Matty Digital

Current estimates show a retail profit boost of $240 billion to $390 billion, translating to a significant margin increase across the industry of nearly two percentage points. But most of that value is still untapped. Even though retailers have been experimenting with Gen AI, few have managed to scale these innovations effectively. McKinsey recently surveyed over 50 retail executives, and only two of them claimed to have successfully implemented Gen AI across their entire organizations. So, what’s holding everyone else back?

The Challenges of Scaling Gen AI

Scaling Gen AI isn’t easy. Retailers often need to rewire significant parts of their organizations, such as upgrading technical capabilities and attracting the right talent. Issues like data quality, privacy concerns, and the cost of implementing Gen AI have also slowed progress.

However, two factors have made all the difference for the retailers that have cracked the code. First, they focus their Gen AI efforts on transforming specific domains rather than spreading themselves too thin. Second, they don’t just stop at pilot projects—they push through to full-scale deployment. Retailers must remain focused on the top priorities and not get distracted with other opportunities before implementation is completed. Achieving this means focusing on integrating technology while making the organizational shifts needed to support AI adoption.

Gen AI’s Impact: From Operations to Customer Experience

Retailers are seeing the benefits of Gen AI in their internal operations, helping them streamline operations and make faster, more informed decisions. On the customer side, Gen AI is paving the way for more personalized and fulfilling shopping experiences. Advanced-gen AI-powered chatbots, for example, can offer customers a smart shopping assistant that’s always ready to help, whether it’s recommending products or assisting with purchase decisions.

Quick Wins: Gen AI in Action

Retailers can start reaping the benefits of Gen AI through some quick-win use cases that require fewer resources to implement but still pack a punch. Here are a few real-world examples:

Marketing: In 2023, Amazon launched an AI-powered image generation tool to enhance the ad experience. This tool transforms basic product photos into realistic lifestyle images, improving click-through rates by up to 40%.

Software Development: Gen AI “copilots” can help tech teams by automating repetitive tasks, freeing up time for more valuable work. Mercado Libre has already seen productivity boosts by using these tools.

In-Store Operations: Lindex, a Swedish retailer, introduced the “Lindex Copilot” to assist store employees with personalized advice and guidance based on sales and store data.

Gen AI isn’t just a futuristic concept—it’s already changing how retailers operate and service customers.

Reinventing Retail with Gen AI

Retailers are also using Gen AI to reinvent the customer experience from the ground up. Traditionally, retailers engaged with customers during only three of the seven customer journey steps. But Gen AI can extend that engagement, making the shopping experience more personalized and, ultimately, more satisfying.

Take Gen AI-powered chatbots, for instance. They can now handle a broader range of customer interactions, from product recommendations to cart management. The real power of these chatbots lies in their ability to understand the intent behind a customer’s message and respond accordingly. With ongoing user testing and refinement, these chatbots can become a go-to resource for customers, potentially transforming them into primary shopping channels. It is essential that chatbots truly benefit the customer experience and not just point customers to a FAQ page. These limited offerings do more damage than good, as customers will become disinterested in utilizing AI solutions.

The Road Ahead: Scaling Gen AI in Retail

Gen AI is no longer a novelty. To stay ahead of the competition, retailers must move beyond testing and start scaling their Gen AI tools. Here are five steps retail executives should consider to make that happen:

1. Focus on Domain-Level Transformations: Identify which areas of your business—whether customer experience, marketing, or employee productivity—need a Gen AI boost.
2. Upskill Your Team: Invest in training programs that help both technical and non-technical staff develop Gen AI skills.
3. Build Cross-Functional Teams: Bring together leaders from across your organization to ensure that Gen AI initiatives align with your overall strategy.
4. Set Up the Right Tech Architecture: Experiment with different Gen AI vendors to find the one that best meets your needs. Your tech should be flexible enough to scale as your business grows.
5. Ensure Data Quality: Good data is the lifeblood of any AI system. Ensure your data is structured, tagged, and ready to fuel your Gen AI tools.

Retailers who successfully scale their Gen AI efforts will enhance their internal operations and offer a more engaging, personalized customer experience. The stakes are high, but so are the rewards.