How AI is changing physical retail

Digital CX has been revolutionized by artificial intelligence (AI), but what is less understood is how AI is being used to transform physical customer experiences.

In this interview, Matthias Goehler, chief technology officer (CTO) for the EMEA region at Zendesk (pictured below), explains how physical stores with high-tech capabilities are transforming the traditional shopping experience into a dynamic and connected journey that is personalized and efficient.

CX Network: We often talk about AI being used to enhance the shopping experience for digital customers, but what is happening with AI in the physical retail space?

Matthias Goehler: The fusion of physical stores with high-tech capabilities is transforming the traditional shopping experience into something much more dynamic and customer friendly. As we all know, AI is at the forefront of this transformation, enhancing not just how customers interact with products but streamline their operational efficiencies, too.

First, AI-driven 'Scan and Go' mobile payment systems have been a game changer. These allow customers to use their mobile devices to scan items as they shop, enabling instant checkouts without the need to queue. This significant reduction in friction boosts customer satisfaction and loyalty. Moreover, these systems are integrated with loyalty programs, offering personalized discounts and promotions based on a customer’s shopping history, which helps to enrich the shopping experience even more.

Additionally, AI gives people the opportunity to see products in a different context, for example a digital mirror can support the shopper choosing suitable clothes while seeing them on their bodies through AI. Then, they only try on the products that are shortlisted. Plus, consumers can also take advantage of products that are not currently in stock but can be ordered.

Beyond improving the customer experience, AI significantly boosts operational efficiency. By analyzing customer buying behaviors and other data points, AI helps retailers make precise decisions about stock purchasing and staffing levels. For example, AI systems analyze trends, including historical sales data and external factors like weather, to accurately forecast product demand. 

What’s more, AI's capability to dynamically adjust pricing based on demand forecasts and competitive analysis helps retailers maximize their profits while remaining competitive.

It’s these kinds of intelligent, data-driven decisions that AI facilitates, which are becoming increasingly crucial in today’s fast-paced market.

Overall, AI is reshaping the retail experience by bringing a level of personalization and efficiency that was previously unattainable in physical stores. As we continue to integrate AI more deeply into our retail operations, we expect these technologies to not only meet but exceed the evolving expectations of our customers.

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CX Network: How are retailers using AI to engage their customers and which capabilities do you consider to be “must-have” for retailers in 2024?

Matthias Goehler: AI is completely transforming the retail landscape, not only by enhancing customer interactions and operational efficiencies but also by simplifying complex processes like product returns, which have increased significantly with the rise of online shopping.

AI's impact on streamlining the returns process cannot be understated. With the growth in online purchases, the volume of returns has also escalated. AI simplifies this process by automating initial return steps such as verification of purchase and assessment against return policies. It guides customers through the process efficiently, schedules pickups, and manages real-time updates to inventory.

This level of automation not only enhances customer satisfaction by making returns hassle-free but also aids retailers in managing returns efficiently, keeping their operations agile and responsive.

Something else to keep in mind is that a return process can become very complex – depending on factors such as date of purchase, value of purchase, customer group, discounts and other variables. Retailers should take advantage by not only returning the product but exchanging it or cross-selling more items. Conversational commerce helps retailers to find out what customers want and make personalized recommendations based on their profile.

Such AI-driven capabilities – intelligent routing, 24/7 support via chatbots, proactive customer engagement and dynamic personalization – are becoming essential for retailers. AI is reshaping how customers interact with brands, making every step from browsing and purchasing to returns more fluid and customer-centric.

Moreover, as AI technologies evolve, they will play an increasingly critical role in not just responding to customer needs but anticipating them. This means that AI will not only manage current interactions but also predict future customer behaviors, allowing retailers to optimize their offerings and interactions in real-time.

This predictive capability is particularly important as it helps retailers manage inventory more effectively, adjust staffing as needed and dynamically modify pricing strategies to stay competitive.

The outcome is a highly efficient, personalized shopping experience that caters to the modern consumer's demand for convenience, speed and relevance.

AI is not just an operational tool; it is a strategic asset that's integral to delivering superior customer experiences. Retailers are well-equipped to navigate the complexities of today’s retail environment, ensuring they remain competitive and responsive to the ever-evolving market needs.

