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Artificial Intelligence (AI) in Retail Market Size, Share & Industry Analysis, By Offerings (Solutions and Services), By Function (Operation-Focused, and Customer-Facing), By Type (Online and Offline), By Application (Predictive Analytics, In-Store Visual Monitoring & Surveillance, Customer Relationship Management, Market Forecasting, Inventory Management, and Others), By Technology (Computer Vision, Machine Learning, Natural Language Processing, and Others), and Regional Forecast, 2024-2032

Last Updated: July 01, 2024 | Format: PDF | Report ID: FBI101968

 

Artificial Intelligence in Retail Market Analysis - 2028

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The global artificial intelligence (AI) in retail market size was valued at USD 7.14 billion in 2023 and is projected to grow from USD 9.36 billion in 2024 to USD 85.07 billion by 2032, exhibiting a CAGR of 31.8% during the forecast period. Increasing use of AI-powered voice and visual search solutions to improve customers’ shopping experience will boost the use of AI in the retail sector.


Retail businesses need to prioritize productivity to remain competitive in the market. Artificial Intelligence (AI) supports retailers in automating their operations, thus increasing profits and optimizing business processes. The report covers solutions, such as automated inventory management, demand forecasting, customer assistance, predictive analytics, and more to enhance retail operations.


The digital transformation in the retail industry is driving the adoption of artificial intelligence in the retail sector. Retailers and brands across the world are rapidly implementing AI technology for optimizing automation in retail stores. AI in retail technology is helping retailers introduce automation in both online and offline services and customer-facing solutions. Moreover, companies are rapidly incorporating the cloud in these advanced technologies to provide better customer experiences. For instance, in February 2023, Google, along with Accenture, launched new tools to help retailers innovate their businesses and benefit from cloud technology. With this partnership, Accenture ai.RETAIL Platform was integrated with Google Cloud to build on joint customer successes.


The COVID-19 pandemic severely impacted the retail industry across the globe. The imposition of lockdowns during this period significantly changed customers’ purchasing patterns & behavior. Therefore, the implementation of AI helped retailers realign their supply chains, recognize dynamic demand, understand new market trends, and boost their efficiency.


Artificial Intelligence (AI) in Retail Market Trends


AI-driven Visual and Voice Search to Propel Market Opportunities


E-commerce platforms and virtual shops are growing rapidly. Today, consumers can use new techniques, such as product images, videos, and voice to search for new products. Artificial Intelligence (AI) in visual search optimizes its functionalities by processing inquiries and mining the metadata. The visual search engine utilizes AI features to analyze, track, and predict growing shopping trends, thereby enhancing shoppers’ experience and engagement.


For instance, in January 2024, Google Cloud launched various new-gen AI-powered technologies to allow retailers to modernize operations, personalize online shopping, and transform in-store technology rollouts. To help customers find and buy products more quickly, Google Cloud's search technology for retailers has been improved with the ability to use large language models. The increasing use of such digital tools can make Artificial Intelligence in retail experience more seamless and spontaneous. Thus, it has become essential for retailers to implement AI-based search engines to enhance customer service and boost revenue growth. In addition, retailers gain valuable insights into consumer trends and make better business decisions through AI powered searches. A rich data base and potential growth opportunities for retailers are expected to be provided by AI driven search engines over the coming years.


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Artificial Intelligence (AI) in Retail Market Growth Factors


Rising Use of AI-powered Chatbots for Improved Customer Experience to Drive Market Growth


AI-powered chatbot assistance is gaining vast popularity across the retail industry owing to its highly efficient customer service. A chatbot offers dedicated and personalized responses to customers to boost their experience. For instance, in May 2023, smart appliances brand upliance.ai integrated ChatGPT into its products. DelishUp, a smart cooking assistant, simplified cooking by automating the process. Moreover, the company plans to launch products in the home appliances category, thus setting a strong footprint in Artificial Intelligence in the retail industry.


The AI chatbots are equipped with Natural Language Processing (NLP) and Machine Learning (ML) technologies. These technologies offer real-time insights regarding customer preferences. Also, they help the chatbot understand customers’ sentiments and behavior patterns, which assist it in responding to customer queries and building relations. For instance, Levi’s has implemented a chatbot platform, Levi’s Virtual Stylist, to provide recommendations to its customers. The bot asks users for basic details, such as size, fit, material, and even preferred brands to offer quick suggestions. Thus, the AI-driven chatbot is expected to drive artificial intelligence in retail market growth.


