In September, Ralph Lauren introduced “Ask Ralph,” a conversational, AI-powered styling helper within its U.S. app. Trained on decades of Ralph Lauren archives and lookbooks, it can suggest outfit options and answer fashion questions for consumers.
This is just one high-profile example of how retailers are experimenting with AI-powered customer engagement. Across brands, emerging tech tools are reshaping everything from inventory management to in-store experiences. In fact, nearly half of retailers now use AI several times per week, according to Amperity’s 2025 State of AI in Retail survey. And a 2025 article in Chain Store Age called AI “retail’s unsung hero in 2025.”
Fraud Detection and Risk Reduction
Behind the scenes, AI is a powerful tool for retailers to detect fraud. Retailers use it to detect unusual patterns in payment data, reduce fraud and minimize returns abuse. These protections not only save money but also build trust with consumers who are increasingly concerned about security in digital transactions.
According to the National Retail Federation, retailers are investing more heavily in AI cybersecurity than ever before. Because attackers are now deploying sophisticated AI-driven scams like cloning voices, modern fraud detection needs AI-based response and prevention tools to combat them.
Personalization at Scale
AI’s real power lies in personalization. Instead of being bombarded by generic product recommendations, machine learning systems can sift through massive datasets (like purchase history, browsing behavior, loyalty program engagement) and recommend products that almost feel handpicked. This basically gives every customer a “personal shopper.”
Amazon, which has been at the forefront of AI for decades, was among the first to use AI for product recommendations. It is now using new AI tools creatively in both video and music, helping users browse new podcast episodes by the topics mentioned within episodes (not just in the title) and on Prime Video to give viewers personalized picks based on their interests.
According to Bain, retailers who use AI-powered personalization have found a 10% to 25% increase in return on ad spend for targeted campaigns. “When retailers get this right, they make shoppers feel seen, valued, and engaged, which builds loyalty and sets a new bar for customer experience,” the report notes.
Shopping Directly in Generative AI Tools
A new wave of partnerships between retailers and generative AI innovators, including those between OpenAI’s ChatGPT and retailers like Etsy, Shopify, and Walmart, is reimagining the shopping experience by letting customers shop directly in these stores from within ChatGPT.
This innovative approach allows consumers to discover, research and purchase products with features like “Instant Checkout” directly within the conversational interface of a chatbot.
Smarter Inventory and Supply Chain Management
One of the most powerful but invisible uses of AI for retailers is inventory optimization. By analyzing sales patterns, seasonal shifts and even local events or weather, AI can forecast demand with greater accuracy.
This helps retailers reduce stockouts, avoid costly overstocks and optimize warehouse distribution. For example, a clothing brand can anticipate a surge in raincoat sales ahead of a predicted storm system and ensure the right products are in the right regions before demand spikes, keeping supplies at the needed level and costs reasonable.
Target and Walmart are just two of many retailers using AI to prevent stockouts. Mattress Firm announced this year that it is investing in it for similar purposes, and Starbucks announced in September that it is deploying an AI tool intended to count inventory in stores eight times faster.
Visual Search and Product Discovery
AI-powered image recognition is also transforming how shoppers find products. Customers can upload a photo of a dress they saw on Instagram or Pinterest, and the system will surface similar items from a retailer’s catalog.
Amazon just launched their visual search tool, Lens Live, and Wayfair and ThredUp are also experimenting with visual search. Rezolve Ai’s stock surged last month after the company launched its own new visual search tool.
Enhancing the In-Store Experience
AI’s benefits aren’t confined to e-commerce. In physical stores, AI can power smart fitting rooms that suggest items based on what a customer tries on or sensors that monitor foot traffic and optimize store layouts. This could improve sales significantly: a 2024 survey found that 36% of adults leave apparel stores empty-handed due to negative fitting room experiences.
Old Navy recently announced its new AI fitting rooms, in which a customer can run a price check, request a different size and even shop for similar styles without leaving the stall. India’s Dharpan.ai designed a smart mirror that helps brands deliver instant, immersive try-on experiences: customers can try any color, size or style available in the store with their consent just by standing in front of the mirror.
The virtual dressing room market is projected to be worth $32.29 billion by 2033.
Looking Ahead
85% of retail executives say they have already developed AI capabilities and solutions in a recent Honeywell/Wakefield Research survey, with 60% actively expanding them.
The future of retail will be shaped not only by customer-facing tools, like AI fitting rooms or hyper-personalized product selections, but also algorithms: protecting consumers’ cybersecurity, optimizing supply chains, tailoring product assortments and powering seamless in-store and online experiences. The brands that thrive won’t be those with the flashiest chatbot but those that harness AI as a system-wide engine for smarter, safer and more personal retail.
Image via Unsplash.