Gen AI: Easing the burden of consumer decision-making
The South African retail landscape is contending with a range of challenges, such as high unemployment, severe inflation, shrinkflation, and the lingering effects of Covid-19. These pressures have transformed consumer expectations and added layers of complexity to their shopping decisions. Retailers must now make faster and more efficient decisions to meet these evolving demands. With advanced technology at our disposal, how can Gen AI ease the decision-making process for consumers?
The unemployment rate in South Africa has reached concerning levels, standing at approximately 33%, reported by Stats SA as of Q1 2024. This widespread unemployment has led to reduced financial freedom for many households, resulting in diminished disposable income. Additionally, inflation has eroded consumers' spending power. Consumer spending in South Africa is said to have declined from the fourth quarter of 2023 to the first quarter of 2024, as an effect of significant constraints on disposable income and overall household finances.
An added issue is Shrinkflation - the practice of manufacturers, and therefore retailers, reducing the mass or weight of products, but maintaining the same or a higher price point. This forces consumers to pay increasing prices for diminishing returns. According to the annual Accenture Life Trends Report, the tightening cost of living has resulted in the consumer’s heightened attention to value, resulting in lower susceptibility to settle for less.
COVID-19 has had a profound impact on trading activity and the overall financial wellbeing of consumers affecting how and what they buy. The pandemic has fundamentally reshaped consumer engagement, whilst also driving a hybrid shopping model where South Africans research products online, but still explore and purchase in-store, emphasising the need for tools that shape the customers experience from an omni-channel perspective. This calls for strategy adaptations to accommodate for changing consumer needs.
The overwhelming decision-making task of what to buy, when to buy it, and where to buy it are being dealt with by consumers as they seek to accommodate their needs with limited resources. Rising prices have forced many to consider alternative options to the products they were previously accustomed to, seeking the right balance between quality and cost. South African consumers now prioritise value for money, requiring them to evaluate product information to determine if these alternatives still meet their needs. The hybrid nature of modern shopping introduces more layers, as they must now navigate multiple channels - both online and in-store - throughout their shopping journey. The sheer volume of choices can make shopping an exhausting task, rather than an enjoyable one.
How Gen AI can transform the shopping experience
A recent Accenture study has reflected that 75% of retail executives view Gen AI as core to their business revenue growth. As South Africans pay higher attention to value, decision-making across a range of products with added cost-consciousness places a heavy burden on the consumer, solidifying the need for more effective tools and strategies that can simplify and optimise this process for consumers. According to the Accenture Life Trends Report, there is a large opportunity space to drive targeted customer interaction, engagement, and personalisation. With South Africa’s diverse demographic, the challenges faced require dedicated capabilities to address these issues, and Gen AI can provide a huge competitive advantage. Accenture reports that 72% of retailers are planning to leverage Gen AI for operation reinvention – and capitalising on these opportunities can offer great rewards for both consumers and retailers, as seen in the following examples:
1. Personalised shopping assistance & tailored product baskets
Gen AI can be used to augment existing capabilities and enhance the value-add for both the consumer and retailer, examples of this include conversational AI capabilities such as chatbots and virtual shopping assistants for advice and recommendations. With Gen AI’s power of creation through prompts, this can generate customised product baskets based on consumer preferences and budget constraints. This is crucial for shoppers seeking smaller yet value-packed baskets that do not deviate too much from what they would typically buy, assisting consumers with limited budget constraints on decision-making for product selection.
When it comes to personalised shopping assistance and tailored product baskets, Walmart is a great example of this, having integrated Gen AI into their search function, customers are now able to input a prompt and receive tailored responses, including the ability to offer recommendations on an optimal basket of goods based on needs and constraints.
2. Automated product descriptions
The development of Gen AI tools that can create product descriptions, offers consumers quick relevant insights into the best product options based on their needs. This makes it easier to identify the most cost-effective products, and eliminates the added responsibility of having to sift through copious amounts of information on products.
3. Dynamic promotion planning and optimised communication, as well as timing
Classical AI, when combined with Gen AI, can play a key role by developing models and algorithms for dynamic promotion planning, allowing retailers to adjust promotions based on real-time data, inventory levels, and consumer behaviour patterns. To prevent marketing fatigue, introducing solutions like contact frequency models that predict optimal frequency and the preferred customer contact platform, with discounted price alerts, based on data from customer interactions, purchase history, segmentation, and product affinity, can aid in ensuring customers are not overwhelmed, while maintaining a positive brand relationship.
There is immense power to be unlocked from Gen AI - Shopify for example, has incorporated multiple Gen AI solutions into their products. Since 2023, the commerce platform has introduced an AI-generated product description capability to send emails at optimal times, and to tailor communications for timelier promotions and email correspondence.
Gen AI offers promising capabilities to retailers to increase their competitive edge and keep them ahead of evolving demands. For consumers, it offers to decrease the load on decision-making, whilst accommodating for the nuances that exist in different communities, and creating a better consumer experience.
The time for advancement is now
We are on the verge of a major shift, with innovation moving to implementation faster than ever, giving the market a new edge. As South Africa continues to embrace digital transformation, Gen AI has the potential to revolutionise the retail experience. By offering personalised, efficient, and culturally relevant shopping experiences, Gen AI can help alleviate the overwhelming choices consumers face, making shopping more enjoyable and accessible for all.
For South African retailers, the message is clear: Those who harness the power of Gen AI will be better positioned to meet the evolving needs of their customers, driving loyalty and growth in a competitive market.