GenAI in Retail: Opportunities Galore, Challenges Remain

  • For retailers to fully embrace the opportunity of advanced technologies like GenAI, solution enablers need to find ways to remove obstacles holding back implementation.
  • There are opportunities left untouched right now to make use of the existing device capabilities and push user engagement further. This is because of long-held beliefs as to how users prefer to engage with their devices and content.
  • There have been instances of technology rollouts being reversed, confirming the need for a careful evaluation of available solutions.

The Location Based Marketing Association (LBMA) recently held its annual RetailLoco conference in Minneapolis, Minnesota. The event brings together experts and stakeholders from across the retail technology ecosystem. This year’s edition showcased GenAI brand activations while underscoring the persistent challenges retailers face in integrating advanced smartphone features and AI across their physical and online shopping experiences.

Opportunities to grow for all

While a cautious approach to AI and GenAI was a theme throughout the event, there were a few interesting implementations highlighted:

  • Burger King Brazil ran a promotion where menu combinations were presented to mobile app users once they scanned their facial expressions.
  • L’Oréal’s Perso at-home assistant integrates Breezometer weather and location information to provide personalized makeup suggestions.
Example of L'Oreal AI assistant.
Image source: Gerrit Schneemann, Counterpoint Research

These activations show the potential of GenAI capabilities to engage customers in new ways. At scale, these types of examples can lead to personalized shopping or dining experiences, previously impossible to deliver.

For retailers to fully embrace the opportunity of advanced technologies like GenAI, AR/VR and network-based positioning, solution enablers need to meet them halfway and find ways to remove most of the obstacles currently holding back implementation:

  • Retailers must prioritize the seamless integration of mobile payments and user-centric experiences.
  • AI-driven solutions possess the capability to enhance operational efficiency, personalize interactions and streamline business processes, be it predictive maintenance in manufacturing or AR-enhanced marketing endeavors.
  • Technology providers must recognize that a one-size-fits-all approach to the deployment of new technologies will not work, and the availability of customizable solutions will be critical for adoption.
  • End users are likely to embrace new technologies if there is a clear benefit for them. This includes sharing location information, downloading specific apps, and changing device use patterns to take advantage of new features.

Fragmentation of backend systems overshadows new technologies’ potential utility 

One of the key themes of the presentations by representatives from companies like Harley Davidson, Glympse and Kroger was that technology availability does not necessarily translate to a clear strategy on how to implement these solutions across mobile apps, online, and retail locations.

A striking example of the lack of utilization of existing features on smartphones is augmented reality (AR) for discovery and guidance within stores. The focus of navigation remains on A-to-B guidance to a store with heavy stress on displaying the famous blue dot on the map, with pedestrian guidance and AR content integration appearing out of favor at this point.

There are opportunities left untouched right now to make use of the existing device capabilities and push user engagement further. This is because of long-held beliefs as to how users prefer to engage with their devices and content. One such point of contention is how users would engage with AR content, and the need to hold up a phone to view it. However, this should be less of an issue now as video content creation across social media is standard behavior for many. Gone are the days when phones were neatly tucked away while on the go.

Another challenge to the full embrace of advanced mobile features appears to be the long tail of proprietary internal systems. Retailers feel inadequately prepared to navigate technologies such as AI, chatbots, AR and VR. Constraints stemming from budgetary limitations, dearth of internal resources and lack of executive endorsement impede their adoption efforts further. While mobile payments, AI and chatbots hold immense promise, retailers grapple with the complexities of implementation.

Kroger feedback loop.
Image source: Gerrit Schneemann, Counterpoint Research

Importantly, there have been instances of technology rollouts being reversed, confirming the need for a careful evaluation of available solutions. Walmart’s reversal on self-checkout stations and findings that Amazon’s touchless shopping experience in physical stores was powered by a large workforce decoding video streams instead of AI are key examples that are likely to cause large organizations to pause and re-evaluate their plans and adjust accordingly.

RetailLoco 2024 served as an interesting snapshot of the status quo and future of retail, where AI and innovation are significant opportunities for all involved in the value chain. However, there are a host of obstacles in the way of faster adoption of the most advanced solutions, driven by an undeniable wariness to over-committing to potentially flawed technologies and the realities of proprietary internal systems, ill-equipped to deal with fast-changing 5G and AI solutions.

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