THE ROLE OF TRUST AND DATA PRIVACY PERCEPTIONS IN MEDIATING THE RELATIONSHIP BETWEEN AI-DRIVEN PERSONALIZATION AND CUSTOMER LOYALTY IN SAUDI ARABIA'S RETAIL SECTOR

Artificial intelligence (AI) is rapidly being implemented in the retail industry, and it has changed the nature of
interaction between companies and customers in terms of personalization of their experiences. Although
personalization is improved by AI and the customer communication increases along with the customer
satisfaction, the issues of data privacy and trust become the important factors of customer behavior. This paper
focuses on the mediation of trust and data privacy perceptions between personalization, AI-based and customer
loyalty in the retail industry of Saudi Arabia. By taking the quantitative research design, data were gathered by
conducting a structured survey with retail consumers, and using statistical modeling methods to verify the
proposed relations. The results show that the effect of AI-based personalization on customer loyalty is quite high
and positive, but the connection is mediated to some extent by customer trust and data privacy perception. In
particular, the stronger perceived trust, the stronger the effects of loyalty, and the more serious privacy
requirements have, the less effective personalization strategies are. A balance between technological innovation
and ethical use of data is critical in improving customer relations as identified in the study. These findings can
be incorporated into the expanding knowledge about AI in the retail setting as they offer empirical evidence in a
developing market setting. The paper also provides some practical implications to the retail managers who may
want to adopt AI-based personalization strategies but keep the consumers trust and privacy issues.