The Rise of AI-Powered Personalization in Retail

November 9, 2023
Artificial intelligence is enabling retailers to provide highly personalized experiences. Key events in 2022 and 2023 like Nike's acquisition of Datalogue, Amazon's Alexa Custom Assistant launch, and new startups using AI show how personalization is on the rise. Retailers must balance personalization with privacy as legislation evolves. Overall, AI is transforming modern retail through customized recommendations and virtual assistants.
Written by
Alec Whitten
Published on
17 January 2022

Personalization has become a major focus for retailers in recent years as consumers increasingly expect tailored recommendations and experiences. Artificial intelligence (AI) is playing a key role in enabling next-level personalization that goes beyond basic segmentation. Several developments in 2022 and 2023 highlight the rise of AI-powered personalization in retail.

In April 2022, Nike acquired data integration platform Datalogue to enhance its personalization capabilities. By combining first-party data across various touchpoints like its stores, website, and apps, Nike aims to create customized product recommendations and experiences. The acquisition shows how leading retailers are investing in behind-the-scenes technology to fuel personalization.

Amazon's announcement in September 2022 of Alexa Custom Assistant further demonstrated the potential of AI. The virtual assistant can learn the shopping preferences and habits of each customer household to provide personalized recommendations. Early partners like hospitality brand St. Regis and clothing retailer Fred Segal highlighted retail as a key focus for the custom AI assistant.

The January 2023 Consumer Electronics Show featured several AI innovations for retail including Samsung's Smart Fridge. With integrated cameras and touchscreens, the fridge can identify users, track food items, provide recipe recommendations, and automatically reorder items. Appliance makers are increasingly incorporating AI to personalize and simplify tasks like grocery shopping.

Startups are also driving AI adoption for retailers. Israel-based Preciate using AI to match customers with products based on attributes like style, fit, and size. Its technology can learn individual preferences and provide tailored results which lead to higher conversion rates. With over $30 million raised in 2023, more emerging firms are bringing AI-powered personalization to market.

Legislative developments have both supported and challenged the use of AI for personalization. Illinois' Biometric Information Privacy Act which came into effect in 2023 imposes consent requirements around the collection of customer data like facial biometrics. However, proposed federal-level legislation like the Consumer Data Privacy and Security Act of 2022 seeks to enable responsible AI use by simplifying compliance across states. Policy will likely continue shaping how retailers deploy personalization.

While privacy and ethics remain top of mind, retailers from mass merchandisers to niche startups are increasingly tapping AI to customize offerings and engage today's experience-driven shoppers. With lifelike virtual assistants and predictive recommendations, AI-powered personalization is fundamentally transforming modern retail. The developments in 2022 and 2023 indicate this technology will only grow more prevalent in the coming years.

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