Artificial intelligence can play useful roles in retail, if it does not interact with customers, according to a study co-authored by a researcher in the Bennett S. LeBow College of Business.

Businesses benefit when AI-powered “nudge bots” encourage customers to finish online purchases. But while the bots can boost sales, the process may alienate customers who perceive a violation of their privacy, the researchers learned from interviews with senior managers.

In-store AI applications can alarm customers. And shoppers don’t know what happens to saved data, which can conflict with a retailer’s promise of privacy.

“The initial purpose for collecting data may be very different from the second, third or last purpose, particularly if AI measures millions of patterns,” Schneider says. “All they need to do is switch a button and say, ‘Now, use the detected emotion to see if people are more likely to steal.’”

Customer-facing AI applications introduce potential bias that could steer companies toward discriminatory acts. For example, Walmart was accused of racial discrimination for locking up Black beauty products, a practice it has since ended.

Conversely, the researchers found less downside to using AI to help customer service representatives aid consumers, to optimize supply chain processes or to analyze data caches.

The study, co-authored by Abhijit Guha of the University of South Carolina; Dhruv Grewal of Babson College; Praveen Kopalle of Dartmouth University; Michael Haenlein of ESCP Business School; Hyunseok Jung and Dinesh Hegde of the University of Arkansas; Rida Moustafa of Walmart and consultant Gary Hawkins, appeared in the Journal of Retailing in 2021.

“The questions are not about whether AI should be adopted by retailers, but about how, and about who should oversee the ill effects of AI.”

—Matthew Schneider

Despite potential pitfalls, the team concluded that AI will help judicious retailers.

Since retailers want usable data without privacy or bias issues, Schneider says, “The questions are not about whether AI should be adopted by retailers, but about how AI should be adopted, and who should oversee the ill effects of AI,” he says.