How AI is transforming the retail experience: From fashion to ecommerce

Artificial intelligence (AI) has become so seamlessly integrated into our day to day lives, you may not even notice when you’re using it. From asking Siri for a song to following Waze on your way to work, AI is redefining the way we communicate, work and play.

The retail sector is one industry that has been transformed by the rise in AI technology. The e-commerce industry achieved a record $5.7tn in sales in 2022, accounting for 20 per cent of all retail sales around the world.

And while some of the AI functionality has become ingrained in the way we shop, such as online chatbots offering purchasing support, or the behind-the-scenes roles of inventory management and supply chain networks, the really thrilling transformations are taking place in the form of experiential retail.

Here are some of the key ways AI is transforming the way we shop.

Personalising the process

Leading the AI charge are major online marketplaces Amazon and Alibaba, whose use of AI has contributed to a massive market share – Amazon clocked up 5.9 billion direct visits in April 2023 alone.

Both retailers use predictive analytics to help personalise the customer experience, analysing previous purchases, popularity and user search patterns to sift through the millions of products available on their marketplaces.

Amazon draws on usage pattern analysis to accurately predict when a regular shopper will need to restock on household necessities, such as diapers, laundry detergent or their morning coffee, giving the user a nudge when it’s time to stock up.

The Sephora app personalises the experience by customising suggested products within the shopper’s expected budget, delivering a better overall user experience and a higher conversion rate.

Virtual reality fitting rooms based on AI

One of the exciting transformations we’re seeing is the creation of virtual reality fitting rooms. This form of blended reality allows shoppers to ‘try on’ clothing, shoes and cosmetics from the comfort of their living rooms using AI and augmented reality (AR) – think Adidas sneakers, ASOS clothing, and Charlotte Tilbury lipstick.

Early adopters Walmart and Macy’s have been more recently joined by luxury brands such as Gucci and Hugo Boss, with the global virtual fitting room market now predicted to grow from $4.03bn in 2022 to $14.87bn by 2029.

Visual search technology

See something you like, but aren’t sure of the brand?

Visual search technology such as ASOS’s Style Match feature allows users to upload an image of a style they’re looking for, and then offer personalised recommendations of similar items to buy.

The tool uses machine learning and AI computer vision technology to analyse the image and then share suggestions based on colours, shapes, and patterns.

Gamification of shopping

You may not have realised at the time, but eBay was one of the first retailers to ‘gamify’ retail, with its virtual bidding system adding a new level of thrill to the shopping experience.

From that initial dopamine rush, the gamification of shopping has evolved into the interactive experiences and experiential retail we have today – from Pepsi’s QR codes featuring AR football stars to digital avatars from the likes of Roblox, Prada, and Balenciaga – all designed to keep users on retail sites for longer, building brand loyalty and conversions.

According to Boston Retail Partners, 87 per cent of retailers plan to implement gamification within the next five years, making it a key area of development for experiential retail.

Behind the scenes

Some of AI’s other roles in experiential retail are less obvious but no less impactful.

From the chatbot that helps you locate your missing order, to the prompt telling you when stock is running low on that pair of sneakers in your wish list, AI technology streamlines the online shopping process from the moment you start browsing until the time it lands in your hands.

AI can even make the retail experience more sustainable. Personalisation and virtual try-ons have been shown to reduce the number of returns a shopper makes, cutting back on transport and packaging – a win for shoppers, retailers and the environment.

The author is CEO of Like Digital & Partners.