Retailers are turning to artificial intelligence to make the holiday shopping season a success

The 2024 Christmas shopping season will not be the best for retailers. Not only is the Thanksgiving to Christmas window narrower than usual, but market watchers are predicting sluggish sales growth for the period.

Salesforce, for example, is forecasting 2% year-over-year growth in global sales for November and December, totaling $1.19 trillion, and 2% growth in the United States to $277 billion. In 2023, year-on-year growth in global sales was 3%, totaling $1.17 trillion.

However, one change that could be for the better is the rise of artificial intelligence as a means to optimize retail performance and consumer satisfaction during the hectic shopping season.

“With Thanksgiving falling on November 28, the 2024 Christmas shopping season will be shorter than usual, affecting assortment, pricing and promotional strategies. The last time the season was this short was in 2019, before Covid. These historical demand patterns can no longer be reliably predicted for this year,” said Martin Ryan, vice president of retail at EPAM Systems, a software engineering, digital platform engineering and digital product design services company based in Newtown, Pennsylvania.

“Retailers need to adapt their demand forecasting strategies to avoid undersupply or oversupply,” he told the E-Commerce Times. “Artificial intelligence tools can be used to provide accurate and dynamic predictions based on data analysis of historical and current data from multiple sources.”

“Social listening tools can gather real-time data about consumer preferences, which typically translate much more quickly into purchasing behavior during the holiday season when time for consideration is condensed,” he added.

How AI gift suggestions are improving Christmas shopping

However, Keri McGhee, CMO of Attentive, a global customer relationship management company, pointed out that holiday shopping has started earlier and earlier in the past few years. “This year is no different,” she told the E-Commerce Times.

McGhee cited Forrester research that found nearly 25% of U.S. adults began shopping for the 2023 holiday season in October or earlier. “This year, we expect the holiday season to start early again, primarily because of the shorter period between Thanksgiving and Christmas,” she said.

“Brands that use AI tools early can reach these customers quickly and effectively and get more conversions than waiting for the traditional rush of Black Friday and Cyber ​​Monday weekends,” she continued. “AI can deliver BFCM promotions and news directly to customers early to drive greater sales throughout the season with exclusive or limited offers delivered via SMS or email.”

One way retailers are using AI to reach shoppers is through gift recommendations. For example, Amazon offers “Rufus,” a generative conversational AI shopping assistant that helps shoppers with everything from finding deals to choosing gifts to answering shopping questions.

“Intelligent virtual assistants can help shoppers find the right gift by analyzing the recipient’s preferences — whether it’s clothing, tech or hobbies,” said Gopi Polavarapu, CSO of Kore.ai, a provider of generative AI solutions, in Orlando, Fla.

“This takes the guesswork out of gift giving, saves time and reduces stress, especially during the holidays,” he told the E-Commerce Times. “For retailers, this means happier customers who are more likely to return because they are more satisfied with the shopping experience.”

Gifts that resonate

The average person spends $71 on gifts that aren’t appreciated, noted Tina Wung, global vice president of marketing at Nisum, a Silicon Valley-based technology consulting firm. “Retailers need to help their customers address this gap,” she told the E-Commerce Times.

“With extensive data on customer behavior, artificial intelligence is able to more accurately predict which products are suitable for specific attributes,” she said. “This information can fine-tune large language models where customers can talk to AI and ask it for gift advice. “Artificial intelligence chatbot ‘gift assistants’ can uniquely ask the shopper to capture the necessary details about the recipient to help them choose the perfect gift.”

“AI and relying on consumer data to anticipate and predict demand has never been more important for retailers,” she added. “AI’s ability to understand customers in a complex way enables successfully targeted shopping assistance. Consumers are 91% more likely to buy from brands they recognize and provide relevant recommendations, while they are 80% more likely to buy from brands that offer them personalized experiences.”

Purchase certainty with AI personalization

Jorge Argota, a Miami-based digital marketing and SEO expert, said artificial intelligence has changed the shopping experience for his customers when it comes to buying gifts.

“Personalized recommendations are now part of our online store,” he told the E-Commerce Times. “Based on an analysis of individual preferences and purchasing behavior, AI suggests gifts that resonate with each customer. Personalization makes shopping more fun and helps customers find meaningful gifts without stress.”

He added that features like visual search and augmented reality have made gift shopping more interactive. “Customers can upload an image and find similar products in our inventory or use AR to see how the product would look in their home or on themselves,” he noted. “These tools not only make shopping more fun, but also reduce uncertainty, so customers have more confidence in their purchase.”

Artificial intelligence can also personalize gifts in other ways. “Using natural language processing, AI can even consider the sentimental or emotional value of gifts based on conversations or social media activity. This level of personalization could make the process more efficient and meaningful, helping people choose thoughtful gifts with minimal effort,” Mark N. Vena, president and chief analyst at SmartTech Research in Las Vegas, told the E-Commerce Times.

