How small retailers can use AI to stay competitive in 2025
Vaishali Ravi
·March 19, 2025
Success in retail is built on understanding your data. You need to know the most cost-efficient channels to reach your customers, the most effective ways to convert them, and how to keep them coming back. It’s also important to identify ways to keep your costs in line without sacrificing speed or quality when it comes to managing your inventory and logistics processes.
Generating these insights was once a time-consuming process that involved lots of trial and error. But with new advances in AI technology, small retail businesses can benefit from access to affordable tools that help them automate processes, generate content, and deliver rich data insights. By using the right mix of AI tools, you’ll stay a step ahead of your competitors and be poised for sustainable growth in 2025.
Here are some tips for using AI to get ahead:
Embrace self-service customer support
By employing conversational AI-based chatbot tools, you can give your customers the ability to find the answers to their questions and solve problems through self-service. Your chatbot can answer your shoppers’ questions about products, shipping and returns policies, and order status, helping you reduce CX support tickets without diminishing the customer experience. You can also use AI-powered delivery time estimates to give your customers access to real-time tracking information, giving them more confidence in the shipping process and cutting down on “where is my order?” questions.
Optimize your inventory management with demand forecasting
As an ecommerce business, it’s important to make sure you’re stocking inventory in line with your customers’ needs—overstock, and you’ll spend extra capital on goods that will languish on warehouse shelves; understock, and you won’t be able to meet buying demand, forcing shoppers to turn elsewhere. By using AI-enhanced predictive analytics tools, you’ll be able to get accurate stocking recommendations based on historical data, and can ask questions about how factors such as temperature changes would impact product demand. Whether selling wholesale or retail, you’ll be armed with the insights that can help you optimize your inventory selection, ensuring you’re delivering on your shoppers’ demands.
Offer personalized product recommendations
Engage and convert your shoppers at higher rates by delivering personalized marketing campaigns that spotlight products they’ll be sure to enjoy, based on their past purchases and browsing history. You can use AI tools to automatically identify relevant product recommendations, based on purchases and reviews from shoppers with similar style profiles. When a shopper is on the verge of making a purchase, you can also spotlight items that complement the original product to encourage upsells: For instance, if a shopper has a pair of wool pants in their cart, you can recommend a collared blouse that other shoppers say pairs well with the item. Personalization also generates repeat business: 56% of shoppers say they’d return to a brand that delivers a personalized shopping experience.
Tap into data insights to drive down labor costs
Are you overspending on warehouse labor due to inefficient scheduling? Do you have customer support team members underperforming expectations on closing support tickets? Using AI data analytics tools, you can drill down into all of your operational spending to understand which teams are achieving the best results and which ones are falling behind, with recommendations for optimizing processes, scheduling, and staffing for improved productivity. You’ll be able to use automated scheduling tools to ensure you have the optimal mix of staff for any operational process, and can use training and assessment tools to help your team members gain knowledge and become more productive.
Detect and prevent fraud
Fraud is a big problem in ecommerce shopping, with losses reaching over $44.3 billion in 2024, and brands are working to strike the right balance between protecting themselves and maintaining a positive customer experience. AI fraud detection and mitigation tools can help, by using machine learning algorithms to identify “high risk” transactions in sales and returns, so that you can automatically block them or conduct a manual review. By stopping fraudsters in their tracks, you’ll be able to protect your profit margins—but won’t disrupt the customer experience for your many legitimate shoppers.
Discover ways to improve the customer experience
By using sentiment analysis tools, you can comb through product reviews as well as external social media channels like Instagram and YouTube to learn what your shoppers are saying about your brand and products. AI tools can turn huge quantities of data into easy-to-read summaries, showcasing key highlights and trends from the content. You’ll be able to see common concerns, such as inaccurate sizing or slow response times, and review AI-provided recommendations for improving your products or business processes to resolve the problems.
Ready to get started? If you’ve built your business on Shopify, you’ve already got an overwhelming head start: Many apps that feature AI technology (Loop included) are available on Shopify’s App Store, enabling seamless integration with your shopfront. Explore the App Store to find the right mix of AI tools that you can use to scale your business.
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