AI-Powered Retail: Revolutionizing In-Store Experiences to Meet Modern Consumer Demands

According to IBM's 2024 Consumer Study of over 20,000 consumers across 26 countries, only 9 percent of consumers are satisfied with the in-store shopping experience. Despite the enduring presence of physical stores, this widespread discontent stems from a yearning for more seamless technology integration into consumer journeys.

As retailers grapple with the implications of this dissatisfaction, the need for proactive measures becomes increasingly urgent. Enter artificial intelligence, a transformative tool brick-and-mortar retailers can use to authentically connect with their customers, turn data into powerful insights, and elevate the in-store shopping experience.

Retailers can meet modern shoppers' expectations and drive sales by strategically leveraging AI-powered solutions at key touchpoints in the customer journey. Real-time data analytics empower brands to tailor messages, promotions and experiences, fostering a sustained and flexible connection adapting to evolving consumer behaviors and preferences.

Understanding Consumer Discontent

Widespread consumer dissatisfaction has far-reaching consequences for retailers, especially regarding customer churn and sales. Most consumers feel disconnected from brands that lack technology integration or personalization within shopping journeys. This frustration can lead to lost sales as shoppers seek more satisfying experiences elsewhere. Over half of consumers will switch to a competitor after one bad experience — even if they love the company.

Moreover, dissatisfied customers are less likely to make impulse purchases, which account for 40 percent to 80 percent of all purchases, significantly impacting a retailer's bottom line. Without the allure of a compelling, personalized in-store experience, consumers may stick to their planned purchases, further impacting sales.

The consequences of consumer dissatisfaction extend beyond immediate sales. Just one unhappy customer typically shares their experience with nine to 15 other people — and some tell 20-plus. Over 90 percent of customers read online reviews before buying a product, and a bad review can lead 86 percent of consumers to stop buying from a business, leading to a loss of potential new customers and a diminished brand reputation.

Identifying Key Pain Points

So, how can retailers address these concerns, improve customer satisfaction and drive sales? The answer lies in pinpointing critical pain points and prioritizing those with the highest potential for AI intervention.

For example, more than half of consumers want to use augmented reality (AR)/virtual reality (VR) (55 percent) and AI applications (59 percent) while shopping. Roughly four in five consumers who haven't yet used AI for shopping would like to see how it can help them research products or get product  information (86 percent), look for deals and promotions (79 percent), or get service, ask questions and resolve issues (82 percent). These numbers demonstrate key areas where consumers believe AI can enhance their shopping experience.

Other potential opportunities to leverage AI include:

• Product information enhancement: Customers often struggle to find detailed, accurate information about products in-store. AI-powered solutions, such as interactive displays or mobile apps, provide instant access to product specifications, reviews and comparisons, empowering informed purchase decisions.
• Hyper-personalization: This tool can help retailers personalize offers and promotions based on individual customer preferences and purchase history, ensuring customers receive relevant, timely incentives that drive sales and loyalty. Around 85 percent of Gen Z consumers, 89 percent of millennials, and 75 percent of baby boomers and seniors want personalized offers.
• Customer support and resource allocation: AI-powered chatbots, virtual assistants and self-service kiosks can reduce wait times and improve customer satisfaction by providing instant and accurate support. Retailers can allocate their resources efficiently using targeted AI solutions to address high-impact pain points and meet customer needs and expectations.
• Data gathering and analysis: Retailers can gather valuable insights by utilizing surveys and feedback forms in-store, via email, and through social media monitoring. By combining industry research with company-specific data, they can tailor AI interventions to customers’ unique needs.

As customer preferences and expectations evolve, retailers must remain agile and responsive. Regularly reassessing pain points and gathering ongoing feedback ensures that AI-powered solutions remain relevant and effective.

Strategies for Implementing AI Solutions

Retailers that embrace AI-powered solutions are well-positioned to stay ahead of the curve and reap the benefits of enhanced customer experiences. Successful AI adoption in retail could contribute roughly $310 billion in additional value by boosting marketing and customer interaction performance.

An effective way to use AI for personalization is through in-store audio or digital displays, which offer an immersive brand experience at the point of purchase. These platforms track impressions through foot traffic and in-store sensors, providing valuable customer engagement and behavior data. Additionally, computer vision technology lets retailers analyze data captured by in-store sensors, such as customer demographics (age and location) and attention spans.

By combining data from in-store sensors, computer vision and other sources, retailers can develop a comprehensive understanding of customers and implement AI-powered personalization strategies, including:

1. Curation of in-store playlists: AI can create dynamic, targeted playlists that enhance the in-store atmosphere and encourage customers to spend more time browsing and making purchases.
2. Personalized product recommendations and offers: AI-powered systems can deliver customized product promotions via digital displays or mobile apps, increasing conversions and boosting customer satisfaction.
3. Targeted placement: With a deep understanding of customer preferences and in-store behavior, retailers can use AI to optimize the placement of advertisements and content on digital displays, effectively capturing customer attention and driving sales.
4. Seamless navigation and information access: AI-powered solutions can help customers navigate stores efficiently with interactive store maps, product locators and real-time inventory information, reducing friction and improving shopping experiences.

Implementing AI solutions requires a strategic approach combining data collection, analysis and application. By staying informed about industry projections and leveraging the power of AI to personalize and streamline in-store experiences, retailers can differentiate themselves from competitors, increase customer loyalty, and drive sales in an increasingly competitive market.

Paul Brenner is senior vice president, retail media and partnerships at Vibenomics, a pioneer in in-store audio advertising.