RESTRAINING FACTORS


Lack of Infrastructure and Higher Implementation Costs to Limit Adoption of AI in the Retail Sector


Well-established retail brands continuously invest in innovative technologies to enhance customer engagement; however, different factors are likely to limit the market growth. Large enterprises and global-level retailers, such as Walmart have already implemented AI technology for in-shop operations and to manage online portals. However, today, new start-ups and small & medium-sized enterprises face challenges in adopting the technology due to a lack of infrastructure and technical expertise. As per IBM's cloud-data service insights, 37% of respondents stated that lack of AI expertise was an obstacle in implementing such technology. The high implementation cost associated with AI in retail solutions is also a major barrier for small retailers, which is limiting its implementation. These factors are expected to hamper Artificial Intelligence in retail market expansion.


Artificial Intelligence (AI) in Retail Market Segmentation Analysis


By Offering Analysis


Increasing Automation in Retail Industry to Fuel AI-based Solution Adoption


Based on offering, Artificial Intelligence in the retail market is segmented into solutions and services. The solutions segment dominated the market in 2023. Some of the popular AI solutions include smart stores, e-commerce, intelligent customer insights, smart delivery, intelligent supply chain, and more. The growing challenges in managing various retail operations are likely to drive the development of new & innovative automation solutions in the retail industry. AI-based retail solutions help retailers manage logistics, supply chain operations, and warehouse management, and improve customer experience. This is expected to fuel the implementation of AI in the retail sector.


The services segment is likely to showcase highest growth rate during the forecast period. Retailers need additional support from vendors in specific services, such as installation, management, maintenance, and more. Thus, the rapid implementation of AI solutions is driving the demand for services.


By Function Analysis


Growing Demand for Efficient Operations to Boost Usage of Operations-focused Functions


Based on function, the market is bifurcated into operations-focused and customer-facing. The operation-focused segment captured the maximum market share in 2023. Some of the popular operation-focused solutions include Intel Movidius VPUs, Taskdesk Virtual Agents, RetailNext Store Layout, and ViSenze merchandising planning. Retailers are implementing AI to boost the efficiency of their operations, such as merchandising, logistics, supply chain, on-time delivery, and more. Proper management of backend functions helps retailers focus on revenue expansion and new growth strategies.


The customer-facing segment is likely to showcase the highest growth during the forecast period owing to the increasing demand for a solution to improve customer experience. To reduce customer complaints and enhance brand loyalty, retailers are adopting AI-driven solutions. In addition, due to its highly efficient customer service, AI-based chatbot assistance is becoming more and more popular in the consumer sector. To increase consumer satisfaction, these chatbots provide personalized and dedicated customer responses.


By Type Analysis


Efficient Management of In-Store Operations to Boost Product Adoption in Offline Stores


Based on type, the market is bifurcated into online and offline. The offline segment captured the maximum revenue share and is also expected to record the highest CAGR during the forecast period. The demand for AI technology is growing due to its capabilities, such as managing in-store operations, enhancing merchandising & assortment, and automating personalized product recommendations, among others, to enhance customer shopping experiences.


In addition, the implementation of AI technologies that can help retailers improve their business growth is also improving online customer service capabilities. For instance, ViSenze offers a wide range of intelligent e-commerce solutions, such as cross-device experience, smart recommendations, discovery, and inspiring SEO marketing.


By Application Analysis


Rapidly Changing Customer Behavior to Drive Use of AI in Retail Technology in Predictive Analytics


Based on applications, the market is categorized into predictive analytics, in-store visual monitoring and surveillance, Customer Relationship Management (CRM), market forecasting, inventory management, and others. The predictive analytics segment dominated the market in 2023. Some of its key solutions are demographic segmentation, store operations, shelf management, inventory management, labor optimization, and more. Retailers are implementing AI-based predictive analytics to understand future market opportunities and customer behavior. The AI is also used to gain real-time analysis of different locations, countries, cultures, gender, age, and other demographics.


The customer relationship management segment is likely to record the highest growth during the forecast period, owing to increasing demand for better customer engagement. AI-driven virtual assistance, chatbots, search engines, and more help retailers maintain strong customer relationships and loyalty. The demand for AI in market forecasting is also gaining traction owing to the uncertain and rapid changes in customer buying behavior. Similarly, the use of AI in in-store visual monitoring and surveillance is likely to showcase steady growth. The continuous surveillance offers high security and captures customer insights, shelf replenishment alerts, control fraud & shrinkage, face recognition, and more.


By Technology Analysis


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Highly Accurate Customer Insights to Boost Adoption of Machine Learning


Based on technology, the market is divided into computer vision, machine learning, natural language processing, and others.


