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How can artificial intelligence boost sales and positively impact retailer-customer interactions?

In recent months, Generative AI has increasingly been in the spotlight, emerging as one of the most promising technologies for digital transformation with broad applications. OpenAI’s ChatGPT, introduced in late 2022, is an excellent example of artificial intelligence capabilities. Although not based on human logic, it uses probabilities to generate reasonable and human-like responses based on available data.

The power of Generative AI though, extends beyond chatbots. The retail industry can greatly benefit from utilizing Generative AI in various applications, including communication design, supply chain optimization, and automation of e-commerce workflows. Even smaller businesses can take advantage of this technology as its implementation cost is often minimal.

According to Accenture’s Technology Vision 2023 report, an overwhelming majority of retail executives (96%) express strong enthusiasm for the new possibilities offered by foundation models (the technology supporting Generative AI applications like ChatGPT). The same research revealed that over 90% of executives believe foundation models will play a significant role in their retail strategies for the next three to five years. Moreover, more than 50% of respondents have already started exploring experimental applications of Generative AI in areas such as customer support and process automation.

Enhancing customer experience through conversational commerce

Generative AI can significantly enhance the customer experience through conversational commerce. This technology allows brands and businesses to integrate Generative AI into their digital environment to provide more personalized and effective search capabilities. Conversational product search, powered by Generative AI, accelerates the search process and suggests options that best match the customer’s profile by analyzing their search history and focusing on reasonable next choices for everyone. This, in turn, can lead to more rapid purchases, improved conversion rates, and enhanced cross-selling. For example, under a blog post about camping, relevant product recommendations can be displayed, eliminating the need for the customer to wonder what is required when planning a relevant activity.

Additionally, Generative AI can bolster support through chatbots, offering sophisticated responses tailored to each customer’s needs and personalized interactions that align with the retailer’s and brand’s style and tone of voice. This greatly surpasses the limitations of traditional chatbots (usually relying on a limited number of pre-programmed scenarios) and creates an entirely new communication and support experience for customers, making them feel like they are interacting with a human and ensuring a higher level of service.

Optimizing supply chain operations

The conversational capabilities of Generative AI can enhance interactions between humans and machines in the supply chain sector. For example, Generative AI can provide real-time package tracking information, responding to customer queries more quickly and accurately. It can also optimize packaging processes by analyzing and calculating product dimensions faster than a human, thereby reducing the overall time it takes for a shipment to reach its recipient.

Automating content creation in e-commerce back-end

Generative AI can improve the customer experience not only on the front-end but also automate workflows in the e-commerce back-end. It can automatically generate consistent and accurate product descriptions and create personalized graphics by analyzing text descriptions and data from images, eliminating the need for new photo shoots. Additionally, Generative AI can assist in generating website content, improving e-commerce support processes, and freeing up employees’ time for other business tasks. This efficient solution allows businesses to focus on more strategic initiatives and increase their productivity as needed. It can be useful even for retailers that have a website but not necessarily an e-shop, as AI-generated content can be applied for advertising purposes (e.g., brochures, posters, banners, etc.) in digital or printed format.

Addressing challenges

While Generative AI offers numerous possibilities for retail, it is essential not to overlook the risks and challenges it may present. Artificial intelligence models like ChatGPT may currently provide answers that appear correct and reliable, but they may not always reflect reality. Therefore, careful verification and content review are necessary in every case. Furthermore, the development of a regulatory framework governing the use of Generative AI is underway, and its operation and use may change in the very near future. Such regulation is essential to provide guidelines and ensure transparency in the use of this technology.

Startups and investors embrace AI

Generative AI is a powerful tool with significant potential and prospects, and as it continues to evolve and shape the industry, we can expect to see more and better applications of it in the retail sector. Moreover, investments in startups developing artificial intelligence solutions are continually increasing. According to data from the Organization for Economic Co-operation and Development (OECD), investments in startups involved in Generative AI skyrocketed in 2023 and are projected to surpass 45 billion dollars worldwide. The future looks exciting!

Consumers are returning products more and more often – how can the retail industry cope with the cost?