Challenges in Implementing Artificial Intelligence in Gift Retail Shopping

AI now knows a lot about customers’ browsing history, buying patterns and even their social media activity, so it could suggest personalized gift ideas that hit the spot every time, noted Blake Ellis, CTO of CommerceV3, an e-commerce platform and service . a company based in Minneola, Florida. “We’re not quite there yet,” he told the E-Commerce Times, “but the potential is huge. It could revolutionize the way people shop for others, making the entire gift-giving process smoother and more meaningful.”

As powerful as AI-powered gift giving can be for retailers, it won’t be a huge blow to them. “AI can significantly increase consideration and close sales rates, but only if it’s implemented well, and too few companies know how to implement it well so early in its young life,” warned Rob Enderle, president and chief analyst at Enderle Group. , a consulting firm, in Bend, Ore.

“Where it works, it draws people to products they might not otherwise consider and away from products they might otherwise buy,” he told the E-Commerce Times. “Once it reaches scale, it’s going to have a significant adverse impact on firms that haven’t figured out how to use it properly, and a huge benefit to firms that do.”

Kassi Socha, a consumer and culture analyst at Stamford, Conn.-based Gartner, a research and advisory firm, also cautioned brands against deploying unusual AI-powered tools. “Brands that introduce AI-powered gift generators or digital holiday card creators that don’t have a clear connection to making the gift-giving process easier or more efficient may experience low user adoption and engagement,” she told E-Commerce. Times.

“Furthermore,” she added, “tools that are prioritized as part of a marketing campaign over integration into the core shopping experience may have been rushed into production and more likely to induce hallucinations or produce results that do not match shopper needs or intent. This could damage the brand’s reputation.”

AI Demand Forecast for Holiday Sales

Another area where AI will impact holiday sales is demand forecasting. For example, Amazon, which is introducing artificial intelligence into its operations starting in 2020, has a collection of artificial intelligence, machine learning and other systems known as SCOT – Supply Chain Optimization Technologies – that make countless predictions, recommendations and decisions every day.

“By implementing new predictive and generative techniques, the SCOT team has already achieved a 10% improvement in our long-term forecasts,” Amazon spokeswoman Maxine Tagay told the E-Commerce Times.

Artificial intelligence and demand forecasting are game changers, says Ellis CommerceV3. “We’re talking about next-level accuracy in predicting what products will fly off the shelves,” he said. “Machine learning algorithms can process vast amounts of data, past sales data, social media trends and even the weather to provide retailers with a crystal ball for inventory planning. No more guesswork or overstocking. It’s about getting the right products to the right place at the right time.”

Dynamic inventory management

“As an agency owner, I have seen firsthand how AI has changed our demand forecasting,” added Argota. “In the past, we’ve made educated guesses and used last year’s sales figures to predict which products will be popular during the holiday season. AI algorithms now track our historical sales and market trends, economic indicators and even seasonal patterns. We get super accurate forecasts to make informed decisions about inventory and resource allocation.”

He also highlighted AI capabilities for real-time data processing. “Consumer behavior during the holidays can change in an instant due to promotions or viral trends,” he explained. “With artificial intelligence, we can adjust our strategies on the fly to match these changes. We don’t get caught off guard by spikes or drops in demand, which is key to customer satisfaction and operational efficiency.”

In addition, he noted that artificial intelligence has almost eliminated excess stock and inventory. “By accurately forecasting demand, we can have the right amount of inventory on hand,” he said. “This reduces holding costs and means popular items are available when our customers want them. It’s a delicate balance, but AI makes it much easier to achieve.”

“AI also helps us get ahead by identifying new trends,” he added. “Based on analysis of social media posts, search queries and sales data, AI tools will tell us what is trending. This allows us to stock trending items that will be in high demand to meet customer expectations during the holiday rush.”

Balancing AI innovation with consumer trust

In their rush to embrace artificial intelligence, retailers need to be careful, confirmed Lija Hogan, head of experience research strategy at UserTesting, a customer experience research and statistics company. “Retailers need to understand how to balance personalizing the shopping experience without being seen as evidence that a brand ‘knows too much’ about its customers,” she told the E-Commerce Times.

“The successful integration of AI will depend on retailers’ ability to prioritize customer trust and transparency,” she continued. “Integrating AI requires constantly evaluating the consumer/retail experience while addressing consumer privacy issues, informing customers about how their data is being used, and understanding consumer attitudes toward AI tools.”

She added: “Retail leaders who continuously improve their shopping experience based on customer feedback will be most successful in today’s dynamic environment.”

