44 Percent of Small Retailers Are Using Generative AI for Holiday Ads to Compete With Corporations

Retailers launch more holiday deals and lean on AI amid a projected rise in returns, according to Capterra’s Holiday Retail Preparations Report.

Retailers are kicking off the holiday season earlier and with more competition than ever before. Capterra’s Holiday Retail Preparations Report indicates that a significant 70% of small to midsize (SMB) retailers intend to offer more holiday deals this year compared to just 45% last year—and almost half of them will occur before Halloween, a stark contrast from Black Friday’s pre-pandemic heyday.

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“Embracing AI as a tool for growth is the natural next step to level the playing field against big box retailers.”

Despite steep competition, 75% of retail SMBs expect more holiday profits than last year. However, 57% also expect more returns, which could be detrimental to any potential gains made during the season. To help mitigate return rates, retailers will offer more final-sale items (41%), shorten the window for returns (26%), and charge more for shipping (24%). They’re also exploring AI strategies to promote products and lower the likelihood of returns.

“Facing the challenges of cash-strapped shoppers this holiday season, small retailers are innovating with urgency to avoid lost sales and a surplus of returns,” says Molly Burke, senior retail analyst at Capterra. “Embracing AI as a tool for growth is the natural next step to level the playing field against big box retailers.”

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Generative AI is a valuable asset in cutting down returns because it can guide online customers to products that are better suited for their immediate needs. SMB retailers plan to use generative AI tools, such as ChatGPT, in their holiday strategy for creating marketing content (44%), personalized customer experiences (43%), and improving data analytics (39%). This could include anything from generating a holiday sale strategy to analyzing shopper behavior online to improve user experience.

Burke suggests, “Other use cases for small businesses include using AI-writing tools to produce richer product descriptions to avoid any unwanted surprises at unboxing to full-blown marketing plans complete with omni-channel ad copy.”

Small retailers aren’t just turning to AI tools for the convenience they offer—they’re also looking to gain a foothold in next-generation web search as generative AI transforms how shoppers browse products online. In fact, 73% are concerned that small businesses will be drowned out by large corporations as online product searches migrate from search engines to AI chatbots and search tools.

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