Artificial intelligence (AI) was seemingly on every retailer’s mind in 2023, especially for the all-important holiday season.

The technology plays a role in how consumers decide what to purchase, and in how retailers facilitate those purchases. In addition, sellers use it to improve customer service and fulfillment efficiency. And the impact is already significant. Salesforce says that AI influenced 17% of all online orders made in November and December. It also says AI accounted for $194 billion in sales over the holiday season.

Salesforce arrived at that figure based on analysis of shopping data from 1.5 billion shoppers, says Rob Garf, vice president and general manager of retail. 

AI product recommendations are getting more accurate

Predictive AI for product recommendations was by far the most common use case for the technology, Garf says. Retailers have been using AI to make product recommendations for years, he explains. As the technology matures, it makes better recommendations that consumers actually use.

“AI is really only as good as the data that it is fed, and from our point of view, that data lives predominantly in a retailer’s own four walls,” Garf says.

Retailers have access to data about their customers’ preferences, shopping history, brand allegiance, return history and more, he states, so it’s all about using that data most effectively.

“Our research shows on average, consumers experience nine different touch points in any given shopping journey,” he notes. “So what AI is doing is helping smooth out that shopping experience by helping both the customer directly and as it relates to their shopping experience and the frontline employee.”

AI frees up employee time

Retailers also began to dip their toes into generative AI for more creative tasks, Garf says. He points to Salesforce clients using generative AI to create subject lines for email marketing campaigns over the holidays. An employee still oversees and edits the text, but doesn’t have to do the initial drafting. 

Verlo Mattress took a similar approach in the months leading up to the holidays, says Ira Klusendorf, vice president of marketing at Verlo. The mattress retailer prioritizes responding to online reviews within 24 hours as a key part of its customer engagement strategy. However, that can be time-consuming.

“Creative writing takes time. So the AI helps you be creative and effective [in a shorter amount of time],” he says.

Verlo uses generative AI to create appropriate responses to reviews, which are about 98% accurate to the brand’s voice, he explains. “We played with the brand voice,” which the brand uses “across the board,” he says. Verlo is now experimenting with AI-generated social media posts that could further free up employee resources to focus on other tasks.

Retailers use AI to be more efficient behind the scenes

In some cases, consumers weren’t necessarily aware of the extent to which AI was involved in their holiday purchases. For example, many of the largest online retailers incorporated AI across their fulfillment and logistics networks.

“[AI] is meant to be something you don’t see or feel, but it’s as critical as oxygen,” says Scott Hamilton, vice president for last-mile delivery routing and planning technology at Amazon, in a press release. “When you don’t realize it’s there, that means it’s working perfectly.”

The online retail giant uses AI to forecast what products will be in demand and coordinate which items to stock in which warehouses. Then, AI-enabled robots sort and inspect millions of packages at these warehouses before they’re loaded into delivery vehicles. The robots are trained using generative AI, which creates simulations of scenarios they might encounter during busy shopping periods, according to Amazon. That same technology allows the robots to map out Amazon’s fulfillment centers and become more efficient at navigating them as time goes on.

Walmart uses AI similarly, senior vice president of end-to-end fulfillment Parvez Musani says in a blog post detailing the company’s AI holiday plans. Walmart trains its AI using historical shopping data, online searches and page views to forecast demand and stock products appropriately. 

“We also consider ‘future data’ such as macro-weather patterns, macroeconomic trends and local demographics to anticipate demand and potential fulfillment disruptions,” Musani writes. “With this combined data, our engines identify and correct discrepancies, inefficiencies, or inaccuracies in supply chain models.” 

The system works in reverse, too. Walmart’s AI technology is sophisticated enough to disregard anomalies, such as highly unusual storms, to prevent muddying the data. 

Amazon ranks No. 1 in  Top 1000. The Digital Commerce 360 database ranks North America’s leading online retailers by their web sales. Walmart ranks No. 2.

Consumers were open to AI this year

While retailers actively incorporated AI into more parts of the selling process, consumers also showed interest, proving themselves willing to engage with the new technology. They had high expectations, too. 76% of respondents to a Talk Survey poll in November said that they expected to make fewer returns of holiday purchases because AI would help guide their purchases.

88% of consumers said they would use AI in some way for holiday purchases in the survey. That included chatbots and personalized recommendations, which were the most common applications for AI, according to Salesforce.

Consumer experience with AI in the 2023 holiday season might have implications for future uses. 68% of online shoppers say they would lose trust in a brand if it gave them poor recommendations. 53% said the experience would stop them from shopping with the retailer again.

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