Retailers Look to AI for Holiday Shopping Season Success

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The 2024 holiday shopping season won’t be the perfect for retailers. Not only is the Thanksgiving to Christmas window narrower than usual, but market watchers are predicting limp sales growth for the period.

Salesforce, for instance, predicts year-over-year global sales growth of two% for November and December, totaling US$1.19 trillion, and a couple of% growth in america, reaching $277 billion. In 2023, YOY global sales growth was 3%, totaling $1.17 trillion.

One change that could possibly be for the higher, though, is the emergence of artificial intelligence as a method to optimize retail performance and consumer satisfaction through the hectic holiday shopping season.

“With Thanksgiving falling on November 28, the 2024 holiday shopping season might be shorter than usual, affecting assortment, pricing, and promotion strategies. The last time the season was so short was in 2019, pre-Covid. Those historic demand patterns aren’t any longer reliable to predict this yr’s,” said Martin Ryan, vice chairman of retail at EPAM Systems, a software engineering services, digital platform engineering, and digital product design company, hadquartered in Newtown, Pa.

“Retailers have to adapt their strategies for demand forecasting to avoid under- or overstocking,” he told the E-Commerce Times. “AI tools will be used to supply accurate and dynamic predictions based on data evaluation from historical and current data from multiple sources.”

“Social listening tools can gather real-time data about consumer preferences, which generally convert much faster into buying behavior through the holiday season when consideration time is compressed,” he added.

How AI Gift Suggestions Improve Holiday Shopping

Nonetheless, Keri McGhee, CMO of Attentive, a world customer relations management company, identified that over the previous couple of years holiday shopping has began earlier and earlier. “This yr isn’t any different,” she told E-Commerce Times.

McGhee cited research by Forrester that found nearly 25% of U.S. online adults began purchasing for the 2023 holiday season in October or earlier. “This yr, we’re expecting the vacation season to begin early again largely due to the shorter window between Thanksgiving and Christmas,” she said.

“Brands that utilize AI tools early can quickly and effectively reach these customers for more conversions versus waiting until the standard rush of Black Friday-Cyber Monday weekend,” she continued. “AI can bring BFCM promotions and news straight to customers early to see more sales throughout the season with exclusive or limited offers delivered via SMS or email.”

A method retailers use AI to succeed in shoppers is thru gift recommendations. For instance, Amazon offers “Rufus,” a generative AI-powered conversational shopping assistant that helps shoppers with all the things from finding deals to choosing gifts to answering shopping questions.

“Intelligent virtual assistants will help guide shoppers to seek out just the proper gift by analyzing the recipient’s preferences — whether it’s for clothing, tech, or hobbies,” said Gopi Polavarapu, CSO of Kore.ai, a generative AI solutions provider, in Orlando, Fla.

“This takes the guesswork out of gift-giving, saving time and reducing stress, especially through the holidays,” he told the E-Commerce Times. “For retailers, this implies happier customers who usually tend to return, because the shopping experience feels more tailored to them.”

Gifts That Resonate

The common person wastes $71 on gifts that aren’t appreciated, observed Tina Wung, global vice chairman of promoting at Nisum, a world post-purchase experience management company. “Retailers must help their shoppers address this gap,” she told the E-Commerce Times.

“With vast data on customer behavior, AI is capable of predict more accurately which products are suitable for specific characteristics,” she said. “This information can fine-tune large language models where customers can seek advice from AI and ask it for gift advice. AI chatbot ‘gift assistants’ can ask the patron unique prompts to capture the obligatory details concerning the giftee to assist them select the right gift.”

“AI and counting on consumer data to predict and entice demand have never been more critical for retailers,” she added. “AI’s ability to grasp customers intricately allows for successfully targeted shopping assistance. Consumers are 91% more more likely to shop with brands that recognize and supply relevant recommendations, while 80% are more inclined to buy when offered personalized experiences.”

Purchase Confidence With AI Personalization

Jorge Argota, a digital marketing and search engine optimization expert in Miami, said that AI has modified the shopping experience for his customers in relation to gift buying.

“Personalized recommendations at the moment are a part of our online store,” he told the E-Commerce Times. “By analyzing individual preferences and shopping behavior, AI suggests gifts that resonate with each customer. Personalization makes shopping more fun and helps customers find meaningful gifts without the stress.”

He added that features like visual search and augmented reality have made gift buying more interactive. “Customers can upload an image and find similar products in our inventory or use AR to see how a product would look of their home or on themselves,” he noted. “These tools not only make the shopping experience more fun but in addition reduce uncertainty so customers are more confident of their purchase.”

Artificial intelligence can personalize gifts in one other way, too. “Through the use of natural language processing, AI may even consider the sentimental or emotional value of gifts based on conversations or social media activity. This level of personalization could make the method more efficient and meaningful, helping people select thoughtful gifts with minimal effort,” Mark N. Vena, president and principal analyst at SmartTech Research in Las Vegas, told the E-Commerce Times.

