Generative AI in retail

This article was originally published by BDO USA.

Few sectors are immune to the impacts of Generative Artificial Intelligence (GenAI), and retail is among the most affected. GenAI is expected to touch almost every customer interaction, connecting back-end data with customer experience in real-time to create truly unified and personalised commerce.

The global market for AI in retail was estimated at USD$11.61 billion in 2024 and projected to reach USD$40.74 billion by 2030, exhibiting a compound annual growth rate (CAGR) of 23 per cent, according to Grand View Research report. GenAI represents a huge technological leap forward that is already changing the nature of retail and throwing fuel on the competitive landscape. 

Generative AI in action 

It’s no surprise to see retailers rapidly implementing AI tools across their businesses. While there is a plethora of use cases for GenAI, two stand out in retail: autonomous agents and hyper-personalisation. 

Autonomous agents use large language models (LLMs) to complete an objective with minimal prompting, such as answering customer queries, by stacking AI models and applying software practices like loops and functions. This enables complex tasks to be completed with limited human oversight.

Hyper-personalisation is set to replace traditional audience segmentation.

GenAI and machine learning can enable a personalised experience for each customer at scale by synthesising their data with real-time information. This is the key to unlocking dynamic messaging, recommending products, customised loyalty offers, and more. 

Retailers are beginning to use GenAI to develop entire fashion shows and advertising campaigns by licensing a human fashion model’s likeness and producing scalable, unique content at a fraction of the cost. Customers can then receive personalised versions of that content, delivered at their preferred time and on their preferred channel. 

Overall, GenAI gives retailers the tools to boost efficiency and enhance customer intelligence in ways that lead to measurable improvements in both revenue and profitability, helping to future-proof the business.

With great power comes great responsibility

Almost every part of a retail business can benefit from the efficiencies and insights that GenAI provides. Retailers looking to deploy GenAI should assess the organisation’s AI readiness and develop a strategy that aligns with both short- and long-term business goals.

If a retail business still relies on legacy IT systems or has limited cloud infrastructure, then some degree of tech modernisation may be necessary to start. Fortunately, various outsourced or AI-as-a-Service options make GenAI adoption more accessible.

Retailers with limited resources may find large-scale change challenging, but using AI is a pragmatic decision. Prioritisation will be key for those with budget constraints. 

Despite these considerations, realising the benefits of GenAI may be more attainable than expected. With a wide range of applications and deployment options available, engaging experienced consultants with deep industry knowledge can help businesses craft a tailored AI strategy, embed risk management practices, and develop a clear plan of action.

What else should Australian retailers watch out for? 

AI usage relies heavily on high-quality data, making it essential to act with accuracy, relevance, and ethics. In a hyper-personalised world, retailers must be confident that their AI systems are using the right data and that it’s stored securely. Data breaches are a significant concern, especially when training in-house models on sensitive enterprise data. 

Retailers must also ensure compliance with the Australian Privacy Principles (APPs) under the Privacy Act 1988, which mandate transparency, purpose limitation, and data accuracy. As privacy reforms loom, retailers face pressures to justify data retention and embed privacy-by-design into their AI systems.

AI is increasingly integrated with Buy Now Pay Later (BNPL) services, raising concerns around ethical boundaries and consumer protection. AI-driven personalisation and behavioural targeting can influence purchasing decisions, at times pushing consumers to buy products they neither need nor can afford. 

In response, Australia has introduced new regulations under the National Consumer Credit Protection Act, requiring BNPL providers to meet responsible lending obligations. Retailers are responsible for ensuring AI systems do not cross into coercion and that consumer trust is preserved through transparency and ethical design.

Finally, while GenAI is still an experimental technology, it’s here to stay. Early movers will gain competitive advantage, while late adopters risk falling behind. Now is the best time to engage with this technology and learn as it evolves.

How BDO can help you map your AI journey

BDO’s AI Strategy offering helps you assess your GenAI readiness and build a tailored roadmap for secure and scalable implementation. Through our Generative AI and Agentic solutions, you can apply rapid innovation and automation by leveraging existing infrastructure or exploring AI-as-a-Service options.

To ensure responsible and ethical AI use, our data governance and trust services help you manage data quality, mitigate bias, and maintain compliance with privacy regulations. By adopting GenAI, you can extract actionable insights, accelerate decision-making, enhance digital capabilities, and drive performance improvements - while capturing efficiencies across your organisation.

Ready to see how GenAI can transform your retail business?

BDO’s retail team and digital team can provide deep industry expertise and tailored guidance on AI use cases to help retailers stay competitive today, tomorrow, and beyond. Contact us to get started.