Christmas tree at night

01 December 2022


How AI is Changing This Year’s Holiday Landscape

While the holiday season might be the most wonderful time of the year, it’s also one of the most hectic—especially for the retail industry. 

Every year, customers’ standards increase, especially as the use of digital channels and online shopping skyrockets. Customers are no longer pleasantly surprised when they receive a personalized offer from their favorite brand—they now expect to receive tailored gift guides for everyone on their holiday shopping list. 

Luckily, AI can help to not only meet, but exceed, rising customer expectations. In this post, we’ll break down specific ways that data science is powering innovations for retailers this holiday season. 

3 Ways AI is Transforming the Holiday Season 

Over the past few years, the CPG industry has come to rely on AI to delight consumers and provide unforgettable experiences. Here’s how AI and machine learning are making this holiday season shine just a little bit brighter. 

1. Providing Personalized Recommendations 

This year more than ever, the retail landscape is extremely competitive. To stand out amongst crowded email inboxes, overflowing SMS chats, and overwhelming in-store promotions, retailers need to focus on providing a top-notch, personalized experience for their target customers. 

So what, exactly, does that look like? 

For one, utilizing AI and machine learning to get consumers to the products they want, faster. AI-powered product discovery solutions leverage real-time data and buyer intent to deliver personalized results, boosting products it expects to have the highest conversion rate with a given customer to the top of the page. 

Another pain point AI can solve is recommending the next best product when the item a customer is searching for is out of stock. McKinsey found that 70% of consumers switched brands when an item they wanted was out of stock, but with AI-driven recommendation engines, brands can provide on-page similar recommendations for unavailable products. 

2. Improving the Digital Customer Experience 

Every single retailer out there wants to provide their customers with the best experience possible—that’s how you win consumers’ loyalty, increase customer lifetime value, and elevate your brand reputation. 

Improving your brand’s CX starts with, and centers around, (you guessed it) personalization. Most CPG brands have the advantage of having tons of customer data at their fingertips—if you subscribe to your favorite clothing store’s newsletter, they have data about how often you engage with their e-blasts, what types of products you’ve purchased in the past, and which type of subject line makes you most likely to open an email. 

Retailers need to use this information to avoid the generic blanket markdowns that we see every holiday season. Instead, they need to develop a deep understanding of the types of products each customer is looking for and then ensure that demand gets fulfilled by promoting in-stock products individual consumers will love. 

According to The Retail Bulletin, adding a layer of AI to the equation creates opportunities for even more sophisticated demand forecasting and nuanced targeting—allowing brands to pitch the right product through the right channel at the right time. 

3. Predicting Demand for Holiday Dinners 

Aside from stocking gifts that eventually end up underneath their consumers’ holiday trees, many retailers are also responsible for selling the centerpieces of their customers’ holiday dinner tables—whether it be the pumpkin pie, the turkey, the cranberry sauce, etc. 

Forecasting demand is tricky—what if you stock too much pumpkin pie, and not enough pecan pie? Will decreasing travel restrictions lead to more guests at your store’s local families’ celebrations? 

To combat this, Sam’s Club is using AI to predict how much pie each of its 600 nationwide stores need to make for the holiday season. The model they’ve created gives each store leader a recommendation, by the hour, of how much pie they should have in stock in their bakeries. 

By using a model that can accurately predict demand, Sam’s Club ensures that they’re not wasting their bakers’ time or their store resources, while also guaranteeing that customers don’t walk into an empty display. 

To Wrap Up 

While it’s up for debate whether the North Pole has already implemented an AI-powered toy workshop, the holiday season certainly highlights data science’s latest capabilities. 

Even if you’re not in the CPG space, AI is making an impact across industries all year long. If you’re not already using data science and machine learning to make your business operations smarter, faster, and more profitable, what are you waiting for? 

If you need inspiration to get started, we’ve got you covered. Check out our use case library, 50 Ways to Impact Your Business With AI, for 50 real-world examples of how our customers have used AI to take their orgs to the next level. 

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