The changes in retail in recent years, that accelerated even more by the rise of e-commerce and, of course, the pandemic, include a new major challenge for merchants, which in previous years was not so prominent: the issue of returns. Now, returns are considered an integral part of the customer journey and something that will concern commerce more in the future.
Even before the outbreak of the pandemic, however, there were signs that returns would become an increasingly important part of the shopping experience. In 2019, Tobin Moore, CEO of Optoro, noted that in the coming years, as e-commerce grows around the world, “the value of returns will reach $1 trillion dollars a year”. At the same time, David Sobie, co-founder & CEO of Happy Returns had mentioned the difference in the rate of consumer returns when buying something in stores compared to returns in online purchases, with the rate of the former being 5-10% and of the latter 15-40%.

The returns keep increasing

In subsequent years, the data showed that the rate of returns was constantly increasing. According to data released in early 2022 by the National Retail Federation (NRF) and Appriss Retail, in 2021 the overall return rate in the US was 16.6% compared to 10.6% in 2020, with online shopping returns however stabilizing at 20.8%. According to the same report, in the US alone for every $100 in returned merchandise accepted, retailers lose $10.30. At the same time, retailers expect more than $761 billion worth of merchandise sold through 2021 to be returned by consumers. This means that refunds are already a $1 trillion problem and will continue to be an even bigger problem in the near future.
According to a McKinsey survey published in May 2021, nearly 75% of retailers agree that returns are “a necessary evil”. They are now a part of business that is often overlooked, but has a huge impact on their brand. In fact, 84% of consumers polled by Doddle, as cited in the same survey, said that the returns experience plays an important role in their opinion of a retailer, while around 95% noted that a poor returns experience will make it less likely that they will make a purchase from a particular brand again.

Addressing the issue of returns

Nevertheless, how can a retailer deal with the rising costs of returns and in what ways can this new reality not become a significant burden on their business?
Certainly, actions that can limit the possibility of returns play an important role. A quality check on the products can prevent a negative experience from consumers, which will lead them to product returns, as well as errors (especially on sites and online sales) that can lead the brand’s customers to wrong purchases. The products must be presented accurately on the site of a brand or store, so that there are no doubts among the buyers. Particular attention should be paid (especially in shopping for clothing and footwear) to the correct display of colors and sizes, while ways for consumers to calculate their size correctly, even online where there is no possibility to try on (via special software or even charts), can help to avoid buying a product that needs to be returned. Augmented reality apps that help a consumer better imagine an object in their space or an accessory on them can lead to purchases for which users feel more confident.
Of course, as part of the online purchase experience, shipping also plays an important role, as a rough or wrong packaging can result in a broken or damaged product reaching the consumer, which will necessarily have to be returned and replaced, with a significant cost to the retailer.

Educating consumers

It is important to have some provisions regarding the store’s return policies that are clear to consumers in advance. The entire procedure must be accurately described in such a case, as well as who bears the cost. In many cases, charging for e-shopping returns is a preferred solution. Not long ago, the leading clothing chain Zara became the latest retailer to start charging shoppers to return products bought online if the return is not made in one of the company’s stores. European customers must pay €3.45 to return their purchases, with the cost deducted from the refund amount. Products bought online can still be returned free of charge to chain stores, which presents many advantages as a method. A consumer who goes to the store even to return a product is more likely to buy something new or something extra that they saw in front of them. Additionaly, the returned product is back on the shelf for sale sooner than if the postal route was followed, reducing risk of withdrawing from the sale because e.g. its time has expired or it went out of fashion/season.
If the store cannot bear the burden of the refund, it can clearly state that it is refunding to a gift card or loyalty card instead of cash or to the customer’s credit/debt card.
Regarding businesses that also maintain physical stores in particular, there are modern automated solutions that speed up returns and put less burden on a store and its staff. For example, some retailers abroad are already implementing the solution of special “Return Bars“, i.e. special points where customers can deliver their returns quickly, using QR codes or another method. Technological developments in the retail sector are an ally in this case as well, offering solutions that make the chain that connects the merchant with the consumer more efficient, bringing the products faster from one end to the other, revealing -through data analysis- audience preferences and areas for improvement, reducing costs and increasing customer satisfaction.

