The retail revolution: Harnessing Generative AI for competitive advantage 

March 5, 2024

Generative AI has ignited a global buzz with its boundless potential to transform how we innovate, create, and interact with technology. From creating content and realistic images to summarizing documents and composing videos, generative AI’s capabilities are reshaping the creative landscape. Owing to its remarkable capabilities, about 82% of businesses are exploring or employing generative AI to revolutionize their industry, reshaping the experience for workforce and clientele in equal measure.

Research by McKinsey indicates that 75% of professionals anticipate that over the next 3 years, Generative AI will significantly change their industry’s competitive landscape. This rapidly advancing technology holds immense potential to revolutionize content creation and consumption, offering time and resource savings while delivering high-quality output. From virtual try-on experiences to personalized healthcare solutions, Generative AI has proven to be instrumental in various applications.

This blog briefly introduces the concept of Generative AI, explains its widespread adoption, and highlights the profound importance of generative AI in the retail industry. It also sheds light on how generative AI is opening up avenues for new possibilities within the industry.

What is generative AI?

Generative AI is a branch of Artificial Intelligence technology that focuses on creating remarkable content, such as text, photos, videos, audio, art, and more, within seconds to serve different purposes.”

In the past two years, generative AI has become more accessible due to advancements in its machine learning model, generative adversarial networks (GANs), and large language models (LLMs). These models are trained on vast amounts of data, which enables them to produce results that are nothing short of magical.

Source: Microsoft

Since it’s incredibly powerful and flexible, generative AI gained traction in less than a year. One of the most significant examples is ChatGPT by OpenAI (released in late 2022), which saw its user base surge from zero to 100 million in under two months.

Despite ChatGPT’s initial breakthrough, the power of generative AI goes far beyond chatbots. Dall-e is another groundbreaking generative AI model developed by OpenAI to generate realistic and creative images from textual descriptions. The launch of Dall-e marked a significant milestone in artificial intelligence and image generation and garnered quick attention within the technology community.

Given its widespread adoption, tech giants such as Google and Microsoft have also jumped on the bandwagon with their large language models, namely Gemini and Copilot, respectively. These gen AI tools amplify human imagination and drive innovation across multiple domains.

Considering Gen AI’s capabilities, the global generative AI market is projected to hit $53.9 billion by 2028, with a robust CAGR of 32.2% during the forecast period.

Generative AI as a game-changing revolution in retail

Given the hype around this technological innovation, a McKinsey report demonstrated the surging adoption of generative AI. Within just a year of its inception, one-third of organizations across various industries are regularly using generative AI for at least one business function – marketing and sales, product and service development, and service operations.

Since generative AI has caused such a stir in marketing and sales, product development, and service operations, it is also becoming equally important for retail business leaders. The retail sector has always been a playground for emerging technologies, and generative AI, in particular, is creating a game-changing impact for retailers and consumers alike. From crafting personalized marketing campaigns to reshaping customer experiences and revolutionizing supply chain management, its influence permeates every aspect of the retail landscape.

A recent CEO survey reveals that industry leaders are increasingly turning to AI technologies to drive revenue growth. According to this survey, 42 percent of retail CEOs are prioritizing the implementation of AI technologies such as Gen AI, ML, and Deep Learning to achieve tangible results over the next three years. Currently, 40 percent of retailers and brands worldwide are experimenting with generative AI, with 21 percent already investing in it.

While Generative AI’s influence on the retail industry’s profitability is currently in its early stages, a report forecasts that by 2029, it will constitute 78% of the overall financial impact and eventually become the driving force behind the industry’s growth.

With the speed at which generative AI is developing in retail, many leading retailers are increasingly investing in adopting this advanced technology to remain competitive. Macy’s, for example, uses AI-driven shopping assistants to enhance customer experiences, enabling shoppers to receive automatic responses to inquiries regarding product availability and location.

Another notable example of retail generative AI solutions is Sephora’s virtual assistant. This virtual assistant utilizes advanced algorithms to help with personalized consultations and provides an online “in-store” shopping experience, increasing shopper’s engagement with the brand.

The revenue potential of generative AI in retail is enormous, with projections suggesting it could contribute $400-$660 billion annually to the industry. Another research suggests that about 96% of retail executives are extremely inspired by this groundbreaking technology and the immense value it brings to the business in terms of productivity, time, and cost savings, besides significantly enhancing the overall customer experience.

The widespread applications of generative AI in retail

Gartner predicts that generative AI will become a cornerstone of global software spending, reaching 35% of worldwide revenues by 2027. This trend underscores the proliferation of AI copilots, integrated into various enterprise systems to automate daily operations and enhance productivity. These copilot systems assist in tasks such as email writing, expediting customer support through chatbots and knowledge bases, and creating personalized content, among others.