This holistic approach to integrating AI in retail will define the leading edge of customer service in 2024 and beyond.

READ MORE: Harnessing advanced chat, custom GPTs and ethical AI for CX

CX Network: When it comes to using AI for CX, what is your outlook for the capabilities and experiences that will be standard by mid-decade?

Matthias Goehler: As we look towards the middle of the decade, AI's integration into customer experience (CX) is set to deepen, fundamentally reshaping how customer service operates. According to our latest CX Trends 2024 report, there are several pivotal developments we expect to become standard in the industry:

Generative AI: Generative AI is anticipated to be extensively integrated across various customer service channels. This development is aimed at enhancing the personalization and effectiveness of customer interactions, making the customer journey more humanized and engaging. A significant 70 percent of CX leaders have plans to integrate generative AI into their customer interaction points within the next two years. This underscores the critical role AI is playing in the evolution of customer service strategies, where dynamic data leverage can transform standard customer interactions into unique, personalized experiences.

Data interpretation: AI's capability to instantly analyze and act upon data from disparate sources is expected to standardize the delivery of hyperpersonalized experiences. This will meet the growing consumer expectations for immediacy and relevance in interactions, marking a significant transformation in how businesses interact with their customers. Despite 62 percent of CX leaders currently feeling they lag behind in providing instant experiences, rapid advancements in AI technologies are swiftly closing this gap, enabling real-time tailoring of customer experiences.

Chatbots: Applications like chatbots are evolving. They're becoming advanced digital agents capable of managing complex inquiries with greater autonomy. These AI-driven agents are designed not only to respond to customer needs but also to proactively address and resolve issues, significantly boosting the efficiency of customer service operations. With 59 percent of consumers expecting AI to revolutionize their interaction with businesses, the readiness for more sophisticated AI capabilities in customer service is clear and growing.

Privacy and security: As AI becomes more embedded in customer interactions, the importance of robust privacy and security measures cannot be overstated. Transparent handling of customer data and secure AI operations will be essential to maintain trust and meet stringent regulatory requirements. With increasing scrutiny on data practices, ensuring AI systems are secure and their operations transparent will be crucial for compliance and fostering customer trust.

READ MORE: Why businesses are putting privacy concerns at the heart of their operations

CX Network: Zendesk recently acquired Klaus and Tymeshift. What does this mean for your product roadmap and future focus areas? 

Matthias Goehler: These recent acquisitions mark a significant strategic foundation of our Workforce Engagement Management (WEM) solutions, fundamentally transforming how we support our customers and manage workforce operations.

First, with the acquisition of Klaus – an AI-powered quality management platform – completed in the first quarter of 2024, and Tymeshift  – a workforce management solution acquired in the third quarter of 2023 –  Zendesk has substantially bolstered its capabilities in both domains.

These acquisitions enhance our ability to meet and exceed customer expectations through advanced tools that optimize workforce efficiency and improve quality assessments.

Klaus’s integration into Zendesk introduces AutoQA, a feature that revolutionizes how quality management is handled across customer interactions. AutoQA enables automated, comprehensive quality assessments on 100 percent of customer interactions across all channels. This capability is crucial for providing real-time feedback and fostering continuous improvement in customer service quality, even for interactions managed by digital agents. By automating quality assessments, Klaus allows customers to maintain a consistently high service quality across all channels, seamlessly identifying service gaps, predicting potential issues, and automating solutions to enhance the overall efficiency and effectiveness of customer support teams.

The strategic addition of Tymeshift focuses on optimizing workforce management. Tymeshift’s AI based tools are now integral to Zendesk, helping businesses streamline their staffing processes and better align workforce schedules with fluctuating customer service demands. This ensures that our clients can manage their teams more effectively, optimising their operations to meet both current and future challenges.

The acquisitions of Klaus and Tymeshift not only strengthen Zendesk's product offerings but also set a new standard in customer service quality and workforce management. By providing critical insights into both human and digital agent performances, these acquisitions enhance coaching, training and system enhancements, leading to improved customer satisfaction and service excellence. Moving forward, these tools will be central to our roadmap and focus areas, as we continue to innovate and provide our clients with the best possible solutions to meet their evolving needs.

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