The 2024 holiday shopping season is not the best season for retailers. Not only is the period between Thanksgiving and Christmas narrower than usual, but market watchers also expect sales growth to be slower during this period.
Salesforce, for example, predicts that global sales for November and December will total $1.19 trillion, up 2% from a year ago, with U.S. sales rising 2% to $277 billion. Global sales in 2023 increased by 3% year-on-year, totaling $1.17 trillion.
But one change that could be for the better is the emergence of artificial intelligence as a means to optimize retail performance and consumer satisfaction during the busy holiday season.
“With Thanksgiving falling on November 28th, the 2024 holiday shopping season will be shorter than usual, impacting assortments, pricing, and promotional strategies. The last time the season was this short was. “These historical demand patterns are no longer reliable in predicting this year’s demand patterns,” said Digital Platform Engineering, a software engineering service based in Newtown, Pennsylvania. said Martin Ryan, vice president of retail at EPAM Systems, a digital product design company.
“Retailers need to adapt their demand forecasting strategies to avoid stock shortages or overstocks,” he told E-Commerce Times. “AI tools can provide accurate and dynamic predictions based on data analysis from historical and current data from multiple sources.”
“Social listening tools can collect real-time data on consumer preferences, which typically translates into purchase behavior faster during the holiday season when consideration time is compressed,” he added.
How AI gift suggestions improve holiday shopping
But in recent years, holiday shopping has started earlier and earlier, said Keri McGee, chief marketing officer at Atento, a global customer relationship management company. “This year is no different,” she told E-Commerce Times.
McGee cited a Forrester study that found that about 25% of online adults in the U.S. started shopping for the 2023 holiday season in October or earlier. “We expect the holiday season to start early again this year, primarily due to the shorter period between Thanksgiving and Christmas,” she said.
“Brands that embrace AI tools early can reach these customers quickly and effectively and drive more conversions, rather than waiting until the traditional Black Friday and Cyber Monday weekends. ” she continued. “AI allows us to bring BFCM promotions and news directly to our customers early on, and drive more sales throughout the season by delivering limited or exclusive offers via SMS or email.”
One way retailers are using AI to reach shoppers is through gift recommendations. For example, Amazon offers Rufus, a conversational shopping assistant powered by generative AI that helps shoppers with everything from finding deals to choosing gifts to answering shopping questions. .
“We are excited to partner with Kore.ai, a generative AI solutions provider in Orlando,” said Gopi Polavarapu, CSO of Kore.ai, a generative AI solutions provider in Orlando. florida
“This takes the guesswork out of gift-giving, saving time and stress, especially during the holiday season,” he told E-Commerce Times. “For retailers, this means customers are more likely to be satisfied and return because the shopping experience feels more personal.”
A gift that touches the heart
Tina Ng, global vice president of marketing at Nisumu, a global post-purchase experience management company, says the average person wastes $71 on gifts that go unappreciated. “Retailers need to help shoppers address this gap,” she told E-Commerce Times.
“By leveraging vast amounts of data about customer behavior, AI can more accurately predict which products are suitable for specific characteristics,” she said. “This information allows us to fine-tune a large-scale language model that allows customers to talk to the AI and ask for gift advice. Our AI chatbot ‘gift assistant’ provides unique prompts to shoppers. to get the necessary details about the giver and help you choose the perfect gift. ”
“Relying on AI and consumer data to predict and attract demand has never been more important for retailers,” she added. “AI’s ability to understand customers in complex ways enables targeted shopping assistance. Consumers are 91% more likely to shop with brands that recognize and provide relevant recommendations. 80% are more likely to make a purchase if they receive a personalized experience.”
Earn trust with AI personalization
Jorge Argota, a digital marketing and SEO expert in Miami, said AI has changed the shopping experience for customers when it comes to buying gifts.
“Personalized recommendations are now part of our online store,” he told E-Commerce Times. “AI analyzes personal preferences and shopping behavior to suggest gifts that resonate with each customer.Personalization makes shopping more enjoyable and allows customers to find meaningful gifts in a stress-free way.”
He added that features such as visual search and augmented reality have made gift buying more interactive. “Customers can upload a photo to find similar products in our inventory and use AR to see how the product will look in their home or on themselves,” he said. “Not only do these tools make the shopping experience more enjoyable, they also reduce uncertainty and help customers buy with more confidence.”
Artificial intelligence can also personalize gifts in other ways. “Using natural language processing, AI can also consider the sentimental or emotional value of a gift based on conversations and social media activity. This level of personalization makes the process more efficient. “It has the potential to be more meaningful and meaningful, allowing people to choose thoughtful gifts with minimal effort,” said Mark N. Vena, president and principal analyst at SmartTech Research in Las Vegas. he said.
