The retail industry is one of AI’s biggest champions: the market for AI in retail is predicted to grow from $9.36 billion in 2024 to $85.07 billion by 2032. It’s not hard to see why interest is soaring among retailers: AI has the potential to streamline the shopping experience and help customers discover new products more easily.
But retailers must remember AI isn’t a silver bullet, and without careful, selective deployment, they risk losing the personal connection with the customer and damaging trust. Only 18% of consumers feel comfortable with certain AI-driven features like facial recognition and AI-generated images, meaning roughly 71% are uneasy or outright uncomfortable with some of the ways retailers are using AI.
The message is clear: while AI offers huge opportunities, flawed customer experience applications are putting hard-won trust and loyalty at risk. Here’s how to ensure that your AI deployments work for your customers – not against them.
Perfecting the basics before AI
Amid the AI hype, many brands have lost sight of the fundamentals. The truth is that no amount of artificial intelligence can compensate for basic CX failures.
Customers are filling their carts only to run into unnecessary hurdles that add friction at the checkout, which prompts them to go to a competitor instead. Even if a customer is dead-set on a product, they won’t hesitate to shop around if the customer experience isn’t up to scratch, and this can include anything from the right payment options to unnecessary authentication checks. For instance, 76% of online shoppers will bail on a purchase if their preferred payment method isn’t available.
Slow load times, clunky checkouts, and inconsistent performance remain silent conversion killers. These “hidden” pain points undermine customer confidence long before any innovative new AI features get a chance to impress.
These kinds of failures are entirely preventable with solid UX design and operational execution. In an era when 81% of consumers have walked away from a brand due to preventable CX flops, getting these basics right is not optional: it’s urgent. The takeaway for enterprises is simple: optimise your core customer experience before piling on AI. Without nailing the basic hygiene factors, AI will only amplify the cracks in your CX – not solve them.
AI guardrails to establish trust
When brands do implement AI into the customer journey, it must be done with thorough contingencies and oversight. Poorly governed AI can rapidly turn from asset to liability. If a chatbot veers off-script or is unable to process a complex request, the increased convenience promised by the tech quickly turns into frustration for shoppers. Shoppers should never feel like they’re ‘alone’ with an AI, especially one that isn’t equipped to help them: escalation to real service employees should always be guaranteed.
Just one bad AI interaction can sour a customer’s view of a brand for good. To avoid unfavourable outcomes, companies need to set clear rules for AI usage. This means rigorous, regular testing, fact-checking, and human oversight for any AI-driven customer-facing tool. Best practice for operating customer-facing AI includes using content filters to block problematic outputs, imposing strict accuracy checks on recommendation algorithms, and ensuring that a human reviews AI-generated content as often as possible.
Transparency is crucial in this still-developing landscape: brands should disclose when content or service interactions are AI-driven. Shoppers aren’t averse to AI by principle: in fact, 25% of customers think that AI is best utilised in customer service scenarios. What they don’t like is dealing with poorly trained chatbots or getting stuck in a doom loop being sent back and forth between different automated agents.
In short, trustworthy AI is governed AI. By remaining diligent, retailers can reap the benefits of AI without eroding credibility. Brands that fail to put safety nets under their AI features may find that their CX “upgrades” end up destroying customer confidence.
Loyalty in the age of AI
Brands need to radically rethink how they earn and retain customer devotion in this new phase of the internet. As we’ve covered, retailers can’t simply win loyalty by offering the most impressive AI features. They’ll have to think smarter, for instance reconsidering their loyalty programmes, and assessing where AI features best fit into these strategies. Historically, loyalty programmes were meant to reward customers for repeat business, but in practice many have become bloated with frustrating gamification and low-value perks that require more legwork than they’re worth, like writing reviews or uploading images.
Nearly half of consumers just want regular meaningful discounts, and 36% are after practical perks like free shipping or flexible payment options. 35% simply want programmes that don’t cost money to join. Brands should only be leveraging AI in loyalty initiatives to deepen value: like using AI analytics to process customer feedback and offer them the rewards they actually want, or provide proactive customer service that solves issues before they become pain points, or streamlining CX by automatically applying discounts. But they must avoid the trap of “AI gimmicks.”
The path forward
The bottom line is that AI offers a lot of value to retailers – when it’s deployed in the right way. Customers are open to AI when it delivers human-like service, solves problems intuitively, and adds real value. But when AI is rushed, ungoverned, or used to paper over deeper CX cracks, it does more harm than good.
The path forward is clear: fix foundational CX flaws first, deploy AI with clear guardrails, and design loyalty programmes that reward meaningfully and build tangible relationships with your customer base. In today’s competitive landscape, where trust is fragile and price often wins, these steps are not just nice to have; they’re essential for long-term retention.
