How AI is transforming the retail store experience

Olaf Akkerman, General Manager, Retail and Consumer Goods Industry, Microsoft UK, reflects on the impact AI is having on the retail sector, following a recent trip to the National Retail Federation 2025 (NRF25) event in New York.

The health of the retail store has been a subject of concern for many years as commerce appeared to move online and our high streets struggled as a result.

But in recent times, the physical store has made a huge comeback – this time with a difference.

Historically, when we shop online, retailers are deluged with useful data: when we arrived; what we clicked on; who we are (if we’ve shopped there before); our purchase history and so on.

The traditional retail store, by contrast, is often flying blind: it doesn’t know when we arrived, what we’re looking for or what we’re buying – not until the very end at the check-out when we might scan a loyalty card and make the purchase.

At that point, grocery retailers might give us money-off vouchers, for example, but before then many opportunities to personalise and enrich the shopping experience have been missed.

Talking to many retailers at NRF25 in New York, I encountered a lot of enthusiasm around using AI to make the in-store experience better for both customers and employees, heralding a new connected-customer experience that combines the best of digital and physical.

From transactional to relational

AI is helping retailers incorporate some of the benefits of online shopping into their stores. And it’s starting to make a real impact.

Conversational AI is enabling store colleagues to talk to digital assistants using natural language. This is empowering store colleagues to have useful information at their fingertips – about product availability, specification, location – and offer more informed advice to customers.

The AI-powered digital assistant can understand customer conversations and prompt the store colleagues to ask pertinent questions, with information being supplied on a digital screen at a point-of-sale desk, on a hand-held tablet, through a headset, or via all three.

As an example, if the product isn’t in stock, the AI assistant can tell the store colleague when it will be in stock again and suggest that it be shipped to the customer. After all, no retailer wants a customer to leave the store disappointed or without having made a purchase. 

Better job satisfaction

While the traditional in-store experience to date has typically emphasised the transactional – you go in, you search for what you want, you buy and leave – AI is enabling richer customer relationships.

And this is giving store colleagues the chance to offer a better service to customers and enjoy a more rewarding job. Interacting with the public and creating great connections will not only make the business more efficient, but also improve staff retention.

AI means store colleagues can enjoy more variety in their roles. Someone who usually works in the televisions section, for example, can move to the coffee-makers section if needed and still be able to answer customer queries knowledgably, thanks to the AI assistant on-hand to help.

As an added benefit, this also cuts down on training needs for retailers and makes store colleagues more flexible.  

Incentives vs rewards

Another exciting development supported by AI is the shift from rewards for loyalty to a more pro-active personalised incentive model.

Imagine creating more scanning opportunities in store. From the moment you scan your loyalty card on entry the store knows who you are and your preferences. This depth of knowledge, supported by new digital connection points installed around the store, and shared by roving connected store colleagues, opens up a wealth of opportunities for incentive-driven activities and promotions.

It is my belief that a digitally supported in-store incentive model will not only drive sales growth and customer loyalty, but also stimulate new and exciting opportunities for retail media. 

Empowering partnerships

My final take-away from NRF25 and my conversations with many retail customers was the need for a collaborative business – as well as technology – partnership as the foundation for success in this new era of AI.

Retailers across the world are passionate and committed to serving our communities with the best they have to offer. It’s a unique industry which my team and I are privileged to support. 

And so I conclude that AI is undoubtedly a transformational force for good, enabling us to empower stores and people across retail to achieve more.