4 Surprising Truths About AI in Australian and New Zealand Retail

It’s impossible to ignore the constant buzz around Artificial Intelligence. But while everyone is talking about AI, the reality of its impact on the ground is often misunderstood. The conversation has moved far beyond futuristic concepts and into present-day reality. This is not a change that’s coming; it’s a transformation that’s already here, with over 91% of retailers in Australia and New Zealand already investing in generative AI. This article cuts through the noise to reveal the most surprising ways AI is already reshaping the retail landscape, from how multinational chains manage their supply chains to how a local boutique predicts the next best-seller.

Younger Shoppers Are Ditching Google for AI

The first stop for shopping advice is no longer a search bar—it's an AI chat window. A surprising generational shift is underway, with Gen Z and Millennials now turning to AI platforms as their primary source for shopping advice, preferring them over traditional channels like search engines and social media.

This isn't a fringe behaviour; it's a rapidly solidifying trend. The data reveals a profound change in consumer habits:

* One in three Gen Z and one in four Millennials now rely on AI for their shopping decisions.

* In Australia and New Zealand, a staggering 46% of Gen Z and Millennials use AI platforms daily.

* Perhaps most tellingly, 23% of Gen Z and 27% of Millennials now trust AI recommendations more than human ones.

This represents a seismic shift in the consumer journey, where trust is being outsourced from human influencers to silicon guides. For a generation that grew up with social media, this pivot suggests the era of the Instagram influencer as a primary discovery tool may be waning, replaced by a preference for the impartial efficiency of an algorithm.

“Gen Z and Millennials now trust AI more than search, social or influencers to guide what they buy. The shift is clear: brands that show up inside AI-driven platforms will be the ones earning relevance and loyalty in this new era.” – Al Williams, general manager of B2C at Commerce

It's a Small Business Revolution, Not Just a Big-Box Game

It’s easy to assume that AI is a tool reserved for retail giants like Coles, Woolworths, or Bunnings, with their massive budgets and data science teams. The reality, however, is that small and medium-sized retailers are not just participating in the AI revolution—they are at the forefront of it.

Evidence shows that smaller players are adopting AI at a remarkable pace to solve real-world operational challenges:

* 70% of small retailers are already using AI in their operations.

* An even larger 83% of small retailers either currently use or plan to adopt AI.

This isn't just about efficiency; it's about democratizing the market. For the first time, local boutiques can leverage predictive power previously reserved for retail giants, enabling them to compete on intelligence, not just scale. AI offers a practical solution to the historic dilemma of overstocking versus running out of stock, with tangible results like reducing inventory-holding costs by up to 25% and cutting stockouts by up to 30%, freeing up vital capital.

“Retailers have historically had to choose between overstocking and running out of stock.” – Tony Bugge, senior VP APAC, Algo

The 4,700% Traffic Boom Has a Surprising Twist

Traffic to retail websites from generative AI sources has surged by an incredible 4,700% year-over-year. But this explosion in visitors comes with a fascinating paradox. While these shoppers are far more engaged—with visits that are on average 32% longer and include 10% more pages viewed—their initial conversion rates are lower than traffic from other channels.

This isn't a sign of failure. Instead, it signals the emergence of a new kind of shopping behaviour. Consumers are leveraging AI as a powerful research assistant for larger, more complex purchases, with 83% of users saying they are more likely to use it for these high-consideration buys. This presents a massive opportunity for retailers in categories like electronics, furniture, and automotive to optimize their content for AI discovery.

Crucially, the conversion gap is closing at a rapid pace. The gap between AI-driven traffic and other channels shrank dramatically in just six months, falling from 49% to just 23%. This indicates that as consumers become more comfortable with these AI-led research journeys, they are increasingly completing their purchases. With 85% of these shoppers reporting that AI improved their experience, it's clear this is a channel maturing from research tool to transactional powerhouse.

We'd Rather Talk to a Bot About Our Debts

Perhaps the most stunning revelation lies not in sales or logistics, but in one of the most fraught customer interactions imaginable: debt collection. While the initial business case was efficiency, the reason for its success is rooted in human psychology.

Conversational AI is proving to be exceptionally effective in these difficult conversations because it removes the element of human judgment and embarrassment. People are often more comfortable, and more honest, when discussing financial difficulties with a bot rather than a person.

“Automated AI conversations work exceptionally well with debt collection because consumers are more likely to agree to a promise of payment with a bot than a human, because of the embarrassment factor. It doesn’t feel as confronting to talk about debt with a bot as it does with a human, where you might have a few more guilt angles thrown at you.” – Chris Connolly, director, solutions engineering, Apac, at Twilio

This surprising success reveals a deeper truth about the future of customer service. For certain sensitive or difficult interactions, AI can create a less judgmental and more comfortable space, leading to better outcomes for both the business and the customer.

The Human Connection in an AI-Powered World

The AI transformation in retail is not a distant forecast; it's a present-day reality full of surprises. AI is rapidly becoming the new search engine for younger generations, it is empowering small businesses to compete on a level playing field, it has created a new, highly engaged channel for complex research, and it is even handling our most awkward financial conversations with unexpected grace.

This shift doesn't make human interaction obsolete; it redefines its purpose. As AI handles more of the friction and data-heavy lifting in retail, what becomes the new, most valuable role for the human touch?