Artificial Intelligence Powering Personalization: Revolutionizing the Retail Customer Experience

Abstract

Purpose: This study explores the impact of artificial intelligence (AI) on personalizing customer experiences in the retail sector. It investigates how AI-driven personalization influences customer satisfaction, perceived value, loyalty, and overall business performance.
Design/methodology/approach: A mixed-methods approach was employed, consisting of a quantitative online survey conducted with 400 retail consumers and qualitative semi-structured interviews with 20 participants. Structural Equation Modeling (SEM) was used to analyze the quantitative data, while thematic analysis was applied to the qualitative data.
Findings: The results reveal that AI-driven personalization significantly enhances customer satisfaction, which positively impacts customer loyalty. Additionally, perceived value mediates the relationship between AI-driven personalization and business performance. Qualitative insights indicate that while consumers appreciate personalized experiences, concerns about data privacy and security persist.
Practical implications: Retailers are encouraged to leverage AI technologies to deliver tailored shopping experiences, while also prioritizing transparency and ethical data practices to build consumer trust.
Originality/value: This study contributes to the literature on AI in retail by providing empirical evidence of its effectiveness in enhancing customer experiences through personalization. It highlights the critical role of customer engagement and ethical considerations in implementing AI-driven personalization strategies.