Journal of African Development

The rapid proliferation of artificial intelligence (AI) has birthed a new era of digital commerce characterized by hyper-personalization. This research investigates the profound impact AI-driven personalization has on the customer engagement and loyalty of Generation Z and Millennial consumers. As traditional e-commerce models face barriers of high customer acquisition costs and low retention rates, retailers are increasingly turning to AI recommendation systems, dynamic content, and predictive analytics for competitive advantage.

Through a quantitative approach utilizing Partial Least Squares Structural Equation Modeling (PLS-SEM) on a sample of retail shoppers, this study explores the psychological drivers of trust, including perceived personalization, AI accuracy, and the “Personalization-Privacy Paradox”.

The findings reveal that while AI-driven personalization significantly democratizes product discovery and increases market participation, it also catalyses privacy concerns and algorithmic fatigue. Furthermore, the study examines the effectiveness of recent 2025–2026 data protection frameworks in mitigating these concerns. The results suggest that customer loyalty now hinges more on transparent data usage and AI trustworthiness than on mere transactional convenience, marking a pivotal shift in how young consumers vet e-commerce platforms in a post-truth digital economy