AI in retail: How artificial intelligence is transforming CX

According to the Zendesk AI-Powered CX Trends Report 2024, 75 percent of consumers who have used artificial intelligence (AI) believe it will completely transform how they interact with companies within the next two years. When implemented effectively, AI can help retailers build long-term customer loyalty, empower retail associates, and streamline operations. This shift isn’t far off—it’s already happening today with retailers using AI to provide 24/7 service, personalize interactions, and process refunds on demand.

In this guide, we’ll explore AI applications in retail that can enhance the customer experience (CX) and increase retention.

More in this guide:

• Why is AI in retail important?
• Common AI applications in retail
• Benefits of AI in retail
• Frequently asked questions
• Improve your retail CX with Zendesk AI

Why is AI in retail important?

AI in retail is important because it helps your business deliver outstanding service, retain customers, and stand out in the marketplace.

With customer interactions projected to increase fivefold and 80 percent of customers expecting agents to meet all their needs, integrating AI into your retail CX isn’t just smart—it’s essential. AI allows retailers to meet these rising expectations at scale, whether providing a more effective CX, issuing refunds faster, delivering personalized support, or even recommending products. For instance, AI-powered copilots can equip agents with real-time insights to resolve issues before a conversation even starts, speeding up resolution times and ensuring solutions are tailored to each customer’s unique needs.

Common AI applications in retail

AI can help retailers take their CX to the next level and boost operational efficiency. Here are a few of the most impactful AI use cases for retailers.

24/7 customer support

Consumers are starting to expect 24/7 support, especially if you’re a retail company that operates in multiple time zones. Businesses can deliver nonstop service with AI agents, advanced bots that can resolve a wide range of customer requests independently.

For example, Zendesk AI Agents are pre-trained on over 18 billion fundamental customer interactions and respond to customers like your human agents would. Papier, a U.K.-based stationary brand, used Zendesk AI agents to provide 24/7 service to customers across the world all while maintaining its existing team size. Its AI agent collects order IDs, asks for a picture upload if something is faulty, and handles all the legwork upfront. Now, its human agents can work on more complex issues.

Personalizing the shopping experience

Personalization is crucial for any retail company, as it forges deeper connections with your customers and strengthens long-term loyalty. In fact, according to Zendesk Benchmark data, 77 percent of business leaders recognize that more personalization leads to higher customer retention rates.

With AI, you can personalize every customer’s experience. AI agents can provide curated shopping recommendations to consumers based on their past purchases. Additionally, AI can provide support agents with insights to personalize requests, such as a customer’s intent and sentiment.

Self-service deflection

Customer self-service empowers customers to resolve issues independently, giving your agents time for higher-value tasks. To foster this, you must first construct helpful assets like FAQ pages, knowledge bases, and product guides. The good news is that AI can help you create and distribute this information.

For example, generative AI can help you turn a few bullet points into complete articles and clarify your copy. AI can even highlight new topics to write about based on trending support interactions.

Processing orders and sending updates

AI can update customers on in-transit orders and provide other status updates—before a customer has to reach out to check an order’s status. AI can also immediately process refunds, cancellations, and exchanges and investigate order issues while analyzing customer sentiment to determine if tickets need to be escalated to a human support agent.

Streamlined workflows

AI can help retail teams streamline workflows to make internal processes more efficient and cost-effective. For example, AI can use intelligent routing to send customers to the right agent or department based on their sentiment, the language they speak, or other critical factors. This reduces wait time for consumers and ensures agents are only assigned tickets they can effectively resolve, resulting in a better customer experience.

Additionally, AI-powered insights can surface new opportunities to streamline workflows. The technology can identify bottlenecks—like inefficient support interactions—and suggest ways to fine-tune them.

Demand forecasting

Many retail businesses experience fluctuations in demand. AI can identify and predict these irregularities by looking at historical data so they can effectively prepare for the future. This can help ensure you have enough support agents on staff to deal with customer requests so you’re better prepared for things like flash sales, new product launches, and slow seasons.

Benefits of AI in retail

AI can bring a host of benefits to your retail business. Here are four you should consider.

Upgraded customer experience

AI can help supercharge your entire CX by making every interaction more personalized, faster, and seamless. Take Lush. The cosmetics brand used Zendesk AI agents to handle common requests—allowing human agents to focus on building deeper and more personalized customer relationships. By modifying the way it approached consumer interactions, Lush achieved an 82 percent one-touch resolution rate and a 369 percent ROI in only one year, which amounted to $434K cost savings.

Optimized agent performance

AI can optimize agent performance in a few key areas. AI tools like AI-powered copilots can act as intelligent assistants to supplement performance, recommending responses and actions based on customer interactions. For example, it can identify when a customer is upset about an order and suggest effective responses that the agents can approve, modify, or execute. The technology can also handle high-volume, routine tickets like order cancellations to free agents to focus on more important tasks.

Additionally, AI-powered quality assurance (QA) tools like Zendesk QA can consistently monitor conversation quality. With it, managers can analyze 100 percent of agent interactions to identify areas of improvement and use that information to plan coaching sessions and training opportunities.

Increased customer retention and lifetime value

AI enables retailers to strengthen customer relationships by personalizing interactions, enhancing the CX, and streamlining order processing, ultimately boosting retention and customer lifetime value (CLV). Not only that, but AI can directly impact short-term revenue.

AI agents can pinpoint and suggest cross-selling and upselling opportunities to help customers find what they need and make additional purchases. Also, QA tools can flag customer churn risk so businesses can work to save the relationship and increase customer win-back rates.

Improved high-volume ticket handling

Successful businesses grow, and as they grow, they experience more customer inquiries. AI can help retail businesses handle greater ticket volumes and customer interactions while cutting retail customer service costs.

Technology like AI agents can deflect customer requests with autonomous service and self-service resources. This frees up employees to work on more important tasks and empowers leaner teams to accomplish more.

Frequently asked questions

Improve your retail CX with Zendesk AI

AIcan help take your retail operations to the next level. With it, you can offer round-the-clock service, personalize shopping experiences, and streamline your workflows. But just as important as what you do with AI is how you do it. Choose a partner like Zendesk for your AI needs—we have advanced capabilities like AI agents, automated QA, and Agent copilot that can delight your customers at every turn. Not only that, but our AI is pre-trained on over 18 billion real interactions, purpose-built for CX, easy to use, and fast to set up without any tech skills required.

To start, take a look at our retail capabilities to learn more about how we can make a difference for you