How AI-powered service is making retailers smile

Every company today is exploring ways that AI can improve customer experience as well as their own operations. But for retailers in particular, it’s a multipart challenge. 

First, retail customers remain AI-wary: Nearly half (47%) say they’re happy with conventional technology for shopping and service, and 39% don’t see a need for AI, according to Bain research. Second, on the service side, customer support teams lag behind other business departments when it comes to use and knowledge of AI. Lastly, unlike their counterparts in B2B companies, retailers face much higher volumes of customer queries and requests—making high-quality service automation more difficult to scale.

The latest Freshworks Global AI Workplace Report, however, suggests that early-adopter retail firms are pushing past those trends and seeing impressive results by deploying AI in new ways with workers and customers. For instance, here’s what retail-company employees reported about their experience with AI in 2024:

• 71% said they are using AI weekly—one of the highest adoption rates among surveyed industry sectors

• 57% said AI chatbots have become instrumental to managing their workload

• 61% said their department is more successful due to AI

It’s not just workers citing new benefits of working with AI, but entire customer-service operations at surveyed companies. Food-delivery service Swiggy, for example—using Freshworks’ AI-powered customer support tools—reported that despite a 30% surge in ticket volume during the holiday season, it managed to speed up ticket resolutions by 20%, accompanied by a 25% increase in customer satisfaction.

Another surveyed retailer credited a 25% increase in overall team productivity over the holidays.

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Those kinds of AI-enabled gains hold huge potential in the retail sector, says Lauren Lee, senior director of CX sales at Freshworks. “AI can deliver bottom-line impact in a thin-margin industry,” she says. “AI helps with seasonality as well—it can train agents to be up to speed faster and stay on-brand, which lowers productivity losses and makes operations more efficient.” 

AI already in action

While the retail sector faces big challenges with AI, it also leads most other industries when it comes to overall adoption. Sales associates in stores use AI-powered mobile devices with product and inventory data; marketing teams rely on gen AI to craft targeted sales pitches; warehouse workers use AI to optimize shipping and returns.

The Freshworks report suggests this kind of holistic approach to AI is starting to pay off.  Six in 10 retail employees, for example, say their department is more successful due to AI, and 82% of the sector’s customer service workers say AI is necessary for business success.

Longer term, AI holds the potential to help solve the retail sector’s ongoing challenge in retaining workers in stores, customer support centers, and warehouses.

“AI has great potential to make a job in those ecosystems less drudge and more fulfilling,” says Bryan Gildenberg, managing director of Retail Cities, an industry research and consulting firm. “It will make retail a more retention-centric labor model and less of a high-turnover model.”

One area of focus is employee training. With the support of AI chatbots, new sales associates and support agents can get up to speed much faster, boosting satisfaction and efficiency. For younger, digital-native workers, this AI-powered assistance meets their tech expectations and can even aid in recruitment.

“The conversation has shifted from AI replacing agents to AI supporting agents,” says Lee. “It’s all about productivity now, and it’s a healthy shift."

Happier employees, happier customers 

Freshworks customer data from the recent holiday season demonstrates the direct impact of AI-enabled employees on customer satisfaction. 

Data shows that these gains, and the corresponding boost in customer satisfaction, can in large measure be attributed to chatbots. According to the Freshworks report, 61% of customer support representatives and IT professionals in retail companies say AI chatbots are positively transforming their daily work, with 57% finding these chatbots instrumental to their workload. With results like these, it’s no surprise that 40% of retail customer service teams plan to increase AI spending in 2025. 

Takeaways for leaders

Removing resistance to AI and realizing its benefits comes through a thoughtful implementation of the right tools plus the right processes:

1). Find the right AI for the right job

Many customer support workers express weariness with AI because mediocre chatbots deployed in recent years have often caused more problems than they’ve solved with customer experience.

More sophisticated AI tools and copilots, however, can help support agents get more done, and deliver super CX.  Soon, next-generation AI agents that can autonomously handle and resolve high-volume queries will free up support teams even more to focus on high-touch customer issues.

2). Double down on upskilling and training 

To maximize outcomes, retail leaders need to invest in upskilling and training to get workers comfortable collaborating with AI, not just automating.  Bridge knowledge gaps with training sessions, and eliminate skepticism with education about the benefits of AI.

3). Set clear policies

Retailers need to establish and prioritize clear AI usage policies that specify how and when employees engage with AI tools. AI is great at handling rules-based, natural language interactions, which are primarily routine queries. It can also assist customer support workers in summarizing a customer’s inquiry, streamlining communication and reducing confusion. If the focus is to enhance productivity, leaders should emphasize use of AI to expand the number of customer interactions.