Mastering the AI Revolution in Retail 

By Catherine Brien, Partner and Managing Director, AlixPartners 

“We tend to overestimate the impact of technology in the short term and underestimate the effect in the long run” – Roy Amara, Futurologist.  

OpenAI’s ChatGPT just celebrated its second birthday. It is one of the fastest-growing consumer applications in history, and has generated unprecedented levels of excitement and debate. Two years on, much of the hype has subsided (thank goodness), and businesses are getting practical. 

Retailers have been using AI for decades. Analysing huge volumes of data; applying statistics to drive forecasting and decision-making; automating warehouses; spotting trends; personalising the customer experience, and much more. And while the temptation is to believe everything has changed, much hasn’t. Product, price, productivity, service, and brand all remain critical. AI is not the answer to everything – far from it – and technology and AI still need to be in service to the business strategy, rather than the other way round. The vast majority of value creation from AI still comes from machine learning and other traditional approaches, and this will continue to be the case for a while.   

But generative AI (GenAI) is a significant shift that can’t be ignored. Users can now interface with data using natural language, making it far more accessible to many. AI can now generate images, text, music, and video, opening up swathes of new use cases, such as enriching or correcting product information and images for websites; hyper-personalising customer interactions; personalising colleague training; dramatically speeding up product design. It is being deployed in audit and other corporate functions, and of course is integral to fighting cyber risks. 

And it’s not just about the customer experience and productivity. AI is reducing barriers to new revenue streams such as marketplace, and combined with IoT, connected stores, and ownership of the customer relationship, AI is fuelling retail media.    

With all of this comes risk. It is sobering that so many recent data breaches and cyber attacks have hit the retail sector. And hallucination and ethical considerations demonstrate that, just as the opportunity has grown, so too have the potential issues. 

Many colleagues will also be nervous – for their ability to keep up, or for what it means for their jobs. So far, we’re seeing that most successful AI is helping people to achieve more, rather than replacing them, but leadership skills will undoubtedly be an essential determinant of which organisations succeed or fail. 

Today, for every success story, there are frustrations. Indecision around where and how to start; proof of concepts that fail to scale; users resisting adoption; financial returns not yet justifying the investment; poor data or legacy technology getting in the way; risk management either holding the business back, or failing to protect adequately. Spoiler alert – winning with AI means avoiding all of these pitfalls. 

Our latest Digital Disruption Survey found that Retail lags other industries such as Media, Telecommunications and Financial Services when it comes to AI, in terms of understanding the technologies and potential benefits, and also in adoption and the ability to derive tangible value and P&L impact.  

Retailers are grappling with questions such as – what role should AI play in my business? Should we move now, or wait for solutions to mature? Where should we focus first? Should we buy or build, and who should we partner with? How do we sort out our data?  Who should lead this? How do we equip our people for the future?  

In our recent AI playbook for CEOs, we explored many of these topics. And in our upcoming 2025 World Retail Congress report and podcast series, focused on how to master the AI revolution, we’ll delve deeper: 

• How are retail business models responding to AI?   

• How is AI changing relationships with customers? 

• What opportunities are there to boost profitability and productivity? 

Critically, we’ll also look at how retail leaders can respond: 

• How to lead in the age of AI? 

• How to build the strong technology and data foundations needed to underpin AI? 

• How to manage risk to create a competitive advantage? 

In a sector where day-to-day operations are all consuming, thinking about the longer term can be hard. We’ll take you beyond the hype. Now is the time to get practical and focus on results.