Challenges of implementing AI in retail gift shopping
Blake Ellis, CTO of CommerceV3, an e-commerce platform and service, says AI knows a lot about customers’ browsing history, purchasing patterns, and even social media activity, so they can create personalized, targeted responses every time. They say they may be able to suggest gift ideas. “We are not there yet,” he told E-Commerce Times. It could revolutionize the way people shop for others, making the entire gift-giving process smoother and more meaningful. ”
AI-powered gift giving is extremely powerful for retailers, but it’s not easy for them. “AI can significantly increase sales value and win rates, but only if it is implemented properly. Too few companies know how to successfully implement AI at a young age. ,” warned Rob Engdahl, president and principal analyst at Engdahl Group. , an advisory services firm located in Bend, Oregon.
“If it works well, people will gravitate toward products they otherwise wouldn’t have considered, and away from products they would otherwise buy,” he told E-Commerce Times. . “Once it reaches scale, it will have significant negative effects on companies that don’t understand how to use it properly, and significant benefits for those that do.”
Kassi Socha, a consumer and culture analyst at Gartner, a research and advisory firm based in Stamford, Conn., also warned brands against implementing sophisticated tools that leverage artificial intelligence. “Brands with artificial intelligence-powered gift generators and digital holiday card makers may experience low user adoption and engagement if they don’t have a clear connection to simplifying and streamlining the gift-giving process.” she told E-Commerce. times.
“Furthermore,” she added, “tools launched as part of a marketing campaign, rather than tools that are integrated into the core shopping experience, are hastily produced, illusive, or misaligned with shoppers’ needs.” “intentions that are likely to produce results that do not meet your needs.” This can damage your brand’s reputation. ”
Demand prediction for holiday sales using AI
Another area where AI can impact holiday sales is in demand forecasting. For example, Amazon, which has been incorporating AI into its operations since 2020, has a collection of AI, machine learning, and other systems known as SCOT (Supply Chain Optimization Technology) that make countless predictions, Making recommendations and making decisions.
“By implementing new forecasting and generation techniques, the SCOT team has already improved long-term forecasts by 10%,” Amazon spokesperson Maxine Tagay told E-Commerce Times.
AI and demand forecasting are game changers, says CommerceV3’s Ellis. “We’re talking about the next level of accuracy in predicting which products will disappear from store shelves,” he said. “Machine learning algorithms can process large amounts of data, past sales, social media trends, and even weather patterns to give retailers a crystal ball for inventory planning, eliminating guesswork and overstocking. No more. It’s all about having the right product in the right place at the right time.”
Dynamic inventory management
“As an agency owner, I have seen firsthand how AI has changed demand forecasting,” added Algota. “Previously, we made educated guesses and used last year’s sales data to predict which products would be the best sellers during the holiday season. and market trends, economic indicators, and even seasonal patterns, giving you highly accurate forecasts that allow you to make informed decisions about inventory and resource allocation.”
He also touted AI’s real-time data processing capabilities. “Consumer behavior during the holidays can change instantly due to promotions and viral trends,” he explained. “AI allows us to adjust our strategy on the fly to accommodate those changes. We are not caught off guard by spikes or dips in demand, which is key to customer satisfaction and operational efficiency. ”
Furthermore, he pointed out that AI has almost eliminated excess inventory and stockouts. “Accurately forecasting demand allows us to have the right amount of inventory on hand,” he said. “This reduces inventory costs and ensures that popular items are available when customers want them. It’s a delicate balance, but AI has made it much easier to achieve.”
“AI can also help you stay ahead of the curve by identifying emerging trends,” he added. “By analyzing social media posts, search queries, and sales data, AI tools can tell us what’s trending. This allows us to stock trendy items that are in high demand and help avoid the rush of the holiday season. It gives us insights to help us meet customer expectations.”
Balancing AI innovation and consumer trust
In the rush to implement AI, retailers need to be careful, warns Lija Hogan, president of UserTesting, a global customer experience company. “Retailers need to understand how to balance personalizing the shopping experience so that brands don’t appear to know ‘too much’ about their customers,” she told E-Commerce Times.
“Successful AI integration will depend on retailers prioritizing customer trust and transparency,” she continued. “Integrating AI requires addressing consumer privacy concerns, keeping customers informed about how their data is being used, and understanding consumer attitudes toward AI tools while providing consumer /Retail experiences must be continually evaluated.”
She added, “Retail industry leaders who continually improve the shopping experience based on customer feedback will be the most successful in today’s dynamic landscape.”
