A leading Australian online furniture retailer that jumped on the "game-changing" potential of artificial intelligence says it is paying off with increased sales and reduced costs.

Temple & Webster said on Wednesday it was using ChatGPT to power all pre-sale product inquiry live chats, using AI to write enhanced descriptions of the more 200,000 products on its site, and had upped its investment in an Israeli visual AI startup for lifestyle brands.

"We have been excited about the potential game-changing technology of AI for many years now," CEO Mark Coulter said in the announcement, noting Temple & Webster first invested in Israel's Renovai in 2020.

"As the leading pure-play online retailer, we have the resources and capabilities to ensure we are at the forefront of this revolution."

Temple & Webster has assembled a dedicated internal team of software engineers, data scientists and product managers to implement AI technology across all customer interactions and internal processes.

Using ChatGPT for its pre-sale live chats has increased customer satisfaction with that channel and boosted the number of customers adding products to their carts and the rate at which inquiries are converted into sales.

The company's testing also indicated using AI to write product descriptions - something impossible to do efficiently with a human team - had increased its conversion rate, its "add to carts" rate and its revenue per visit.

As an online-only business without physical stores or in-person sales staff, AI has the potential to significantly lower Temple & Webster's cost of doing business, Mr Coulter said.

"We believe this will further drive our competitive advantages and allow us to win market share," he said.

Temple & Webster said it was investing another $2m into Renovai via a convertible note.

The company makes tools to let customers visualise their purchases, and Temple & Webster said using it had also increased sales.

Temple & Webster further announced on Wednesday it would use some of the roughly $100m on its balance sheet to begin a share buy-back of up to $30m.

It said sales in the past four weeks were up 10 per cent compared to the same time last year.

"We recognised early that in this inflationary environment, customers would be looking for choice and value and we have successfully adjusted our range, promotional activity, pricing, and on-site merchandising to reflect these changing customer needs," Mr Coulter said.

At 11.37am AEST, Temple & Webster shares were up 15.9 per cent to $4.38.