AI Realities in Retail (6/17/25)

Ellie Thornton

Hello and welcome back to Milestones: Behind the Freight Curtain! I’m Ellie Thornton coming to you from London’s West End and as always I’m joined by the one and only Professor Steve DeNunzio from Ohio State. Steve how’s Ohio treating you today?

Steve DeNunzio

Hey Ellie! Well, it’s, uh, classic Ohio—cloudy, a bit muggy, but, you know, I can’t complain. I’ve got my coffee, and I’m ready to talk retail. So, let’s get into it. AI in inventory management—this is, like, the big story right now, right?

Ellie Thornton

Absolutely. I mean, it’s wild how quickly things have shifted. You look at Target, Walmart, Home Depot—these giants are using AI to keep shelves stocked and avoid those dreaded “out of stock” signs. Target’s Inventory Ledger, for example, is making billions of predictions every week about what needs to be in stores and online. That’s not just a little tweak, is it?

Steve DeNunzio

No, it’s a total overhaul. I mean inventory accuracy at the brick and mortar retail store has historically been below 70%! Shoppers pick stuff up and then leave it where it doesn’t belong. Paper shrink occurs, meaning the product was never really in the store at all. Or Jimmy Sticky Fingers walks away with the product in his pocket. Now AI is flagging shortages before anyone even notices. It’s, uh, kind of surreal.

Ellie Thornton

It’s not just about having more data, is it? It’s about being able to act on it in real time. Like, Home Depot’s Sidekick app actually guides workers to restock shelves and even helps them find products that are hiding up on those top shelves. That’s a game-changer for employees, not just customers.

Steve DeNunzio

Yeah, and it’s getting so granular. Like, Target’s using AI to figure out which colors and sizes of, say, seasonal jumpers are gonna sell in which stores. Walmart’s making sure pool toys are in Florida and sweaters are in Minnesota. It’s not just “do we have enough stock,” it’s “do we have the right stuff in the right place at the right time.”

Ellie Thornton

And for shoppers, that means less frustration, right? You’re less likely to walk in and find your size missing, or the thing you want only available online. But I do wonder—does it make things easier for store staff, or does it just add more pressure to keep up with the tech?

Steve DeNunzio

That’s a good question. I think, for a lot of folks, it’s a relief. You’re not running around with a clipboard, trying to count boxes. But, yeah, there’s a learning curve. Some people love the tech, some are, uh, a bit skeptical. But overall, it’s making the job less about firefighting and more about, you know, actually serving customers.

Ellie Thornton

It’s funny, isn’t it? We talk about AI like it’s this big, scary thing, but in a lot of ways, it’s just making the basics—like having the right products on the shelf—a bit less stressful for everyone.

Steve DeNunzio

Yeah, and, I mean, it’s not perfect. But compared to the old days? I’ll take a predictive algorithm over a 2 a.m. phone call any day. Unless, you know, it’s Beyonce.

Ellie Thornton

So Professor as much as we love a good AI success story (and Beyonce), there’s a bit of a reality check happening, isn’t there? I’ve been reading about this whole “AI fatigue” thing—retailers starting projects, then just… giving up on them. The numbers are kind of shocking.

Steve DeNunzio

Yeah, it’s, uh, it’s real. I saw that the share of companies scrapping most of their AI projects jumped from, what, 17% to 42% in just a year? That’s a lot of abandoned pilots. And, you know, the average company’s ditching almost half their AI proofs of concept. It’s like, everyone’s excited at first, but then reality sets in.

Ellie Thornton

And it’s not just the tech, is it? I mean, in the UK, I’ve seen retailers hit a wall because their data’s a mess. You can’t just throw AI at a problem if you haven’t sorted out your data hygiene. Plus, there’s this tendency to chase the latest shiny thing—“Oh, everyone’s doing AI, we should too!”—without a real plan.

Steve DeNunzio

Totally. I mean, is the tech failing retailers, or are retailers failing the tech? I kind of think it’s more the latter. The tech’s there, but if you don’t have clear ownership, or you’re not thinking about how to scale, it just fizzles out. It’s like, you can’t just plug in an AI tool and expect magic.

Ellie Thornton

But some people would say the tech is overhyped, right? Like, it promises the world, but then you try to use it and it’s… not quite there. Or it’s just not as easy as the sales pitch made it sound.

