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In a remarkably short time, digital technologies have rapidly revolutionized how retailers reach, target and engage customers. A recent study estimates that Generative AI (Gen AI) could unlock between USD 240-390 Billion in economic value for retailers.1 While 2023 tested retailers' AI investments, the 2024 holiday season presents a new challenge: Meeting the heightened expectations of shoppers whose lives have been transformed by cutting-edge consumer-facing AI technologies.

This challenge will be a defining factor in the success of retailers’ holiday sales, with more than a third of consumers already using or planning to use Gen AI in their seasonal shopping journeys.2 It means retailers must up their game to delight a newly AI-powered shopper; one who is savvier, more specific and with needs more niche than retailers have experienced before.

Despite economic optimism, consumers across all income groups display frugal and value-seeking behaviors. In this value-driven environment, operating with agility while delivering hyperpersonalized engagement is essential. Forward-thinking retailers are already leveraging AI and Gen AI to elevate customer engagement and provide tailored experiences.

Early indicators of the holiday season are promising, with Thanksgiving sales in the US increasing year-over-year by 8.8 percent, driven by significant discounts and an uptick in mobile shopping.3 Here, we explore the trends leading retailers will harness to continue this success and thrive throughout the holiday season and beyond.

1. The Fight for Affordability

Affordability is a significant concern for a majority (53 percent) of consumers this festive period, with inflationary pressure squeezing household budgets.4 Many are looking to the latest technologies for a solution, with common use cases for tapping into Gen AI this holiday season including finding the best deals for items (36 percent) or comparing prices (32 percent).5

This heightened price sensitivity – combined with consumers empowered with enhanced decision-making capabilities – underscores the growing importance of speed and agility this holiday season. Tempting customers with the right deal at the right time in a highly personalized way will prove crucial as shopping behaviors oscillate rapidly. Amazon employs AI-driven dynamic pricing to adjust the prices of millions of products daily. Its algorithms analyze factors such as competitor pricing, demand, inventory levels and more to determine optimal, competitive prices.6 These prices are sometimes updated multiple times throughout the day to stay aligned with market conditions.

2. Gifting Guidance

It isn’t only bargain hunting that technology is enabling this holiday season. With almost 40 percent of shoppers saying they trust AI tools completely, an opportunity exists to differentiate and drive revenue by proactively inspiring and guiding consumers at each stage of their shopping journey. The appetite for this gifting guidance is clear to see: 42 percent of Black Friday shoppers who plan to use AI will enlist it to help them with gifting inspiration, with most (38 percent) seeking help buying for friends, followed by their children (35 percent) and parents (29 percent).7

Leading retailers are already harnessing this interest. Etsy’s Gift Mode, for instance, is an AI-powered hub capable of helping holiday shoppers find unique, personalized gifts by matching them with items tailored to over 200 recipient personas. Meanwhile, Amazon’s Gen AI-powered shopping assistant, Rufus, can find gifts precisely tailored to the recipient.

3. Enhanced CX

With mobile shopping hitting an all-time high during 2024’s Black Friday (sales through mobile increased 10.5 percent year-over-year), value-seeking consumers are evidently happy to switch up the channels they use for holiday shopping.8 This shows the need for an enhanced, connected and omni-channel Customer Experience (CX) to drive loyalty and what could be a high-stress activity into a delightful one.

Retailers should look to balance high-tech with high touch, utilizing fast-developing technologies and techniques without sacrificing the personal nature of human-powered interactions where they matter most. Leading CX platforms can help retailers strike the right balance, combining digital-first solutions with human-assisted services across all channels, while Gen AI sets new benchmarks for success.

For instance, H&M utilizes AI-powered chatbots to assist customers with tasks such as size recommendations, returns and general inquiries, seamlessly handling routine interactions.9 For more complex or nuanced queries, the system transitions to human intervention to ensure a personalized and effective resolution.

However, a recent Everest Group survey, in partnership with WNS, found that the retail sector is the least prepared across technology, people, process and change management readiness for Gen AI. It means now is the time to make moves to unlock growth into 2025 and beyond.

4. Total Transparency

While AI enables retailers to make better data-driven decisions, the technology does the same for consumers. Almost two-thirds (64 percent) of shoppers, for instance, question the real value of discounts / promotions – and now they have the tools to quickly assess their veracity.10

This shift underscores the critical need to deliver meaningful transparency to customers – a demand further amplified by concerns over logistical challenges and a growing focus on reducing carbon footprints. These factors have prompted 51 percent of consumers to plan their shopping earlier and choose alternative delivery methods.11

Customers seek to-the-minute updates on the provenance and journeys of products, reducing stress and providing assurances when making sustainability-driven purchasing decisions. AI is already enabling retailers to select the right suppliers, mitigate risks, maintain efficient supplier relationships and enhance the resilience of their supply chains. Showcasing this ingenuity to customers through next-level transparency can provide retailers with a competitive advantage and peace of mind.

Unilever is leveraging AI to re-imagine its supply chain with a strong focus on customer connectivity.12 This innovative model transforms and scales collaborative processes with customers, revolutionizing planning, forecasting and replenishment. The result is an optimized supply chain that significantly benefits Unilever and its customers.

Fueling Festive Cheer with Next-generation Retail

There’s no question that customer use of AI is pushing retailers to up their game. It’s a shift that looks likely to continue into 2025 and beyond, with 80 percent of shoppers saying they found Gen AI helpful this holiday season and almost 40 percent saying they plan to use it more frequently in the future.13

Retailers must stay agile and forward-thinking to adapt to these changes, overcoming barriers to change that accompany any complex transformation. Turning to third-party expertise represents an effective way of doing so, ensuring retailers can instantly access the data, digital and domain expertise required to delight and reach new heights during the holiday season and beyond.

Connect with our experts to discover how AI can empower your retail organization to exceed customer expectations.

References

  1. LLM to ROI: How to Scale Gen AI in Retail I McKinsey

  2. Black Friday 2024: GenAI Helps Consumers Hunt for Bargains I Boston Consulting Group

  3. Online Shoppers Set Thanksgiving Day Spending Record After Big Discounts I CNN Business

  4. Festive Shopping Starts, But Consumers Worry about How to Finance Their Purchases I EY

  5. Black Friday 2024: GenAI Helps Consumers Hunt for Bargains I Boston Consulting Group

  6. Harnessing AI for Dynamic Pricing for Your Business I Forbes

  7. AI Will Play an Important Role in Black Friday 2024 I Attest

  8. Consumers Spend Record $6.1B Online on Thanksgiving I Total Retail

  9. AI and Retail: Enhancing Customer Experience and Operational Efficiency I Medium

  10. Holiday Shopping Survey I EY

  11. The State of Consumer Holiday Shopping 2024 I PR Newswire

  12. Utilizing AI to Redefine the Future of Customer Connectivity I Unilever

  13. Black Friday 2024: GenAI Helps Consumers Hunt for Bargains I Boston Consulting Group

Disclaimer: WNS has sourced the data from various publicly available websites. WNS is not responsible for the content or accuracy of any linked sites.

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