AI transforms retail

By Sat Bal

A shopping overhaul is under way thanks to Generative AI (Gen AI) with 71% of consumers integrating
it into their purchasing experiences.

The preference of Gen Z and Millennials, for hyper-personalization and seamless digital experiences is the main
driver of this trend according to the fourth edition of Capgemini Research Institute’s annual consumer trends report,
‘What Matters to Today’s Consumer’, which finds that technological innovation, shifting financial
priorities, and increasing sustainability awareness are fueling consumer behaviors.

Nearly half (46%) of consumers are enthusiastic about the impact of Gen AI on their online shopping and three
quarters are open to Gen AI recommendations, up from 63% in 2023. More than half (58%) have replaced
traditional search engines with Gen AI tools as their go-to for product/service recommendations. 68% of
consumers want Gen AI tools to aggregate search results from online search engines, social media platforms,
and retailers’ websites to provide a one-stop shop for highlighted purchase options.
7 in 10 consumer products and retail companies view Gen AI as a transformative technology,  a significant shift
from last year. However, the study finds that while investment in the technology is on the rise, Gen AI usage is
not meeting expectations. Consumer satisfaction with the technology is down from last year (at 37% in 2024
compared to 41% in 2023). The report highlights that it is important for retailers to understand where and how
consumers want the technology implemented.

“Consumers today want personalized shopping experiences, enhanced by AI and generative AI. In addition, they
expect fast and efficient deliveries and have become more conscious of their purchasing impact,” said Lindsey
Mazza, Global Retail Lead at Capgemini. “To remain competitive and build brand loyalty, retailers must adopt
strategies that put the consumer at the center, leveraging AI to deliver seamless yet exceptional customer
interactions. The clear shift towards social commerce is also significant. Retailers need to capitalize on their
social and digital advertising platforms to engage consumers early in the purchasing journey.”

Demand for quick commerce is on the rise, with consumers from some geographies increasingly willing to pay
for speed and efficiency. For example, willingness to pay more for quick delivery skyrocketed from 41% in 2023
to 70% in 2024, highlighting a strong consumer trend towards easy access to products.
With this increase, consumers are now willing to pay 9% of the order value for 2-hour and 10-minute delivery.
65% of consumers consider a 2-hour delivery format a key attribute when they shop, indicating that retailers
should consider integrating this into their business models. This trend is prevalent in countries such as India,
Germany, France, Sweden, Spain, and the Netherlands, with the US significantly lagging in this regard.
Consumers expect sustainable products, but are not prepared to pay a premium

Sustainability is a critical factor when making purchasing decisions. While 64% of consumers buy from
sustainable brands and 67% would switch retailers due to a lack of sustainability, their willingness to pay a
premium is decreasing. The proportion of consumers willing to pay between 1-5% more has risen slightly, from
30% to 38%, but those willing to pay more than 5% has dropped consistently over the past two years. The
report found that initiatives such as carbon labelling and food-waste reduction also resonate strongly with
consumers.

The study highlights that consumers are also increasingly seeking more detailed information about the product
they are purchasing. Nutritional information comes out as the key consideration, with 67% of consumers saying
they would switch products based on this.

Consumers use AI influencers and social media to discover products
AI influencers, such as avatars created using artificial intelligence, are rising in popularity with one quarter of
consumers trusting them and making purchases based on their recommendations. Social media influencers are
also becoming popular, with around 7 in 10 Gen Zs learning about new products through them in 2024, up
significantly from 45% in 2023.
Platforms such as Instagram and TikTok are also reshaping retail, with over half of consumers discovering new
products via social media, up from 32% in November 2022. The report found that 40% of all consumers
occasionally use social media for customer service interactions, reflecting a growing reliance on social media for
resolving issues and seeking support.
Advertisements on retailer websites/apps influence purchases
The report found that 67% of consumers notice ads on retailer website/apps when they search for a product.
Over the past 12 months, online adverts influenced nearly one-third of online purchases.
In contrast, in-store advertisements lag behind in consumer satisfaction, in terms of content quality and
placement. There are several reasons for consumer dissatisfaction. For example, 59% of consumers say the ads
shown are very generic and don’t serve their specific needs. While over half (53%) want personalized in-store
ads such as a display in a smart shopping cart, smart mirrors, or interactive touchscreens. As a result, retailers
are focusing on retail media networks (RMNs) to capture consumer attention.

Visit  https://www.capgemini.com/researchinstitute/