Gen AI can unlock the next wave of retail media innovation

Since my time at Walmart, it and Amazon have evolved from e-commerce platforms to significant players in the advertising space. Walmart, with its omnichannel advantage, recognized the trend a decade ago. It was merging vast amounts of in-store and online data to target customers with ads that would influence their buying decisions – regardless of which channel they chose to shop from.

This convergence is not a fleeting trend; it’s the new normal.

Retailers must think like publishers and vice versa. But I remember discussing this topic on a panel at Cannes Lions seven years ago, making the point that retailers are in pole position due to being able to influence a customer’s choice at the moment of truth.

Starbucks has continued to set the bar high with its mobile app, offering personalized discounts and product recommendations based on customers’ purchase history. It uses a data-driven AI algorithm based on your preferences and behavior and the behaviors it wants to encourage. The coffee giant introduced in-app payments in 2011, a feature that was still relatively novel at the time. By 2014, it had pioneered mobile pre-ordering and payment options, allowing customers to bypass in-store queues. This empowered customers to place their favorite orders from any location – from the comfort of their homes or during their commute to work – long before such convenience became a standard offering.

Effective use of data can significantly improve customer engagement and ROI, making it an indispensable tool for modern marketers if used for mutual benefit. But it can be hard to join the dots.

Meanwhile, Shopify’s integration with advertising platforms has democratized media buying, allowing even small retailers to run effective ad campaigns. This democratization will foster innovation and competition, making the media landscape more vibrant and accessible.

But speeding this whole process up are tools like Amazon’s new generative AI features. These are designed to help sellers create captivating product listings built on large language models trained on extensive proprietary data.

While they promise to save time and provide more complete product information, they also raise concerns about the potential for creating false or misleading information at scale.

In terms of gen AI, there are only a few immediate applications being trialed so far.

Tekion’s smart communication feature is a practical example of how AI can enhance real-time customer engagement and sales strategies. Its feature analyzes and summarizes communication between dealer sales agents and future car buyers. It extracts valuable insights from conversations and generates recommendations and prompts for sales agents for the next conversation topic. This feature has been so effective that one Tekion dealer partner used it in 75% of all sales emails sent in one month.

Additionally, for longer than I care to remember, tech types have been imagining how virtual shopping assistants will create outfits for us based on our past purchases and current fashion trends.

Unlike VR headsets and AR activations, gen AI has the potential to revolutionize the online shopping experience, going beyond customer service to become a personalized shopping assistant.

Scanning all your retail purchases and web searches, basing its choices and recommendations on your previous purchases, mood/state of mind, the season or time of day, your bank balance - the list goes on. As gen AI gets better at ‘knowing us,’ consumers will be willing to open up more and more of their personal data.

But there are dangers. The British Retail Consortium has highlighted the ethical and regulatory considerations of using gen AI in retail. While AI offers numerous benefits, it’s crucial to be mindful of data privacy, security concerns, and the evolving regulatory landscape.

For instance, who owns the copyright (if anyone) of that award-winning strapline you chose from a list of 10 from ChatGPT this morning?

Nonetheless, according to Salesforce, 93% of UK retailers are increasing their investment in AI-driven technologies. This indicates a significant industry-wide shift towards embracing advanced technologies for retail media strategies.

The retail industry is at a pivotal moment. The convergence of retail and media, fuelled by gen AI, is not just an incremental change but a paradigm shift. Retailers and marketers can adapt and innovate or be left behind.

Check out The Drum’s latest Deep Dive, The Media Convergence, for more on how the borders between channels are blurring as they steal each other’s features, adopt universal standards and simplify for consumer ease.