April 4, 2024 - last updated
Generative AI by Industry

Generative AI in retail & e-commerce

Tom Alon
Tom Alon
6 min read Feb 18, 2024

Generative AI (GenAI) is reshaping the way we shop online. The e-commerce sector has quickly leveraged LLMs to generate unique content. Through existing data and NLP models, businesses are presenting opportunities to transform the online shopping experience for retailers and customers alike. 

Let’s explore applications of Generative AI in e-commerce scenarios. 

What is Generative AI?

Generative AI involves a machine, like a chatbot, generating content autonomously based on user prompts. Unlike traditional AI, Generative AI uses large language models (LLMs) and neural networks to generate new, unique outputs. 

Generative AI is revolutionizing diverse industries, such as cybersecurity, healthcare, finance, and more. 

Despite challenges like accuracy issues, bias, and AI hallucinations, generative AI apps are top of mind for every business looking to improve efficiency, cut costs, and generate new revenue streams. 

The impact of Generative AI on e-commerce

Generative AI is impacting the e-commerce sector, enhancing customer experiences through AI-powered chatbots, virtual shopping assistants, and personalized recommendations, transforming how retailers interact with customers. 

Image source

Additionally, Generative AI optimizes inventory levels, forecasts demand, and enhances supply chain operations, boosting operational efficiency. In marketing, it facilitates campaign revamps and the creation of scalable, customized experiences. Retailers use Generative AI for actionable insights, informing product development, generating studio-grade imagery, and transforming product-user engagement. 

While its transformative potential is significant, proper governance is crucial to ensure Generative AI complements human efforts.

Generative AI in eCommerce: Enhancing online shopping

One of the most significant applications of Generative AI in e-commerce is user engagement with product recommendations.  

The anticipated growth of generative AI in e-commerce is expected to hit $2.1 billion by 2032, demonstrating a forecasted annual growth rate of 14.90%.

Another application of Generative AI is customer service automation, where AI-powered chatbots can handle customer queries and complaints, freeing human agents to focus on more complex issues. 

Let’s explore some applications of Gen AI in e-commerce:

1. Personalization 

Generative AI also promotes AI-driven personalized shopping by utilizing customer data and predefined prompts to craft individualized product suggestions, customize marketing materials, custom recommendations AI, and facilitate the creation of personalized items. 

Travel retailers employ Generative AI for tailored adventure holiday recommendations, while Nike’s “Nike By You” platform enables customers to design custom sneakers with generative AI. This personalization extends to various content formats, such as text, images, audio, and video, elevating customer engagement and satisfaction.

2. Inventory management & forecasting with AI

By adopting AI-driven predictive analytics in retail, businesses can use AI in inventory optimization, forecast demand, and streamline supply chain operations with remarkable accuracy. GenAI excels at analyzing vast quantities of inventory data, discerning patterns, and predicting incoming consumer demand, substantially reducing overstocking and understocking issues. 

For instance, Walmart, the retail giant, employs artificial intelligence to examine data from various sources, including weather, social media, and sales patterns. This helps enhance inventory management and distribution efficiency across its stores and warehouses.

3. Customer support

AI-enhanced customer support, mainly through AI chatbots in retail, has revolutionized the industry by delivering efficient and instant assistance. These virtual artificial assistants handle routine queries, provide product information, and guide users through purchasing. 

A notable example is the deployment of AI chatbots by leading e-commerce platforms, such as Shopify and Amazon. These platforms use advanced algorithms to understand user queries, offering personalized responses, significantly reducing response times, and offering automated customer assistance. 

4. Virtual try-ons 

Virtual Try-Ons powered by Generative AI have been spotlighted in the AI fashion retail sector. GenAI enables users to virtually try on clothing and accessories before purchasing, enhancing confidence in their selections and reducing return rates. 

The anticipated growth of the worldwide virtual fitting room market is from $3 million in 2019 to $6.5 million by 2025.

A prime example is the adoption of virtual fitting room technology by global fashion brands like Warby Parker. By using Generative AI, the platform provides users with a realistic preview of how items will look and fit, creating a more immersive and personalized shopping experience in the digital realm.

Generative AI tools for retail and eCommerce

Generative AI tools are causing a shift in retail and e-commerce, with innovative platforms leading the charge. One exemplary tool is IBM Watson, which employs Generative AI for retail chatbots, providing seamless and intelligent customer interactions. 

Additionally, Adobe’s Sensei leverages Generative AI to enhance product recommendations and personalize content, enhancing the online shopping experience. These real-world applications demonstrate how Generative AI tools empower retailers with advanced capabilities, from conversational interfaces to content curation. 

Generative AI Startups in Retail

A wave of emerging Generative AI startups, such as Findmine, employs Generative AI to automate product recommendations, ensuring a cohesive and personalized shopping experience. 

Another startup, Vue.ai, focuses on revolutionizing visual merchandising through AI-driven insights. These startups exemplify the industry’s shift towards efficiency and personalization while showcasing how new companies leverage AI to transform the retail sector.

Generative AI in RetailTech

Generative AI’s integration into RetailTech marks a crucial advancement with transformative implications for the industry. AI in RetailTech products enhances customer experiences, streamlines operations, and drives better sales to ensure efficient inventory levels and minimize disruptions. 

What Is RetailTech? RetailTech, short for Retail Technology, is an innovative solution designed to enhance and streamline various aspects of the retail industry. In synergy with AI, RetailTech leverages advanced algorithms for tasks ranging from inventory management to customer experience optimization.

Real-world examples include H&M using AI to monitor sales in all 4,700 locations, which shows how AI can make it easy for businesses to focus on more important things. At the same time, it automates most of the business operations. 

Wrapping up generative AI in e-commerce

The integration of Generative AI in e-commerce offers many benefits such as reduced costs, improved productivity, and enhanced customer satisfaction. This transformative technology is reshaping the retail industry, from personalized shopping experiences to streamlined operations. 

However, as GenAI innovates the online shopping experience, new risks threaten adoption. AI Hallucinations, prompt attacks, privacy issues and more can severely damage user trust and brand reputation. 

The Aporia AI Control Platform employs AI Guardrails. These work behind the scenes to filter outputs and secure interactions, aligning your GenAI with your business needs. With real time AI Guardrails, retailers go beyond basic AI security and gain the following: 

Get a demo to see guardrails in action!

Green Background

Control All your GenAI Apps in minutes