The economy is stormy, and shoppers feel the consequences firsthand. To stay competitive, retail businesses must focus on efficiency. Artificial intelligence in the retail industry can become a silver bullet to help you succeed. Solid 48% of retailers believe AI technologies will shape the domain in the next three to five years.

Adopting artificial intelligence solutions for retail is quickly becoming a hot trend, and if you avoid it, your market positions are at risk. Let us demonstrate how intelligent tech can step in to help you with the challenges you face daily. 

This article is a part of the “AI in retail” series, where we showcase all aspects of AI implementation for businesses. Other articles on this topic include:

The Retail AI Market Overview: How Technologies Change the Shopping Industry

Retail is quickly moving to digital, and digitalization, in turn, drives fast AI adoption. The value of the AI in the retail market has skyrocketed to an estimated 7.1 billion USD in 2023, marking a 29% increase from just a year earlier.

A fresh survey shows the top three reasons for implementing AI in retail businesses are:

  • improving customer experience (59%);
  • boosting productivity (49%);
  • achieving cost efficiencies and return on investment (44%).

Retail AI statistics

Sources: Honeywell, Fortune Business Insights

But is AI a magic wand that can solve all business problems, or is it a short-lived hype?  Let us delve into a real-life case of retail AI research and development to find out.

What Challenges AI Can Solve: Insights Based on CHI Software Expertise

Personal recommendations have always been the driving force behind sales in beauty retail. Earlier, shoppers typically sought advice from store assistants. But when COVID restrictions got tough and online shopping started booming, keeping that personal connection became challenging. Yet, its significance never waned.

To explore new avenues, our client, a major beauty retailer in the US, came to us in the fall of 2020 with a novel concept of an AI-powered beauty advisor. The solution was meant to be an expert in skincare and make-up recommendations online and in physical stores.

Advanced recommendations or profound user analytics? Get it all with AI Talk to our specialists

The new product idea appeared in response to the pressing challenges of the time:

  • The rise of competitive e-commerce platforms; 
  • No strong competitive advantage over other market players in the eyes of shoppers;
  • No personal approach to skincare recommendations on the client’s website;
  • Lack of properly trained personnel in the client’s physical stores.

To address the issues, the CHI Software team designed and developed an AI-powered mobile app enhanced with computer vision for face recognition and a GPT-based chatbot. 

Computer vision solution for a cosmetic retailer

The app flow works like this:

  1. A user takes a selfie; 
  2. Then, the algorithms identify a face on the photo and analyze the skin condition and potential problems; 
  3. When the problem is clear, the system recommends relevant make-up and skincare products; 
  4. Users can add more input or ask for explanations by communicating with a GPT-based chatbot. 

The app delivers expert advice and 24/7 client support, so it is not surprising the solution was embraced with open arms on the market and led to stunning results:

  1. A remarkable 10% sales increase thanks to spot-on product recommendations driving higher order values.
  2. 10% of revenue growth through effective cross-selling and upselling.
  3. Stronger customer engagement resulted in 8% growth in customer retention rates.
  4. First-time shoppers joined the retailer’s audience thanks to positive word of mouth.

Read more about the retail mobile app development, technologies used, and potential benefits in our comprehensive case study

More Challenges for Artificial Intelligence in Retail Businesses

Retail and artificial intelligence are a perfect match. Retailers deal with vast amounts of data daily, and AI algorithms quickly analyze this data to support management decisions. That is exactly why artificial intelligence in retail business shines across many functions – from beefing up security and enhancing customer service to fine-tuning demand planning and optimizing in-store operations.

How to use AI in e-commerce? Check out these seven use cases

Competitive Pricing Challenges

In times of rampant inflation, shoppers are on the hunt for better value for money. An eye-opening 43% of customers admit they recently stopped buying from their favorite retailer because of price hikes.

In the dynamic world of retail, setting the right price is essential. It is the sweet spot between driving profit and keeping customers returning for more. Intelligent software analyzes large amounts of internal and external data to determine the perfect price point. 

Challenges in Forecasting and Demand Planning

Analyzing trends and figuring out what products, when, and where will be needed are complex tasks that require a lot of data and many hours of analysis. The price of error is high. That is when AI forecasting tools come into play, helping make informed decisions for better financial results.

Always be prepared for what's coming. It's that simple. Just book a short call with AI experts

Cybersecurity Challenges

The retail industry is the number one target for cyber attacks. Only in 2023, 69% of retailers experienced ransomware attacks aimed at customers’ sensitive data. AI-driven security tools, unlike humans, quickly analyze large amounts of data, identify suspicious system behavior in seconds, and respond to real-time security threats.

