At Shoptalk 2024 in Chicago, a panel of investors shared their unfiltered views on the role of AI in transforming retail technology.

Up for discussion was where AI is most likely to be a game-changer—like the in-store experience or intelligent agents—and how investors sort the hype from reality.

The market for AI-powered solutions is projected to reach $136 billion by 2030, according to MarketsandMarket. Retailers are already using this technology to enhance customer service, search functions, store operations, and employee training.

But AI fatigue is real. The explosion of AI-powered firms means that many have been more generous with their descriptions of the application of AI, signaling consolidation ahead.

Investor share where retail’s AI bright spots lay, and where to steer clear.

The good: Investors’ next big AI bet

The in-store experience is ripe for enhancement. AI can help retailers better serve customers and anticipate their needs while also improving loyalty programs and retail media.

“We’re increasingly seeing more Starbucks-type experiences, where, as a consumer, my needs are known by the system,” said Aron Bohlig, founder and managing partner at ComCap LLC. “I get specific promotions for specific products at a specific time that I’m most likely to act, through the channel that I care about, whether that’s in-store, on a mobile device, or on a website.”

Intelligent shopping agents, which understand our needs and take on rote tasks, are another area that can be transformational.

“An intelligent shopping agent understands our needs, budget, and inventory that we have in the house, and takes action on our behalf,” said Scott Friend, partner at Bain Capital Ventures. “It doesn’t mean you’ll stop following a creator you love or shopping at your favorite store. But mundane tasks—like planning dinner this week or my kid has a birthday party to go to and I need a gift for a second-grade girl—will ultimately be done on our behalf.”

For brands, there’s the obvious inventory management and content creation improvements that AI can assist with.

Tessa Flippin, founder and managing partner at Capitalize VC notes that managing product listings, images, and brand consistency across platforms like Shopify, Amazon, and Walmart has been challenging, particularly for brands with large inventories.

“But with generative AI, if you have hundreds of products across 10 platforms, it opens up a whole new opportunity for brands to take advantage of different customer touchpoints,” she said.

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The overhyped: Use caution

In the last few years, companies have overlaid basic applications on existing models, leading to the overhype of a firm’s abilities, said Friend.

“Anyone within a couple of hours could launch an image or video-related augmentation business that sits on top of Stable Diffusion or OpenAI,” he said. “That’s not interesting.”

Flippin adds that the inflated valuations of companies deploying gen AI contribute to the ongoing market hype.

“If you look at the valuations of [those] companies, they’re crazy,” said Flippin.

Bohlig anticipates the machine learning (ML) market will consolidate, favoring those with strong client relationships and valuable data, while smaller companies struggle for market traction.

“I am skeptical of gen AI players and some older tech companies which will probably die off,” said Bohlig.

Bohlig views the current AI market, particularly with LLMs, as “frothy and noisy.” Much of it is a rebranding exercise, he said, with AI replacing ML in many instances.

“That’s a lot of what’s happened over the last year and that’s flushing the system,” said Bohlig.  

The opportunity: Reimagining search

Flippin anticipates a shift in shopping behavior from searching for specific items—like a red dress—to detailing broader lifestyle needs, such as planning a vacation in the South of France while wanting to wear red for dinner.

“That’s a huge opportunity for retailers to then serve me that perfect red dress, shoes, bag, and earrings that go with it,” she said, which increases the order value of that consumer purchase.

Bohlig, who previously worked with the Google product management team, believes Google is “missing the boat” with its AI shopping experience.

“In the past, Google told me they wanted to drive everything through the search box experience,” he said. “But if I’m shopping for cars or just anything, I don’t want to flip through listings to find what I want. I want somebody who can give me set results and lead me through a process.”

The traditional search-driven experience is being upended, and the next generation of shopping experiences is ripe for innovation.

“It’s not clear that Google is going to win that race,” said Bohlig.

Trishla is an Adweek staff reporter covering tech policy

Source: Ad Week