holiday shopping

No one knows precisely how the 2023 holiday shopping season will turn out. However, many analysts point to lackluster sales and tight margins. Forrester Research retail analyst Sucharita Kodali told CNBC consumer confidence is faltering, as is retail seasonal hiring.

Adobe also released its online shopping forecast for the year, which it deems Nov. 1 through Dec. 31. Adobe’s analytics data examines more than 1 trillion visits to U.S. retail sites, and 100 million SKUs within 18 product categories across 85% of the top 100 internet retailers in the U.S. Adobe expects U.S. online holiday sales to hit $221.8 billion this holiday shopping season, representing 4.8% growth over last year, somewhat better than the 3.5% growth in 2022. Still, Adobe expects deep discounts and deferred payments to fuel spending as shoppers seek to stretch their budgets as far as they can. According to the U.S. Department of Labor, the annual inflation rate in 2022 was 6.5% and 3.7% for the twelve months ending in September.

While research from CRM vendor Salesforce sees global online sales hitting $1.19 trillion in November and December; that’s a 4% increase over last year. Salesforce also sees a highly competitive shopping season, with online retailers discounting, improving return policies and turning to generative AI tools to help increase sales and shopper loyalty.

We reached out to experts to understand how retailers have turned to generative AI this holiday season. They see AI playing a significant role this year and shared their thoughts about how they expect generative AI to have its most significant impact.

Karl Cama, senior chief architect, office of the CTO at Red Hat, contends that AI this year is critical to ensuring effective personalization. One of the ways AI can do that, Cama says, is by providing shoppers with unique suggestions and recommendations based on history and customer preferences.” AI should be used to look at behaviors from other customers with similar likes and dislikes and not just general behavior from the whole demographic,” Cama says.

Cama adds that AI can also be used to look at additional sources of information, including social media, weather patterns and characteristics unique to the local geography and culture, and then “conduct a personality analysis or determine an individual’s propensity to buy. It can also be used to formulate the “best offer” specific to that individual to get them past any hesitation and complete the purchasing process,” Cama says.

Asim Zaheer, former CMO at Glassbox, agrees that companies can leverage AI to improve personalization and prevent customer abandonment by better analyzing their data for personalized recommendations or suggestions based on a customer’s past interactions across platforms. “These data insights help to enhance the customer experience and can lead to increased loyalty and sales,” Zaheer says.

AI will also drive more personalized customer service, says Christy Augustine, COO at Bloomreach. AI-powered chatbots and virtual assistants can answer customer queries, address concerns and guide customers through purchasing. “By analyzing vast amounts of customer data and automating campaigns, AI is already empowering retailers to create personalized holiday shopping experiences for customers and, in turn, drive sales throughout the season,” Augustine says.

It’s not just during the beginning of the sales process where AI will have a starring role this holiday season, but also deep into the product selection and customization process, according to Red Hat’s Cama. Through improved automated manufacturing processes and customization, AI will help customers make detailed decisions, helping to guide last-minute selections. “For example, allow a customer to pick minor details on clothing such as monograms, pocket sizes, button styles as they purchase the item in store, then have it delivered to home the same or next day,” says Cama.

Finally, such personalization efforts will increasingly include experiences within brick-and-mortar stores. “[AI will] provide recommendations and suggestions as the consumer enters and moves around a retail store. AI can be used to help detect the customer within the store, review all information about the consumer, then send real-time recommendations to their phone or shopping cart,” Cama adds.

AI will also be providing more personalized advertising and marketing as personalization. “During the 2023 holiday season, artificial intelligence will be at work at every step of a digital shopping excursion. Ad targeting will try to put relevant ads in front of likely customers to draw them to a merchant’s site,” says Katherine Wood, Signifyd staff data scientist.

“Automation can also be used for marketing campaigns or deploy “pop up stores” for special events that have a defined window of time. It allows retailers to capture revenue in a very short amount of time yet customize the merchandise and overall shopping experience specific to that event,” adds Cama.

Such capabilities will also help improve the web presence for online shoppers, as AI can provide improved product tagging and categorization functionality, making it easier for customers to find the products they’re looking for. There’s also customized online content, including AI conversations, stories, images, videos and music, to enhance the online shopping experience and drive more sales.