Digital transformation is a major trend. It involves digital solutions that are reshaping how businesses operate. This change has been a key highlight in recent years. Much like every other industry, the retail industry isn’t exempt from this wave.

In the last three years, AI-driven technologies have particularly transformed customer experience, personalization, and supply chain management.

So, it doesn’t come as a surprise that global research firm Gartner recently predicted that 91% of retail IT leaders are prioritizing AI as the top technology to implement by 2026.

But how exactly is AI reshaping digital experiences in the retail world and how can you leverage this technology to scale your business? Read on to find out more.

The Need for AI in Retail

The COVID-19 pandemic forced many industries to embrace digital transformation, causing leaders even in the retail industry to find new ways to improve retail operations. For example, Walmart faced major challenges during the pandemic, including supply chain disruptions, unpredictable consumer demand, and labor shortages.

To address these issues, the retail giant accelerated its AI-driven digital transformation in several ways, using AI for things like inventory management, automated fulfillment centers, checkout systems, and customer service. The result was record-shattering online sales growth and enhanced inventory management.

The truth is that customer needs have evolved with customers wanting things faster than ever before. Furthermore, the traditional models for supply chain management are ill-equipped to meet those needs. And that’s why the use of AI and automation in retail is fast becoming a center-point of conversations in the industry.

As Jahan Ali, founder and CEO of mobileLIVE, noted in an interview, “retailers are increasingly turning to AI to remain competitive in an environment defined by digital-native consumer behavior, omnichannel expectations, and shrinking margins. With AI, businesses can analyze vast volumes of structured and unstructured data to forecast trends, optimize supply chains, and deliver tailored experiences at scale.”

How AI is Driving Change

While AI is driving change across the retail world in many ways, here are some of it’s most popular use cases in the industry:

1. Personalized Shopping with AI Recommender Systems

Companies use machine learning (ML) to analyze customer data. This includes browsing behavior, purchase histories, and demographics. With this information, they can predict what products will interest their customers.

Many retail businesses implement intelligent ML algorithms to offer product recommendations that are highly personalized. A relatable example is Amazon which has a strong recommender system that can predict what you would most likely buy.

Personalized recommendations increase conversion rates and enhance customer satisfaction, making them a must-have for retailers.

2. Inventory and Supply Chain Management Using Predictive Models

It’s important to manage and optimize inventory and supply chain, because it helps businesses to identify the demand from the customers and meet them without overstocking or understocking.

Ali explained that “retailers face persistent challenges including data fragmentation, inventory volatility, inefficient fulfillment, and disconnected customer experiences.” He added, however, that “AI is tackling this head-on by enabling retailers to unify data across systems, gain predictive insights, and orchestrate end-to-end operations. Additionally, at mobileLIVE, we are creating and deploying AI agents for retailers to automate back-office operations including finance, accounting, supply chain and logistics to exponentially reduce operating costs.” Ali added that the future of retail organizations is a hybrid workforce where humans and AI agents will collaborate to deliver outcomes much more efficiently.

AI predictive models help to forecast demand and retailers can leverage this information to optimize their stock levels, ensuring there’s no shortage of inventory or more than is necessary.

“From improving personalization to optimizing logistics, AI brings clarity to complexity,” Ali said.

3. AI-Powered Virtual Assistants and Chatbots

Customer service has been transformed by AI-driven chatbots that provide instant, human-like responses to inquiries. Today’s AI-powered virtual assistants use Large Language Models (LLMs). Unlike earlier rule-based chatbots, they understand context and intent. They also consider past interactions. This leads to more accurate and engaging conversations.

What’s more? With today’s strong wave of Agentic AI, customers can now interact with AI agents, and get very relevant and human-like responses that are not too different from what you would get when interacting with a real human. And the best part? These AI-powered virtual assistants work 24/7, available to customers every time, helping human resource personnel to focus on more complex tasks.

According to Ali, AI agents are now becoming central to how AI is reshaping the retail industry. “On the customer-facing front,” he said “AI agents power intelligent product discovery, virtual shopping assistants, and conversational commerce, offering seamless support and recommendations across digital touchpoints.”

4. In-Store Innovations with Computer Vision

“What I ordered vs. what I got” is a popular phrase in digital retail that describes the difference between what a customer expected to receive (based on what was advertised) and the actual product or service they got. This is common in categories like home decor and fashion.

Now, AI-powered computer vision lets customers try products virtually. They can see how things look without ordering. These virtual try-ons look very realistic.

This improves customer shopping experience, enhances customer trust and helps reduce uncertainty, thereby allowing customers to order these products and services, risk-free.

A good example is Sephora’s Virtual Artist feature which allows customers to virtually try on makeup products using their smartphone or in-store tablets before making a purchase. Similarly, Amazon Go stores use AI-powered cameras and sensors to enable a frictionless checkout experience, allowing customers to walk out without stopping at a cashier.

5. Enhanced Transaction Security

AI models can help to analyze transactions in real-time to detect anomalies or unusual patterns that can be signs of a potential fraud. These anomaly detection models are very beneficial to both retailer and customer. Fraud in digital retail could range from identity theft to payment fraud, as well as coupon and discount fraud.

Without intelligent AI systems, these would have been a nightmare, especially to retailers. That’s another way AI is helping to drive digital transformation, ensuring a safe and secure digital retail system.

Getting Started

With the evolving landscape of LLM and agentic AI, retail is expected to undergo further transformation at an even more unprecedented rate. Advancements in LLMs, generative AI, and autonomous AI agents will shape the next wave of digital transformation and offer retailers new ways to streamline operations and connect with customers even better.

Ali shares “At mobileLIVE, we believe the future of AI in retail is one of seamless, predictive, and immersive engagement— where technology anticipates needs, adapts in real-time, and blurs the boundaries between physical and digital.”

“We’ll see AI embedded across every customer interaction and operational layer— from AR-enabled shopping and voice commerce to predictive supply networks and sustainable sourcing decisions. Trust, transparency, and ethical AI will also gain importance as personalization grows more sophisticated,” he noted.