Retail’s Secret Santa: How Main Street Can Use AI to Win This Holiday Season

The holiday season is a double-edged sword for retailers — a time of immense opportunity and significant stress. Deloitte is forecasting sales growth of 2 percent to 3 percent this season, which will put pressure on retailers, their online platforms, and customer service teams. They will face a spike in questions, requests and returns. Add a shorter holiday calendar this year and the stakes couldn’t be higher.

What can help? Artificial intelligence (AI). Despite its transformative potential, AI still needs to be utilized in retail. This isn't hype; it's a reality ready for prime time in this industry where margins and customer satisfaction are critical to success. Smaller retailers often shy away due to perceived costs or lack of understanding of the benefits, while larger businesses grapple with integrating AI into outdated legacy systems. However, affordable AI tools that don’t need an army of consultants and IT professionals to support them are now available, enabling businesses of all sizes to survive and thrive this holiday season. Efficiency doesn't have to come at the expense of customer satisfaction. The right AI solution can deliver both.

Lighten the Load on Customer Support

Holiday pressures hit customer service teams hardest as repetitive inquiries pile up. Think, “What’s your return policy?” “What’s the status of my order?” or “Is this item still in stock?” This is where AI agents shine. By handling these routine queries instantly, AI agents reduce customer wait times and free up human agents to tackle the volume of more complex, value-driven issues.

This is a game-changer for smaller retailers with lean teams. AI agents provide 24/7 support, ensuring operations run smoothly even during peak shopping days. Meanwhile, human agents enjoy a more engaging workload, leading to higher productivity and job satisfaction. As AI evolves, it’s poised to take on even more responsibilities, leaving teams free to focus on building deeper, more personalized customer relationships.

AI-Powered Gift Recommendations: No More Guesswork

Holiday shopping can be stressful, especially when buying for someone who seems to have it all. AI can take the guesswork out of gift-giving by offering hyperpersonalized recommendations tailored to individual preferences.

How? By analyzing purchase history, browsing behavior, and even sentiment data, AI helps businesses understand their customers. For instance, an AI-powered recommendation engine might proactively suggest the perfect gift — like that trendy Stanley cup in its newest color — just as it hits store shelves. This not only delights customers but also builds loyalty, increases repeat purchases, and ensures a more profitable holiday season.

Easing Returns and Enhancing Inventory Management

Post-holiday returns are an inevitable headache, but AI can turn them into an opportunity. From streamlining return logistics to reducing returns altogether, AI helps retailers stay ahead.

Modern AI tools optimize return routes to minimize transportation costs and delays, a significant win for smaller retailers without large-scale logistics networks. AI can also reduce return rates by recommending better product matches based on customer history, ensuring that buyers make the right choice the first time.

AI can help enhance operations by predicting demand based on historical data and current trends, analyzing data and seasonal trends to maximize inventory levels, and shaping pricing strategies for potential gifts based on competitor prices and customer data.

The result? Retailers get the most bang for their AI buck AND keep customers happier.

The Gift Retailers Need This Season

At the busiest, most crucial time of the year, customer support teams need more support, too. AI solutions are within reach for companies of all sizes from both a budget and ease of integration standpoint. With AI in their corner, retailers can deliver the efficiency, personalization and joy that define the holiday season, making AI the ultimate gift for Main Street.

Mika Yamamoto is chief customer and marketing officer of Freshworks, a provider of cloud-based tools for customer relationship management, IT service management, and e-commerce marketing.