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Generative AI can boost smaller retailers, report says

May 28, 2024
Illustration of a robotic hand holding a glowing dollar sign.

Illustration: Allie Carl/Axios

Generative AI can help smaller retailers make their digital resources work harder in a competitive landscape, per a Bain & Co. report.

Why it matters: Effective use of AI will help retailers personalize experiences and create marketing content.

Between the lines: The No. 1 revenue driver thanks to generative AI is around personalization, Bain & Co. partner Mikey Vu tells Axios.

  • "The more personal the experience gets in retail, the more likely as a customer you are to buy, the more things you're likely to buy, the more you're likely to come back," he says.
  • Gen AI can tailor the imagery, tone, language, and even the specific message length to the individual.
  • Scaling such personalization efforts could increase revenue by 5% to 10%, according to the Bain & Co. report that Vu worked on.

Zoom in: The second revenue driver is around creative content generation, especially in marketing.

  • Generative AI's use in marketing can contribute up to 30% to 40% in productivity gains, the same Bain & Co. report finds.
  • It can be cost-prohibitive if you want to adjust digital assets for different channels and markets, but it's possible to "take one asset and have 1,000 different variations of it through generative AI," he says.

Yes, but: One of the things that companies are doing is "a lot of experimentation, but not a lot of scaling," Vu says.

  • "We actually don't encourage people to experiment in a shotgun way," he says, guiding them instead to focus on two to three use cases and going really aggressive with them.
  • They also risk being too cautious in the application of AI.

What they're saying: "Whatever retailers are investing in, they probably need to add another zero to that," Vu says.

  • Retailers shouldn't just consider the cost when it comes to applying gen AI. "You have to think about the ROI."
  • What he's seeing in some use cases isn't ROIs that are 2x or 3x. "They're like 20x, 30x, 40x."
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