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Retailers are turning to artificial intelligence to make the holiday shopping season a success

The 2024 Christmas shopping season will not be the best for retailers. Not only is the Thanksgiving to Christmas window narrower than usual, but market watchers are predicting sluggish sales growth for the period.

Salesforce, for example, is forecasting 2% year-over-year growth in global sales for November and December, totaling $1.19 trillion, and 2% growth in the United States to $277 billion. In 2023, year-on-year growth in global sales was 3%, totaling $1.17 trillion.

However, one change that could be for the better is the rise of artificial intelligence as a means to optimize retail performance and consumer satisfaction during the hectic shopping season.

“With Thanksgiving falling on November 28, the 2024 Christmas shopping season will be shorter than usual, affecting assortment, pricing and promotional strategies. The last time the season was this short was in 2019, before Covid. These historical demand patterns can no longer be reliably predicted for this year,” said Martin Ryan, vice president of retail at EPAM Systems, a software engineering, digital platform engineering and digital product design services company based in Newtown, Pennsylvania.

“Retailers need to adapt their demand forecasting strategies to avoid undersupply or oversupply,” he told the E-Commerce Times. “Artificial intelligence tools can be used to provide accurate and dynamic predictions based on data analysis of historical and current data from multiple sources.”

“Social listening tools can gather real-time data about consumer preferences, which typically translate much more quickly into purchasing behavior during the holiday season when time for consideration is condensed,” he added.

How AI gift suggestions are improving Christmas shopping

However, Keri McGhee, CMO of Attentive, a global customer relationship management company, pointed out that holiday shopping has started earlier and earlier in the past few years. “This year is no different,” she told the E-Commerce Times.

McGhee cited Forrester research that found nearly 25% of U.S. adults began shopping for the 2023 holiday season in October or earlier. “This year, we expect the holiday season to start early again, primarily because of the shorter period between Thanksgiving and Christmas,” she said.

“Brands that use AI tools early can reach these customers quickly and effectively and get more conversions than waiting for the traditional rush of Black Friday and Cyber ​​Monday weekends,” she continued. “AI can deliver BFCM promotions and news directly to customers early to drive greater sales throughout the season with exclusive or limited offers delivered via SMS or email.”

One way retailers are using AI to reach shoppers is through gift recommendations. For example, Amazon offers “Rufus,” a generative conversational AI shopping assistant that helps shoppers with everything from finding deals to choosing gifts to answering shopping questions.

“Intelligent virtual assistants can help shoppers find the right gift by analyzing the recipient’s preferences — whether it’s clothing, tech or hobbies,” said Gopi Polavarapu, CSO of Kore.ai, a provider of generative AI solutions, in Orlando, Fla.

“This takes the guesswork out of gift giving, saves time and reduces stress, especially during the holidays,” he told the E-Commerce Times. “For retailers, this means happier customers who are more likely to return because they are more satisfied with the shopping experience.”

Gifts that resonate

The average person spends $71 on gifts that aren’t appreciated, noted Tina Wung, global vice president of marketing at Nisum, a Silicon Valley-based technology consulting firm. “Retailers need to help their customers address this gap,” she told the E-Commerce Times.

“With extensive data on customer behavior, artificial intelligence is able to more accurately predict which products are suitable for specific attributes,” she said. “This information can fine-tune large language models where customers can talk to AI and ask it for gift advice. “Artificial intelligence chatbot ‘gift assistants’ can uniquely ask the shopper to capture the necessary details about the recipient to help them choose the perfect gift.”

“AI and relying on consumer data to anticipate and predict demand has never been more important for retailers,” she added. “AI’s ability to understand customers in a complex way enables successfully targeted shopping assistance. Consumers are 91% more likely to buy from brands they recognize and provide relevant recommendations, while they are 80% more likely to buy from brands that offer them personalized experiences.”

Purchase certainty with AI personalization

Jorge Argota, a Miami-based digital marketing and SEO expert, said artificial intelligence has changed the shopping experience for his customers when it comes to buying gifts.

“Personalized recommendations are now part of our online store,” he told the E-Commerce Times. “Based on an analysis of individual preferences and purchasing behavior, AI suggests gifts that resonate with each customer. Personalization makes shopping more fun and helps customers find meaningful gifts without stress.”

He added that features like visual search and augmented reality have made gift shopping more interactive. “Customers can upload an image and find similar products in our inventory or use AR to see how the product would look in their home or on themselves,” he noted. “These tools not only make shopping more fun, but also reduce uncertainty, so customers have more confidence in their purchase.”

Artificial intelligence can also personalize gifts in other ways. “Using natural language processing, AI can even consider the sentimental or emotional value of gifts based on conversations or social media activity. This level of personalization could make the process more efficient and meaningful, helping people choose thoughtful gifts with minimal effort,” Mark N. Vena, president and chief analyst at SmartTech Research in Las Vegas, told the E-Commerce Times.