Localization Challenges

Localization challenges for retailers

Do you know that 65% of customers prefer content written in their native language, and 40% will not buy a thing from a site in a foreign language? Adjusting to local markets has become a challenge during retail overseas expansion, but you have a solution. AI translation and personalization tools help adapt content and senses to cultural preferences and find a way to your customers’ hearts. 

Future of AI in the Retail Industry: Trends to Watch in 2024

In 2024, the retail world is buzzing with one word (or two, to be precise): AI. Why? Because the quest for an enhanced customer experience, boosting productivity, and savvy cost efficiency is real. And these driving forces are not just a passing trend. They will continue to shape the industry in the coming years.

AI for Hyper-Personalization

71% of shoppers expect companies to know them well enough to offer only relevant content and products. A highly personal approach in mass business is a tall order, but AI is stepping up to the plate. Algorithms analyze shoppers’ data and serve up personalized suggestions. So, tailored shopping is not a luxury. It is the future.

AI-Powered Virtual Assistants for Stunning Customer Service

Round the clock and always alert, AI chatbots are the new frontrunners in customer support. With time, they are not just responding but evolving into top-tier virtual assistants that understand natural queries and perform various tasks. 

Learn what business advantages you can gain with AI right now Read more

AI for Smooth Omnichannel Experience

9 of 10 e-commerce websites in the US are backed by brick-and-mortar retailers. And AI helps weave online and offline retail worlds together. Artificial intelligence tools harness insights from various shopping channels to create a unified customer experience.

AI Robots for Cost Effectiveness

Think of AI as the turbo boost for manual operations. Not only does it accelerate tasks, but it also cuts costs and supercharges efficiency. 

Automated cashiers are on 24/7 with no coffee breaks needed. Amazon’s warehouse robots move, pick, and sort packages, streamlining the shipment process. And in Walmart stores, cleaning robots scrub floors and check inventories on the shelves.  


The retail horizon is rapidly widening thanks to AI. Intelligent tech helps businesses, big or small, target the right customers while optimizing productivity and cost-efficiency. With 97% of retailers embracing AI solutions today, you should join the bandwagon, too.

Wondering where to begin? What challenges would you like to address with a new solution? These are the basic questions to ask yourself. Luckily, you have the CHI Software team to discuss the essentials with. 

Whether you have a well-shaped idea or just consider possible retail software development, let us meet and talk. You do not have to “start somewhere”. Start smart. Start with us.


  • What are the main trends for AI in retail business? arrow

    In retail AI research and development, the main trends include personalizing customer experiences through AI-powered recommendation systems, integrating AI in retail mobile app development, and using in-store technologies like smart shelves and facial recognition for better customer service. Additionally, artificial intelligence in retail business increasingly focuses on supply chain optimization and predictive analytics for inventory management.

  • What challenges can artificial intelligence solve in the retail industry? arrow

    Artificial intelligence in the retail industry can improve customer experience through personalized interactions and recommendations. It also streamlines inventory management, helps in accurate demand forecasting, and enhances operational efficiency. Finally, AI solutions are pivotal in managing complex data analysis, leading to more effective marketing strategies.

  • What are the perspectives of artificial intelligence solutions for retail? arrow

    The perspectives of artificial intelligence solutions for retail include advancements in custom software development to provide more tailored and efficient customer service, the use of AI for more accurate demand forecasting and inventory management, and enhancing customer shopping experience through AI-driven personalization. There is also a growing trend in using AI for sustainable practices in retail, such as optimizing logistics to reduce carbon footprints.

  • Will chatbots be relevant for the retail industry in 2024? arrow

    Chatbots are expected to remain highly relevant in the retail industry in 2024. Their capabilities in providing efficient customer service, handling queries, and offering personalized shopping assistance make them invaluable. Retail software development service providers are continuously improving chatbot technologies to make them more intuitive and human-like, further solidifying their role in enhancing customer engagement and satisfaction in retail.

  • What is the role of artificial intelligence in retail business? arrow

    AI enhances customer experience through personalized recommendations, improves supply chain efficiency, and optimizes inventory management. AI in retail business also plays a key role in analyzing consumer data for better market insights, aiding in decision-making processes, and automating routine tasks, thereby increasing overall operational efficiency.

About the author
Alex Shatalov Data Scientist & ML Engineer

Alex is a Data Scientist & ML Engineer with an NLP specialization. He is passionate about AI-related technologies, fond of science, and participated in many international scientific conferences.

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