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OpenAI, a research laboratory based in Los Angeles dedicated to Artificial Intelligence technology,  is the parent company of groundbreaking AI technologies such as DALL·E 2 which creates original art and images based on a text description, and Whisper which is a speech-to-text AI solution that can very accurately transcribe speech across languages.

ChatGPT is OpenAI’s latest release that has turned heads. ChatGPT is a chatbot technology that has the ability to generate human-like text, which could bring value to businesses that want to add a layer of sophistication to their digital communications. The solution offers human-like responses to a variety of questions, admits when it makes a mistake, and can even help write or correct code.

ChatGPT has been creating a lot of buzz since OpenAI released the free version, and the company has also shared that they will be monetizing the tool by offering it as a cloud-based API (Application Programming Interface) that businesses and developers can integrate into their own applications and services. But what does this mean for retailers and businesses? Will such sophisticated chatbots bring added value to businesses in the short term or will the technology need more time to learn and be applied in a way that serves consumers and businesses without the fear of impacting brand image?

What are we talking about? Testing ChatGPT

The funny thing about ChatGPT is that the Association could ask it to write this exclusive for us, as many analysts and commentators did as a test this year. Unfortunately, the results from various tests and approaches were not quite as detailed as we hoped. We started out by first feeding it text from past IADS exclusives so the AI could capture the tone we typically use. From there we requested that the bot offer an introduction text sharing why department store leaders need to pay attention to ChatGPT and AI solutions. The result was an eloquently written paragraph of fluff listing the key highlights of ChatGPT for retailers: improved customer engagement and targeted product recommendations. Not a very insightful start, but remember we are talking to a machine, so we decided to dig deeper.

We then guided ChatGPT to list 5 specific areas that retailers have used AI in the past. The response was a little more detailed than before: personalization, pricing, demand forecasting, inventory management, and in-store navigation. And we followed up that question with what retail leaders should consider when planning to use AI in their future business. The response once again highlighted the benefits of AI from a customer engagement and product recommendation point of view, but the reply also came with warnings. These warnings included reminders that AI solutions are only a piece of the puzzle and AI models can have biases, stereotypes, and errors if not properly evaluated and monitored. Therefore, it is very important that companies use AI as a tool but not as a replacement for human interactions.

Where ChatGPT failed in our trials was in sharing specific examples and references. When it shared information, we requested sources of where the information comes from so we could read further, but the bot does not have access to search the internet (it finished its training in early 2022, which also provides some limitations taking current events into consideration).

Work smarter, not harder: AI as a personal assistant

AI (Artificial intelligence) is not a new concept to retailers as the whole purpose of automation is to increase efficiency and reduce costs. With such golden promises, smart retail leaders started to implement AI across their businesses with a variety of use cases from running inventory operations more efficiently to accommodating clientele in a more personalized approach. Department stores are especially versed in AI’s capabilities as retailers around the world have hired the power of AI to enhance their store experiences and capabilities in order to better serve their customers.

Pre-ChatGPT, department stores have harnessed AI solutions that offer inventory management, personalization, chatbots, visual search, marketing campaigns, product localization, analytics, virtual stylist services, and logistics. So what is it that ChatGPT can really bring to retailers that they already have not experimented with?

In its current iteration, retailers are hoping that ChatGPT can bring more intelligence to current chatbot functions that have already been put in place. ChatGPT has the ability to react in a more human-like way which can boost customer service capabilities and can free human employees from repetitive admin tasks. Outside of customer service, ChatGPT can help create product descriptions, website copy, employee notice emails, and company HR notifications.

It seems that embedding the AI capabilities of ChatGPT is where the trend is turning. Around the same time that ChatGPT was released, many other companies started to release similar AI functions within their existing tools and products. For example, Notion, is releasing a beta version of Notion AI which will help users with content creation. And Canva has also released Magic Write which offers an AI text generator. Such integrations can be an inspiration as to how department stores and retailers can use AI text generators to enhance product descriptions, marketing materials, and personalization campaigns to ensure all content is optimized.

When it comes to customer service, ChatGPT can be used to personalize the shopping experience for each individual customer by recommending products based on past purchases and browsing history. It can also be used to share important information with customers such as the status of their order, delivery details, and personalized promotions and offers. If used well, AI chatbots can increase conversions and reduce cart abandonment, and the more that the chatbot collects data over time, the more benefits it can bring.