Challenges in Implementing Artificial Intelligence in Gift Retail Shopping

AI now knows a lot about customers’ browsing history, buying patterns and even their social media activity, so it could suggest personalized gift ideas that hit the spot every time, noted Blake Ellis, CTO of CommerceV3, an e-commerce platform and service . a company based in Minneola, Florida. “We’re not quite there yet,” he told the E-Commerce Times, “but the potential is huge. It could revolutionize the way people shop for others, making the entire gift-giving process smoother and more meaningful.”

As powerful as AI-powered gift giving can be for retailers, it won’t be a huge blow to them. “AI can significantly increase consideration and close sales rates, but only if it’s implemented well, and too few companies know how to implement it well so early in its young life,” warned Rob Enderle, president and chief analyst at Enderle Group. , a consulting firm, in Bend, Ore.

“Where it works, it draws people to products they might not otherwise consider and away from products they might otherwise buy,” he told the E-Commerce Times. “Once it reaches scale, it’s going to have a significant adverse impact on firms that haven’t figured out how to use it properly, and a huge benefit to firms that do.”

Kassi Socha, a consumer and culture analyst at Stamford, Conn.-based Gartner, a research and advisory firm, also cautioned brands against deploying unusual AI-powered tools. “Brands that introduce AI-powered gift generators or digital holiday card creators that don’t have a clear connection to making the gift-giving process easier or more efficient may experience low user adoption and engagement,” she told E-Commerce. Times.

“Furthermore,” she added, “tools that are prioritized as part of a marketing campaign over integration into the core shopping experience may have been rushed into production and more likely to induce hallucinations or produce results that do not match shopper needs or intent. This could damage the brand’s reputation.”

AI Demand Forecast for Holiday Sales

Another area where AI will impact holiday sales is demand forecasting. For example, Amazon, which is introducing artificial intelligence into its operations starting in 2020, has a collection of artificial intelligence, machine learning and other systems known as SCOT – Supply Chain Optimization Technologies – that make countless predictions, recommendations and decisions every day.

“By implementing new predictive and generative techniques, the SCOT team has already achieved a 10% improvement in our long-term forecasts,” Amazon spokeswoman Maxine Tagay told the E-Commerce Times.

Artificial intelligence and demand forecasting are game changers, says Ellis CommerceV3. “We’re talking about next-level accuracy in predicting what products will fly off the shelves,” he said. “Machine learning algorithms can process vast amounts of data, past sales data, social media trends and even the weather to provide retailers with a crystal ball for inventory planning. No more guesswork or overstocking. It’s about getting the right products to the right place at the right time.”

Dynamic inventory management

“As an agency owner, I have seen firsthand how AI has changed our demand forecasting,” added Argota. “In the past, we’ve made educated guesses and used last year’s sales figures to predict which products will be popular during the holiday season. AI algorithms now track our historical sales and market trends, economic indicators and even seasonal patterns. We get super accurate forecasts to make informed decisions about inventory and resource allocation.”

He also highlighted AI capabilities for real-time data processing. “Consumer behavior during the holidays can change in an instant due to promotions or viral trends,” he explained. “With artificial intelligence, we can adjust our strategies on the fly to match these changes. We don’t get caught off guard by spikes or drops in demand, which is key to customer satisfaction and operational efficiency.”

In addition, he noted that artificial intelligence has almost eliminated excess stock and inventory. “By accurately forecasting demand, we can have the right amount of inventory on hand,” he said. “This reduces holding costs and means popular items are available when our customers want them. It’s a delicate balance, but AI makes it much easier to achieve.”

“AI also helps us get ahead by identifying new trends,” he added. “Based on analysis of social media posts, search queries and sales data, AI tools will tell us what is trending. This allows us to stock trending items that will be in high demand to meet customer expectations during the holiday rush.”

Balancing AI innovation with consumer trust

In their rush to embrace artificial intelligence, retailers need to be careful, confirmed Lija Hogan, head of experience research strategy at UserTesting, a customer experience research and statistics company. “Retailers need to understand how to balance personalizing the shopping experience without being seen as evidence that a brand ‘knows too much’ about its customers,” she told the E-Commerce Times.

“The successful integration of AI will depend on retailers’ ability to prioritize customer trust and transparency,” she continued. “Integrating AI requires constantly evaluating the consumer/retail experience while addressing consumer privacy issues, informing customers about how their data is being used, and understanding consumer attitudes toward AI tools.”

She added: “Retail leaders who continuously improve their shopping experience based on customer feedback will be most successful in today’s dynamic environment.”

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