AI-driven subscription models reshape retail landscape, new study finds

Retailers are rapidly adopting artificial intelligence and subscription-based models to enhance customer loyalty and drive growth, according to a new study from the School of Management.

“Subscriptions are no longer just about free shipping or occasional discounts — they’re a powerful tool for creating a continuous relationship with consumers,” says the study’s author, Dinesh Gauri, Melvin H. Baker Professor of Marketing and faculty director of the Center for Marketing Analysis in the School of Management.

Gauri surveyed nearly 1,800 shoppers last fall as research for his study, “Subscribing to the Hype: AI in RetailDownload pdf(17.6 MB).”

The study reveals, among other things, that hybrid shoppers — those who divide their purchases between online and in-store channels — are the most active users of subscription services, with Amazon Prime leading the market at 66% penetration. Walmart+ follows at 26%, while wholesale club memberships maintain a solid foothold at 56%.

The report highlights how AI-powered tools are revolutionizing subscription services through such features as personalized shopping lists, smart carts, virtual try-ons and tailored promotions. 

Busy parents, particularly those with young children, emerged as significant adopters of AI tools, with 55% using AI to create shopping lists compared to just 8% of non-parents.

“Retailers that leverage AI tools to deliver seamless cross-channel experiences and hyper-personalized value will be the ones to succeed in an increasingly competitive market,” Gauri says.

Walmart+ was found to resonate more strongly with in-store shoppers, while Amazon Prime excels with hybrid shoppers seeking both in-store and digital benefits. The report recommends that Walmart+ refine its online grocery offerings and that Amazon Prime continue enhancing cross-channel conveniences.

The study also found that retailers must address “subscription fatigue” by continually demonstrating value.

As generative AI technologies continue to evolve, their integration into subscription services promises to redefine customer engagement and loyalty.