Retailers Bet on AI to Drive Holiday Sales

Inside Amazon’s digital marketplace this holiday season, a new artificial intelligence (AI) assistant named Rufus has been steering shoppers through millions of product choices. The chatbot, launched earlier this year, represents the retail giant’s push to streamline the complex world of online shopping.

Across retail, AI-powered shopping assistants have emerged as key players in the holiday rush. Walmart has introduced AI, while other major retailers have integrated similar tools to enhance the digital shopping experience.

The impact of these AI assistants became clear during Cyber Monday, when chatbot-driven traffic to retail sites surged 1,950% compared to last year, according to Adobe Analytics. This unprecedented AI engagement helped drive online sales to $13.3 billion, a 7.3% increase from the previous year.

Many companies are seeing changes from AI this holiday season.

“In our business, we’ve seen increased traffic coming from ChatGPT in the last couple of weeks,” Komninos Chatzipapas, founder of HeraHaven AI, told PYMNTS. “We’re able to measure this because when it links to your site, it adds a “ChatGPT” UTM source parameter. That’s when users ask ChatGPT questions and then ChatGPT recommends our product with a link to it. From my personal observations, this seems to be loosely correlated with how well a website ranks on Bing for keywords related to the user’s query.”

Retailers Rush to Unwrap New Tech

Nearly all U.S. retailers plan to deploy generative AI for customers during the 2024 holiday season, according to a survey of retail executives by NLX. The study found 92% will roll out AI applications, with conversation-based product recommendations being the most common planned feature.

“We were surprised at the numbers around the percentage of retailers planning to have customer-facing generative AI live for the holidays,” said NLX CEO Andrei Papancea, noting that widespread implementation isn’t yet visible in the industry.

The technology’s influence extends beyond basic customer service. AI systems now analyze shopping patterns and browsing history to offer personalized gift recommendations. Google has integrated AI into its shopping tools, allowing customers to use Google Lens to scan products in stores for instant price comparisons and reviews.

The stakes are significant. Salesforce estimates AI will influence more than $200 billion in holiday sales this year, representing a 12% increase from last year. A survey by Talkdesk revealed that 62% of consumers plan to use AI-powered product recommendations for gift ideas this season.

Walmart is deploying AI technology to transform holiday shopping, including personalized gift recommendations and a digital shopping assistant that can engage in natural conversations with customers. The retail giant announced that its AI systems will expand home delivery to 12 million more U.S. households during the holiday season, using data to optimize delivery routes and schedules.

The company explained that “AI technologies understand their preferences, and GenAI predicts the type of content they’d like to see,” giving the example, “If a customer previously searched for board games, they may be shown deals, new game releases or gift ideas.”

Younger consumers appear particularly receptive to AI shopping assistance. Research by Boston Consulting Group found that 38% of consumers intend to use generative AI during major sales events, with higher adoption rates among younger demographics.

AI Grinches

But this enthusiasm comes with risks. A surge in AI-assisted fraud has prompted increased vigilance from payment processors. Visa reported blocking twice as many fraudulent charges during Black Friday and Cyber Monday compared to the previous year.

These challenges underscore the nascent state of retail AI technology. While the tools show promise in streamlining the shopping experience and boosting sales, their limitations suggest a technology still in its early stages of development.

Despite these growing pains, consumer interest remains strong. A new survey by beauty tech company Perfect Corp. reveals that 66% of shoppers plan to spend less this holiday season while still seeking personalized shopping experiences powered by AI. The report found that 60% of consumers prefer a mix of online and in-store shopping, with 23% specifically seeking virtual try-on tools and 26% valuing AI-powered virtual assistants. 

“AI is becoming more crucial than ever for effectively engaging consumers and addressing their evolving preferences for personalization,” said Perfect Corp. CEO and Founder Alice Chang. 

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