Challenges Implementing AI in Retail Gift Shopping

AI now knows loads a few customer’s browsing history, purchase patterns, and even their social media activity, so it could suggest personalized gift ideas that hit the mark each time, noted Blake Ellis, CTO of CommerceV3, an e-commerce platform and repair company, headquartered in Minneola, Fla. “We’re not quite there yet,” he told the E-Commerce Times, “however the potential is big. It could revolutionize how people shop for others, making the entire gift-giving process smoother and more meaningful.”

As powerful as AI-assisted gift-giving will be for retailers, it won’t be a slam dunk for them. “AI can increase consideration and shut rates on sales significantly, but only whether it is implemented well, and too few firms know implement it well this early in its young life,” warned Rob Enderle, president and principal analyst of the Enderle Group, an advisory services firm, in Bend, Ore.

“Where it really works, it’s going to pull people to the products they wouldn’t have otherwise considered and away from products they otherwise would have bought,” he told the E-Commerce Times. “Once it reaches scale, it’s going to have a big hostile impact on firms that haven’t discovered use it properly and an enormous profit to firms that do.”

Kassi Socha, a consumer and culture analyst with Gartner, a research and advisory company based in Stamford, Conn., also warned brands against deploying gimmicky AI-powered tools. “Brands who roll out gen AI-powered gift generators or digital holiday card makers that don’t have a transparent connection to creating the gift-giving process easier or more efficient may even see low user adoption and engagement,” she told the E-Commerce Times.

“Moreover,” she added, “tools which are spun up as a part of a marketing campaign versus integrated into the core shopping experience could have been rushed to production and more more likely to hallucinate or produce results that don’t align with the patron’s need nor intent. This might damage brand popularity.”

AI Demand Forecasting for Holiday Sales

One other area where AI will impact holiday sales is forecasting demand. For instance, Amazon, which has been baking AI into its operations since 2020, has a set of AI, machine learning, and other systems generally known as SCOT — Supply Chain Optimization Technologies — to make countless predictions, recommendations, and decisions on daily basis.

“Deploying novel predictive and generative techniques, the SCOT team has already produced a ten% improvement in our long-term forecasts,” Amazon spokesperson Maxine Tagay told the E-Commerce Times.

AI and demand forecasting are game-changers, maintained CommerceV3’s Ellis. “We’re talking next-level accuracy in predicting what products will fly off the shelves,” he said. “Machine learning algorithms can crunch massive amounts of knowledge, past sales figures, social media trends, and even weather patterns, to present retailers a crystal ball for inventory planning. No more guesswork or overstocking. It’s all about getting the proper products in the proper place at the proper time.”

Dynamic Inventory Management

“As an agency owner, I even have seen firsthand how AI has modified our demand forecasting,” added Argota. “Previously, we might make educated guesses and use last yr’s sales data to predict which products could be hot sellers through the holiday season. Now, AI algorithms take a look at our historical sales and market trends, economic indicators, and even seasonal patterns. We get super accurate forecasts so we are able to make informed decisions on inventory and resource allocation.”

He also touted the real-time data processing capabilities of AI. “Consumer behavior through the holidays can change immediately on account of promotions or viral trends,” he explained. “With AI, we are able to adjust our strategies on the fly to match those changes. We don’t get caught off guard by demand spikes or drops, which is vital to customer satisfaction and operational efficiency.”

As well as, he noted that AI has almost eliminated overstocking and stockouts. “By predicting demand exactly, we are able to have just the proper amount of inventory available,” he said. “This reduces holding costs and means popular items can be found when our customers want them. It’s a fragile balance, but AI has made it much easier to realize.”

“AI also helps us get ahead of the curve by identifying emerging trends,” he added. “By analyzing social media posts, search queries, and sales data, AI tools tell us what’s trending. This provides us the insight to fill up on trendy items that might be in high demand so we are able to meet customer expectations through the holiday rush.”

Balancing AI Innovation with Consumer Trust

Of their rush to embrace AI, retailers have to be careful, cautioned Lija Hogan, a principal at UserTesting, a world customer experience company. “Retailers must understand balance personalizing the shopping experience without having it veer into being perceived as showing that the brand ‘knows an excessive amount of’ about their customers,” she told the E-Commerce Times.

“Successful AI integration will rely on retailers’ ability to prioritize customer trust and transparency,” she continued. “Integrating AI requires continual evaluation of the buyer/retail experience while addressing consumer privacy concerns, keeping customers informed on how their data is getting used and understanding consumer attitudes towards AI tools.”

She added, “Retail leaders who constantly refine their shopping experience based on customer feedback might be probably the most successful in today’s dynamic landscape.”

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