Generative AI drives hyper-personalization in the retail sector

Madrid, November 5, 2024. ― Generative Artificial Intelligence is driving the hyper-personalization of proposals aimed at retail consumers, establishing itself as one of the main tools in the sector.

This is one of the main conclusions of the 5th Retail Barometer 2024 – 2025: the era of hyper-personalization, prepared by Esade Alumni, with the support of the technology consultancy SEIDOR and the collaboration of the communication consultancy ATREVIA, based on a survey of 250 manufacturers, distributors, and professionals in the wholesale and retail sector. It was presented today at the Esade Campus in Madrid.

Specifically, the report highlights that hyper-personalization in commerce and the large-scale use of Artificial Intelligence to enhance customer knowledge, anticipate their desires, and create personalized and engaging content, has established itself as the major technological trend of this year.

In this context, retailers also face the challenge of converting this consumer information into concrete actions that improve customer interactions. In this regard, Javier Alonso, Marketing & Commerce Senior Advisor at SEIDOR, has highlighted that "70% of the shopping experiences offered by retailers still do not capitalize on the new technological tools available, which shows a disconnect between the vast knowledge provided by AI and its effective implementation in the daily practice of the sector.”

Alonso has added that "the ability of AI to generate deep customer knowledge is indisputable, but the real challenge for retailers is to apply that knowledge in a way that truly transforms interactions and improves the shopping experience"

Personalize without compromising privacy

As customer knowledge increases, the report also warns that the other great challenge for the retail sector is finding the balance between deepening customer knowledge and respecting the boundaries of their privacy. While the ability to analyze and use data to tailor proposals to individual needs is a key benefit of AI, retailers must handle this information with caution to avoid compromising consumer trust.

The study also reveals that, in an environment where personal data is increasingly valuable, ensuring security and respect for privacy is essential for the success of personalization strategies.

Personalization, key to loyalty

The Barometer also reveals that 56% of buyers state that they are more likely to return to a store that offers them a personalized experience. This data underscores the importance of tailoring interactions and proposals to the individual preferences of consumers.

Brands that invest in improving the personalized shopping experience, in addition to enhancing customer satisfaction, also foster long-term loyalty and retention, key factors in a competitive environment where consumers have more choices than ever.

Demand for greater transparency

Another major demand from consumers highlighted by the Barometer is transparency. Buyers expect to know as much as possible about the details of the products they purchase, such as the origin, manufacturing process, or the social and environmental impacts of what they buy.

Thus, the report shows that consumers are seeking greater clarity on brands' sustainability practices, from working conditions in factories to the carbon footprint of products.

More workplace flexibility

The Barometer also highlights that the retail sector is adapting to changing labor dynamics, especially regarding talent retention. Work flexibility has become a priority, with initiatives such as open shifts, managed through digital platforms, allowing employees to choose their schedules based on business needs and their training.

This flexibility, combined with improved internal communication, is enhancing employee engagement and aligning them more closely with the company's goals. Digitalization is not only transforming the customer experience but also the way retailers manage their teams, which is key to maintaining an agile and adaptable work environment.

Less dependence on digital platforms

Another highlight of the study is the 13% reduction in the use of third-party digital platforms by retailers. This decline reflects a strategy aimed at regaining full control over the customer experience, avoiding the intermediation of marketplaces.

By focusing on their own channels, retailers manage to offer a more consistent and personalized brand experience, essential aspects in an environment where hyper-personalization is crucial to satisfy the consumer.

Additionally, these businesses invest in the strengthening of their own websites and mobile applications, driving an omnichannel strategy that seamlessly integrates the online and in-store experience.

In this regard, according to Mónica Colmenero, Director of Consumer Affairs at ATREVIA, “communication is a strategic lever in retail because it allows us to impact our stakeholders, both externally and internally. The consumer is changing, and the way to impact them is also changing. The same happens with the internal audience. Listening, hyper-personalization of messages, and building a transmedia strategy are key to generating that emotional bond that the consumer demands and that makes brands reinforce their differential value.”

Positive Outlook

In global terms, the retail sector continues to consolidate its recovery, with a 6.1% increase in sales, according to data from the INE, and a contribution of 5.4% to the Spanish GDP, according to the National Accounts. The Retail Barometer 2024-2025 reveals that 59.2% of retailers expect to maintain or increase their sales volume in the coming year, while 8.4% plan to increase talent hiring, highlighting the sector's ability to face challenges such as inflation and rising labor costs, while adapting to a digitalized environment.