Will chatbots impact retail jobs? The jury is still out

As mentioned, AI tools such as ChatGPT are able to harness large amounts of data and can be taught to mimic human responses and feedback. Such a tool could be very powerful for businesses, giving them the opportunity to optimize their human teams with AI tools. Giving employees tools that can automate their daily jobs and that can increase their productivity should in turn reduce the number of full-time employees, right?

According to the World Economic Forum's "The Future of Jobs Report 2020," there is a potential for 85 million jobs to be displaced by 2025 thanks to AI. But the same report shares that another 97 million jobs could be created as well. This means that while AI might replace some jobs and roles, it is more likely that it will shift the skills of workers that are impacted by such changes. The CEO of OpenAI warned that there is still a lot of progress to be made on the robustness and truthfulness of what ChatGPT can offer, so companies should not base mission-critical projects on it at this time.

All good things come with time: ChatGPT is still in its youth

Based on tests conducted by the IADS team on separate occasions and with differing goals in mind, we can conclude that in its state as of early 2023, ChatGPT still has a lot of ‘learning’ to do in order to offer more specific and relevant information. But what the tool promises is even greater than what it currently lacks, therefore innovative and patient users have been able to learn how to manipulate the tool enough to reap the benefits. Most use cases shared thus far have centred around content creation, SEO implementation, code generation, and personal assistant-type manual work coverage.  While ChatGPT can help bring human-like responses to customer service functions, consumers are still expecting real human empathy behind responses and not bot-generated speech. This is going to be a major hurdle for retailers to overcome in the short-term.

Currently, there are still a lot of red flags about ChatGPT that might make retailers weary to adopt the solution as it is now. Unlike other chatbots that will admit when it cannot answer a question, ChatGPT has been trained to give a confident response to almost any request even if the information is false. AI tools are limited to the information that it is fed and can result in outdated information or even biases that could negatively impact the brand image of a business. This is why those that are ready to use AI tools for customer-facing applications need to be sure to have a human audit.

Despite its many flaws and warning signs, AI tools are the future, and those that shy away from implementing them will be left in the dust. Innovative companies must respond to disruptive products in order to stay relevant. In the beginning, there will be tradeoffs such as accuracy, but in return, companies can benefit from lower costs, speed, and simplicity that the tool can bring to their businesses. Also, the good thing about investing in AI early is that the more information that it is fed over time, the more accurate and valuable it becomes. While ChatGPT lacks critical thinking, creativity, and strategic decision-making, it makes up for these flaws by improving efficiency and productivity through its automation features.

What’s next for retailers? Learning from big tech’s response to ChatGPT

ChatGPT is one of those innovative technologies that will inherently change the tech landscape. Companies such as Google and Microsoft have had to completely rethink their AI strategies to ensure that they will not be left in the dust as newer AI native solutions pop-up to steal some of the market share. As big tech players have been the first to act, it will be important for retailers to note what changes are on the horizon.

For example, big tech players are having to consider how AI solutions such as ChatGPT can plug into their current line of products and operations. They will need to make swift decisions and take risks to implement the technology as a basis for new products or as an integration for existing ones and to claim their position in the market. According to LionTree LLC, an investment and merchant bank that focuses on the global digital economy, so far big tech has taken four major approaches when implementing their AI strategy. Microsoft has partnered with OpenAI to integrate key production into their products, Google has invested in R&D to be able to leverage AI solutions, Apple has focused on localization in order to offer AI software for Apple hardware products rather than on the cloud, and Amazon is betting on the infrastructure play as they sell GPU compute power on AWS and have invested in assets within autonomous vehicles and IoT devices.

As large organizations start integrating ChatGPT into their business foundation and establishing their position in the market, retailers need to be doing the same. ChatGPT and AI can be very powerful tools that can help large retail businesses, especially department stores, provide even more unique services to their various clientele from loyal clients to newly converted GenZ customers. AI solutions only get ‘smarter’ as more information is fed to them, therefore the sooner it is implemented, the better the output.

But despite the various promises that ChatGPT and AI can bring, companies that are willing to integrate such revolutionary and innovative technology into their business need to be careful that bots do not completely take over the human experience. While advanced technology can help free human workers from redundant tasks, it is very important to consistently audit them to be sure the built-in bias and unknowns do not negatively impact the overall brand image. To sum it up: proceed, but proceed with caution.

Going further on ChatGPT:

Companies tap Chat GPT to make their chatbots smarter

How retailers can use Chat GPT

Credits: IADS (Mary Jane Shea)