Microsoft’s success with Microsoft Dynamics 365 Copilot signifies an era of optimistic growth forecast for Generative AI. Over 130,000 organizations have already experienced the copilot capabilities within Microsoft Dynamics 365 and Microsoft Power Platform.

Further readings: Microsoft Dynamics 365 Copilot, the next-generation AI

As generative AI becomes increasingly and seamlessly incorporated into the retail sector, it fundamentally reshapes operations, customer experience, and business strategies. The following are the major generative AI applications in the retail sector, where it is demonstrating its significant impact.

Personalized customer experience

Customer experience really matters in the retail sector. With generative AI, retailers can tailor their offerings to their target audience to increase engagement and conversion. By analyzing past purchases, browsing history, and demographic data, retailers can create personalized recommendations that resonate with each customer on a personal level and enhance customer satisfaction.

For instance, copilot capabilities in Microsoft Dynamics 365 Customer Insights offer a deeper understanding of your target customers and segments. This helps you create hyper-personalized campaign content and improve engagement.

Explore more: What’s new about Microsoft Dynamics 365 Customer Insights?

Highly targeted marketing campaigns

Gone are the days of one-size-fits-all marketing strategies. With generative AI, retailers can create highly targeted campaigns that speak directly to the needs and interests of their target audience. By leveraging data-driven insights, retailers can identify specific customer segments and tailor their messaging accordingly to deliver the right message to the right people.

This level of personalization ensures that the marketing efforts are efficient, driving higher conversion rates and maximizing ROI.

Automation of customer service

Retailers must provide excellent customer care to gain trust and loyalty. However, earning loyalty requires significant effort to ensure customer satisfaction. With chatbots powered by Generative AI, retailers can handle multiple customer requests simultaneously and offer 24/7 support and assistance.

Microsoft, through Copilot, empowers contact centers to integrate generative AI capabilities seamlessly into their daily tools and processes. With Copilot for Service, organizations can integrate their knowledge base with Copilot for Microsoft 365 to enhance agent productivity. This includes offering AI-guided answers and personalized resources tailored to each customer issue and conversation, resulting in quicker resolutions and improved CSAT scores.

Read more: Explore the capabilities of Coploit for Service

Intelligent order management

The retail industry has always been grappling with challenges in order management. These challenges have drastically impacted retailer’s operational efficiency, from forecasting demand to optimizing inventory levels and efficiently fulfilling customer orders. However, the adoption of generative AI in dealing with these longstanding issues has resulted in remarkable results. Streamlined order management processes, improved inventory accuracy, and enhanced overall operational efficiency are just a few of the benefits witnessed.

According to a report, the adoption of generative AI in order management reduces order processing time by up to 93% and saves up to 86% on order processing costs.

Maximizing retail success with generative AI: Best practices to get started

Driving retail success with generative AI depends on a multi-faceted approach that includes three key aspects:

  • Having a comprehensive retail strategy in place
  • Investing in a robust retail data infrastructure
  • Partnering with the right service provider
  • Having a comprehensive retail strategy in place

Considering the current competition in the retail market, having a well-defined retail strategy is a lifesaver for businesses eyeing success. Every retailer should follow a retail strategy that outlines the goals, objectives, and strategies for leveraging generative AI to drive business outcomes.

However, when the strategy is being made up, retailers should closely monitor various factors, such as customer preferences, market trends, etc., to enhance customer experience. By clearly defining the role of generative AI within the retail strategy, retailers will surely set themselves up for success.

Investing in a robust retail data infrastructure

Since data is central to the retail industry, every retailer should consider investing in a robust data infrastructure to collect, store, and manage data in all formats. As the volume of retail data in Lakehouse is enormous, retailers can leverage generative AI algorithms to gain insights, make informed decisions, and drive business outcomes.

Partnering with the right service provider

The chances of success are greater when the retail business partners with a trusted service provider. A reliable partner brings expertise and experience to the table, assisting retailers in addressing the challenges of AI implementation.

When choosing a service provider, retailers should seek a partner with a proven track record of success in the retail sector, along with AI technology. Confiz, a leading Microsoft Solutions Partner with deep expertise in AI integration, can help you unlock the power of generative AI in your ERP and CRM operations through the capabilities of Copilot in Dynamics 365.

Confiz: Your partner in securing your retail future with Generative AI

While this sounds promising, retailers need to leverage generative AI as an opportunity to innovate, differentiate, and stay ahead in today’s hypersensitive retail market. That said, know that the future is here, and retailers must embrace generative AI to thrive in the ever-evolving retail market.

Confiz stands as your trusted Microsoft Solutions Partner in revolutionizing your retail business by leveraging Copilot in Dynamics 365. With our proficiency in generative AI, we empower your retail business to deliver a data-driven experience that resonates with your customers and drives growth. Contact our consultants at to propel your retail business forward into the future with the power of generative AI.