being used not only ethically, but also legally.”
Intelligent Investment in AI and Machine Learning
Even as the obsession with generative AI and machine learning grows, striking a balance between technology and human-based service is essential.
“Despite the fast pace of technology innovation and the rapid increase in AI solutions as an enabler of EX/CX strategy, 8 in 10 executives agree that human-led support will remain a critical element to employee experience (EX).”
However, investments in AI and ML can help retailers address consumer priorities.
Graeme Geddes, Chief Growth Officer at Zoom says in this Forbes article:
“Generative AI-powered solutions for CX aren’t merely ‘nice-to-haves’ anymore—they are now fundamental for success. Businesses that haven’t invested in AI will fall behind on productivity and customer satisfaction in 2024. Generative AI capabilities with unified communications and omnichannel contact centers are helping CX workers get more done, while deeper analytics on customer sentiment and engagement are enabling CX workers to strengthen relationships.”
The human touch should always exist, but AI can be used for routine tasks to free up people to focus more on the experience for shoppers.
“In the retail industry, AI is proving to be not just a powerful tool but also key to enhancing the capabilities of human workers with actionable insights and complex, automated calculations.” – Forbes.
Generative AI Increases Customer Loyalty
According to a CX Network survey, 28% of respondents recorded a positive impact on customer loyalty through their use of generative AI and 39% percent recorded a positive impact on company profits. The biggest areas of impact were investments in generative AI for virtual agents and agent assists, which reduced the need for human intervention. The ability of AI to analyze and synthesize data to automate simpler tasks and customer responses “enabled agents to focus on more complex issues and high-value interactions.”
Some companies are getting AI right and truly enhancing the customer experience. They’re using it to streamline the customer experience; reduce friction; prevent inventory depletion; provide virtual experiences for trying on everything from makeup to shoes; and answer questions intelligently (with far less hold time) 24/7. MSR Cosmos identified the following retailers who have mastered the power of AI for good to deliver these types of improved experiences:
• Amazon Go
• Walmart’s Smart Shelves
• Sephora’s Virtual Artist
• Nike
• Nordstrom
‘Botshit’ is a Bane
As chatbots take over every aspect of our lives when it comes to online customer service, it’s not always an ideal replacement for humans. In fact, the term “botshit” has been coined to describe the disasters that happen when chatbots are not properly overseen by humans. Air Canada found out the hard way that when their bot offered a customer the ability to claim a bereavement discount after the flight. They had to honor it. It’s the adage of garbage in, garbage out. If retailers want chatbots to be successful, the data they’re being fed must be accurate.
Data-Driven from Start to Finish
To improve AI in retail and ensure it delivers for consumers, retailers need to prioritize investments in AI in ways that free humans to provide better CX while taking over the largely routine and automated functions within the operation.
Investing in technology isn’t just a way to save money on labor costs or reduce inventory costs. Retailers can also use the data gathered by employing AI technology to:
• Map traffic. Heat maps can help retailers position products strategically based on traffic patterns.
• Improve personalization. By using AI to analyze consumer purchases and preferences, retailers can better personalize offers and product suggestions.
• Make supply chains more efficient. From inventory management to supply chain excellence, AI and ML can transform the entire supply chain process, including reducing labor costs and product costs.
• Improve customer experience. Smart mirrors, interactive displays, customized digital signage, and interactive displays can enhance the in-store experience.
What’s Next for Retail CX?
Retailers should already be providing seamless omni-channel experiences and personalization, and as we look to how technology will improve CX this year and beyond, it’s as if the era of The Jetsons has finally arrived (ok, maybe not the flying cars – yet). But technology is evolving exponentially, and in the next few years, these things will become prevalent:
• Robots in warehouses, fast food restaurants, and retail shops, like the KettyBot.
• Chatbots like Ada, with language skills and responses imperceptibly human-like.
• Faster decision-making through automation to optimize business operations.
AI’s potential is greater than its best chatbot, though. As Joe Andrews writes in Microsoft Start, “Solely focusing on automation can be a trap for businesses, drawing them into a narrow focus on tasks like AI chatbots and basic troubleshooting. I believe AI’s true potential lies in its capacity for observability. Rather than simply executing predefined tasks, AI must dig deep into data, uncovering trends and patterns within customer interactions that might otherwise remain hidden.”
So while GenAI is “soulless,” as retail thought leader Robin Lewis describes it in The Robin Report, it can “amplify marketing messaging, and deliver design suggestions (for better or worse) that can help designers and marketers. It won’t replace them, but GenAI may be a partner to human decision-making and an alternative to making assumptions about customers and the marketplace.”
Humans will continue to play a pivotal role in shaping CX, driving customer satisfaction and loyalty. But even as retailers employ humans to further actual empathetic engagement with consumers, technology will provide a foundation for automation and intelligent decision-making capabilities that frees the people part of the equation to further elevate the overall customer experience.