Returns are a necessary evil for merchants, but one they can deal with without significant negative consequences. What they need to do is turn in-store product returns into a good shopping experience for their customers and see the new reality as an opportunity from which they can get valuable data for the development of their business.
What do the experts recommend? Place more emphasis on increasing first sales and customer satisfaction, so that the cost of returns becomes less and less. The problem of returns is one of the topics discussed at the 1st Retail Tech Communities Workgroup, organized by Cardlink with the support of Found.ation, as part of the Retail Innovation Hub actions. Read more insights regarding the challenges retail faces, and what the experts have to say in our free Retail Insights Memo.

What, how and where do consumers shop during the Covid-19 era?

In the last two years, we have experienced important changes in our lives, due to the unexpected onset of the Covid-19 pandemic. Among all others, we have become different as consumers. But what are the changes that have taken place in consumer habits? What do consumers buy now, from where and in what ways?

Delivery is dynamically enhanced

People may not have been able to visit restaurants for a long time, but that doesn’t mean they stopped discovering new tastes, even at home. According to a recent survey by IELKA (Research Institute of Retail Consumer Goods), 4 out of 10 Internet users now order food online. In addition, according to data from Euromonitor International, the share of spending on e-commerce related to food and beverages exceeded 10% in 2020, from just 3% in 2015, while, according to the survey ‘Voice of the Consumer: Lifestyles’ of Euromonitor International, 46% of consumers aged 30-44 years ordered food to go or for delivery in 2020, from 34% in 2019. At the same time, new trends have sprung up in delivery, such as ghost kitchens (stores that can deliver food, without having space to serve customers or a shop window), which, according to Euromonitor, will represent a business opportunity of 1 trillion dollars by 2030.

What other online markets have been boosted?

Which markets, however, flourished the most during the pandemic? According to a study by Plushost in collaboration with Focus Bari, which studied the relationship between consumers and e-commerce before, during and after the restrictive measures in 24 different market sectors, the categories that grew during the quarantine period are Cosmetics / Perfumes (+ 17%), Clothes & Shoes (+ 12%), Underwear / Pajamas (+ 12%), Toys (+ 10%), Medicines / Supplements (+ 8%), Gift Items (+ 8%), Sports Equipment (+ 8%), Books (+7%) and Sportswear / Shoes (+ 6%). In terms of where consumers shop, online shopping orders from Skroutz / Best Price precede with a percentage of 28%, followed by chain shops’ websites (27%) and of course stores that offer many different brands.

Great rise for e-commerce in general

E-commerce has, of course, taken off. According to statistics concerning Greece from the Europe e-commerce report 2021, the percentage of Internet users who buy goods or services online reached 59% in 2020, with the forecast to reach 63% in 2021, from 45% in 2016. Similar are the statistics of ELSTAT, according to which, in the first quarter of 2021, online purchases were made by 60% of consumers, having an increase of 22% compared to the corresponding period last year.

How do consumers pay?

Of particular interest are the findings regarding payment methods, where consumers still prefer Cash on Delivery (CoD) albeit to a lesser extent (63% before the pandemic, 56% in quarantine, 57% in the click-in-shop system and 59% today). Overall, however, a significant increase was noticed in card usage, during the pandemic period. According to an interim report of the Bank of Greece on monetary policy 2021, card payments made by physical presence at a physical EFTPOS terminal in 2020 amounted to 28.7 billion euros, an increase of 29% over the previous year, while the corresponding value of those carried out remotely amounted to 6.8 billion euros in 2020, an increase of 71% over the previous year.

Support for local markets increased as well

The quarantine also brought a strong interest in local markets. In 2020, according to statistics from the European Commission, 81% made purchases closer to home and supported local businesses, in a statistic proving that people, after the onset of the pandemic and the constraints it has brought to their lives, have turned a lot to their neighborhood and to the shops closest to their home.

Keeping up with trends and helping businesses in the world of retail to understand them is one of the aims of Retail Innovation Hub – a regional platform with the ambition to facilitate the development of retail in the digital age. More insights were presented at the Retail leaders Innovation Workgroup on January 20th, an interactive online event aimed at sharing ideas and identify challenges that have a broad impact on the industry and require solutions. The insights from this workgroup are available in a mini report that you can download here for free.