Retailers turn to AI for marketing, merchandising

• More than eight in 10 retailers have integrated artificial intelligence into their operations to a moderate or large extent, according to a report released Nov. 12 by BRG, formerly known as Berkeley Research Group.
• North American retailers are using AI currently for tasks such as marketing (70%), IT and digital functions (62%), digital commerce (56%), and merchandising strategy and pricing (54%). In the future, they plan to deploy the technology toward planning and product flow (40%), corporate operations (38%), supply chain and sourcing (36%), and distribution and logistics (32%).
• However, AI usage may not necessarily “translate into tangible business impacts.” Though AI tools like ChatGPT and Copilot can complete menial tasks such as writing product descriptions or marketing copy, it remains unclear whether such capabilities are causing a noticeable shift for retailers, the report noted.

As more AI companies emerge, companies must prioritize AI investments that address specific business problems, BRG recommended. The report cited several key performance indicators to measure AI’s benefits, including average order value, inventory turnover rate, revenue, customer retention and labor efficiency improvements, among others.

“Companies should fit AI into a clearly defined target operating model rather than force the technology into what they’re already doing,” the report advised. “AI is not cheap, and payback periods vary drastically; retailers must have a clear roadmap with well-defined business cases, ROIs, and pilots to test and launch their AI initiatives.”

BRG’s caution comes as major retailers dive headfirst into their AI investments. Sam’s Club, for instance, is using its AI-powered Scan & Go smartphone app to validate purchases as it reinvents checkout at 600 stores, per the report. The wholesale retailer last year opened a store without checkout lanes in Grapevine, Texas, that requires shoppers to use the app.

Levi Strauss & Co. partnered with Microsoft last month to adopt a “complex agentic framework” across various company functions, including its IT, human resources and operations. Similarly, Walmart debuted its own artificial intelligence framework in July, centering on four super agents: the customer-centric Sparky agent; the partner agent Marty for suppliers, sellers and advertisers; a store associate agent; and an agent for company technology developers. The retailer plans to develop more specialized subagents over the upcoming year.

Meanwhile, Target is deploying AI as part of its strategy to jumpstart sales and traffic. The retailer is using generative AI to produce new ideas for its merchants using the company’s AI platform, Target Trend Brain. The retailer is also using AI to evaluate vendors applying to join Target Plus, its third-party marketplace platform, Target Chief Information and Product Officer Prat Vemana said in an October interview with Retail Dive.

As the retail industry implements various AI-driven strategies, its impact on the industry is not fully understood. Retailers are experimenting with AI in areas like search and product recommendations, while at the same time seeking to understand how AI will affect their business long term.