The holidays are retail’s most hectic time of year, but AI is stepping up to help in a big way. From personalizing holiday sales to preventing seasonal shoplifting, new AI advancements will be a huge boost for retailers this holiday season.


SwissCognitive Guest Blogger:  Zachary Amos – “How AI Is Helping Retailers This Holiday Season”


Artificial intelligence is helping retailers manage inventory, forecast demand and improve the customer experience this holiday season. As more businesses adopt this advanced technology, they see more significant returns.

1. Processing Holiday Returns

Retailers see a massive increase in refunds and send-backs during the holiday season. Consumers collectively return almost 18% of purchases, amounting to $171 billion in losses. Businesses feel motivated to adopt new policies like only offering store credit or charging for shipping. Consequently, brand loyalty and customer satisfaction have taken a hit. 

On top of return-related losses, retailers must absorb increased labor costs. In fact, around 44% of them hire temporary staff just to handle holiday returns. Instead, they could use AI to automate the process. Additionally, they could use it to analyze consumer history and predict send-back rates to improve their policy-making.

2. Managing Inventory

The massive increase in orders and returns during the holiday season makes inventory management complex. Unavoidable situations like supply chain delays caused by winter weather add to the confusion. As a result, overstocking and inaccurate stock reporting are common issues.

Thank you for reading this post, don't forget to subscribe to our AI NAVIGATOR!


Fortunately, AI can optimize fulfillment and reduce excess stock to maximize revenue. It can minimize supply chain overhead costs by forecasting reorder points, increasing order accuracy and streamlining distribution. Retailers can use it to track shipments in real time or automatically order products, reducing human error during the chaotic holiday rush.

3. Personalizing Holiday Sales

Customers expect holiday sales. Often, retailers find accurately predicting those expectations challenging. Marking down unpopular items or incorrectly estimating the best discount rate leads to lower profitability, brand loyalty and customer satisfaction. In response, many businesses are adopting AI-led pricing decisions.

Stores that use algorithms to forecast demand in real time have a much higher chance of aligning their actions with consumers’ expectations. Because of this, experts believe AI-led pricing decisions could add $500 billion in value to the global market. Ultimately, this technology could maximize holiday revenue and brand awareness since people are more likely to purchase products when they receive personalized deals.

4. Preventing Seasonal Shoplifting

Even retailers who don’t typically suffer from shoplifting will experience it in full force during the holiday season. At this time, shrinkage — losses due to theft, fraud or administrative errors — increases by over 15% on average, accounting for nearly 40% of annual losses. Sudden increased inventory movement and customer bases make it challenging for workers to spot and stop thieves. 

This issue has only gotten worse with time. In 2022, shrinkage totaled over $112 billion, up nearly $20 billion from the previous year. Retailers feel forced to close stores, reduce operating hours, lock up products and alter in-store selections. Most don’t even allow their employees to physically stop shoplifters for safety reasons, proving the need for an automated system like AI.

AI-powered cameras, alarms and sensors can identify and detect thieves in real time without tipping them off. For example, one store’s model leveraged 100,000 hours of surveillance videos to monitor over 100 behavioral cues. As a result, police are more likely to arrive in time to prevent losses.  

5. Replacing Seasonal Workers

For decades, temporary workers have been the industrywide solution to demand spikes. In the United States, retailers must fill 400,000 seasonal positions to accommodate increased consumer demand. Most assume they must take on the heightened labor and administrative costs. However, AI presents a new solution. 

Retailers can use AI instead of filling positions with humans. It can automate management, customer service or in-store guidance. For example, an in-aisle kiosk could provide a product’s location and answer pricing questions. This minimizes overhead and labor costs.

6. Improving Search Functionality

Retailers can use AI to deal with sudden shifts in demand and large spikes in customer queries during the holiday season. For example, they can use a generative model to edit the frequently-asked-questions page in real time. Alternatively, they could use an algorithm to update auto-fill suggestions based on current interests. 

Companies are already experimenting with this technology to improve browsing. For example, Google’s new generative model lets people virtually try on clothes before ordering them. These customer experience improvements can maximize profitability, brand loyalty and consumer satisfaction.

7. Tracking Holiday Shipments

Winter-weather-caused delays and a sudden, massive spike in orders make retail supply chains incredibly hectic during the holidays. In response, many companies are adopting AI to monitor shipments and predict trends. Amazon’s new supply chain AI manages inventory and forecasts daily demand, increasing sorting and stocking speeds by 75% and lowering processing time by 25%.

Leveraging AI Leads to a Profitable Holiday Season

In-person and online retailers can use AI in almost every aspect of business, from customer experience improvements to order fulfillment. It’s clear this technology will lead to a uniquely profitable holiday season.

About the Author:

Zachary AmosZachary Amos is the Features Editor at ReHack, where he writes about artificial intelligence, cybersecurity and other technology-related topics.