Steve DeNunzio

Yeah, I mean, there’s definitely a hype cycle. We’re probably coming down from that “peak of inflated expectations” and into the “trough of disillusionment”—if you buy into the Gartner thing. But, you know, that’s normal for any new tech. The real challenge is, can you get past the fatigue and actually make it work for your business?

Ellie Thornton

And it’s not just the execs, is it? Employees are feeling it too. There was a study showing that people who use AI a lot at work are actually more burned out than those who don’t. Maybe because they’re constantly adapting to new tools, or maybe because the tools aren’t as helpful as they should be.

Steve DeNunzio

Yeah, and, you know, if you’re rolling out AI without a clear goal, or you’re not measuring the right things, it’s just another distraction. I think the companies that are succeeding are the ones who start small, focus on a real problem, and actually own the process. Otherwise, it’s just another failed experiment.

Ellie Thornton

I suppose the lesson is: don’t just do AI for the sake of it. Get your basics right, clean up your data, and make sure you know what you’re trying to solve. Otherwise, you’re just adding to the fatigue.

Steve DeNunzio

Exactly. And, you know, sometimes the best thing you can do is slow down, pick one thing, and do it well. The rest will follow—eventually.

Ellie Thornton

Alright, let’s talk about the fun stuff—the future of shopping. Because while the big retailers are wrestling with AI at scale, there are these startups, like Phia and NewGen, that are totally reimagining how we shop. Have you seen what Phia’s doing Steve?

Steve DeNunzio

Yeah, it’s, uh, pretty wild. So, Phia’s this browser extension—founded by Phoebe Gates (not actress Phoebe Cates) and Sophia Kianni, right?—and it basically scans, like, 40,000 websites while you shop, looking for better deals, including secondhand options. It’s like having a personal shopping assistant that’s, you know, actually good at math.

Ellie Thornton

And it’s not just about saving money. They’re really leaning into sustainability—helping people buy secondhand, which, apparently, can cut an item’s carbon footprint by 80%. That’s huge, especially for Gen Z shoppers who care about the planet and their wallets.

Steve DeNunzio

Yeah, and NewGen’s coming at it from the backend—building these AI-native storefronts that make shopping more conversational, more personalized. Instead of clicking through endless filters, you just, like, ask for what you want and the AI does the rest. It’s, uh, a whole new way of thinking about e-commerce.

Ellie Thornton

But is all this personalization and sustainability really being driven by what younger shoppers want, or is it just clever marketing? I mean, the data says Gen Z expects personalization—nearly 90% think AI will improve their shopping experience, and most are willing to pay more for sustainable products. But sometimes I wonder if brands are just telling us what we want to hear.

Steve DeNunzio

That’s a fair point. I think it’s a bit of both. Gen Z is definitely pushing for more relevance, more speed, more eco-friendly options. But, you know, brands are also smart—they see where the demand is and they’re adapting. The difference now is, with AI, they can actually deliver on those promises, at least some of the time.

Ellie Thornton

And for shoppers, it means less time hunting for deals, more time actually enjoying what you buy. I love the idea of a digital closet that tells me what I already own, what goes with what, and even finds me a secondhand version if I want to save money or be a bit greener. It’s like shopping, but smarter.

Steve DeNunzio

Yeah, and, you know, the old way of shopping—wandering the mall, hoping to stumble on something good—that’s kind of fading. Now it’s all about algorithms, recommendations, and, uh, meeting you where you are, whether that’s on your phone or in your browser. The mall is dead long live the algorithm, right?

Ellie Thornton

Exactly. And I think we’re just at the beginning. As these tools get better, and as more retailers figure out how to actually use AI well, shopping’s only going to get more personal, more sustainable, and, hopefully a lot less stressful.

Steve DeNunzio

Couldn’t agree more. Well Ellie I think that’s a good place to wrap for today. We’ve covered a lot—from the nuts and bolts of inventory to the future of digital closets. I’m sure we’ll have plenty more to talk about next week. I need to finish my coffee.

Ellie Thornton

Definitely. Thanks for joining us, everyone. Steve, always a pleasure. See you next episode? Or over at Starbucks?

Steve DeNunzio

You bet, Ellie. Take care, everyone. Bye for now!