Machine learning holds the largest share and is expected to continue its dominance in the market during the forecast period. Retailers are keen on understanding their customers’ behavior, emotions, personality type, and more to provide customized services. Machine Learning (ML) offers quick deep insights from the collected information and is useful in providing personalized experiences to customers. To boost inventory productivity, it helps retailers optimize their supply chain plans and demand forecasts. For instance, Amazon SageMaker is a fully managed service that deploys machine learning models for any application, right from predictive analytics to customer experience. Similarly, the implementation of computer vision is expanding significantly in the retail industry. AI-based computer vision is being adopted to gain insights from facial recognition and video searches.


REGIONAL INSIGHTS


Geographically, the market is fragmented into five major regions, such as North America, Europe, Asia Pacific, the Middle East & Africa, and South America. They are further categorized into countries.


North America Artificial Intelligence (AI) in Retail Market Size, 2023 (USD Billion)

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North America dominates the global revenue share in 2023. The retailers in this region are focusing on extracting data based on customers’ preferences to boost customer service efficiency. The U.S. is an early adopter of AI technology and is witnessing technology investment in AI. The country is also witnessing notable growth in the network of new startups and small enterprises due to the rising demand for this technology. This factor is expected to boost Artificial Intelligence (AI) in retail market growth.


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Asia Pacific is expected to showcase the highest growth rate during the forecast period owing to large-scale digitalization. The region’s retail industry is going through a rapid transition phase. This is driving the demand for advanced AI technologies to improve operations and customer experience. For instance, as per SAP SE’s analysis, 2020, China has secured a 23.4% share of AI investments for its commerce & retail industry. Moreover, investments in this technology are expected to reach USD 18.8 billion by 2027. India is anticipated to register the highest CAGR due to the high demand for automation tools to improve decision-making capabilities and operations.


Europe will likely capture the second largest market share. The current large-scale retailers across the region in cosmetics, fashion, and apparels sectors are actively investing in advanced technologies to boost customer experience. This is expected to surge the demand for artificial intelligence in the retail industry.


The Middle East & Africa region will showcase prominent growth opportunities for the market in the coming years due to the increasing shift toward implementing innovative solutions to boost customer engagement. Similarly, Latin America is set to witness steady growth owing to the rise in investment in AI in the retail industry.


List of Key Companies in Artificial Intelligence (AI) in Retail Market


New and Innovative Product Launches to Boost Market Positions of Key Players


The key players in the market are continuously investing in innovative solutions. These solutions help retailers quickly adapt to new services in companies. The growing data volume in the retail industry is further driving the implementation of AI. Thus, the market players are launching tailored and customer-targeting solutions. By leveraging advanced technologies, companies are strengthening their product portfolios to stay ahead in the market competition. Further, the key players are implementing partnership, merger, and acquisition strategies to expand their market share.



  • January 2024 Salesforce launched AI-powered tools and new data to transform all shopping experiences. Retailers and marketing companies can use generative tools with a real-time understanding of customer preferences and behavior to optimize every interaction with customers by integrating AI into the marketing cloud and commerce cloud.

  • January 2024 – Lenovo launched its AI-powered and end-to-end retail solutions designed for retailers and consumers in every category to help reduce loss, grow business opportunities, and enhance customer experience.


List of the Key Companies Profiled:



KEY INDUSTRY DEVELOPMENTS:



  • April 2023 – Siam Makro Public Company Limited, a leading retailer, collaborated with Oracle to accelerate its digital transformation. The company implemented Oracle Cloud Infrastructure to drive efficiency in Makro Retail management.

  • January 2023 Microsoft collaborated with AiFi, a tech start-up, to launch Smart Store Analytics. It is a cloud-tracking service for smart and cashier-less outlets that aids retailers with shopper and operational analytics.

  • January 2023 EY, a Fintech company, launched the EY Retail Intelligence solution built on Microsoft Cloud to provide clients with a time-saving and secure shopping experience. This solution uses Microsoft Cloud for Retail and its technologies including Artificial Intelligence (AI), analytics, and image recognition to provide valuable insights.

  • January 2023 Perfect partnered with Valmont, a luxury cosmetics brand, for its latest AI-focused beauty partnership. The collaboration brings Valmont’s background in skincare with Perfect’s artificial intelligence solution to offer consumers a detailed skin analysis.

  • November 2022 Fractal launched Asper.ai, an AI product for manufacturing, consumer goods, and retail sectors. The solution brings an end-to-end AI product, unifying inventory optimization, demand planning, strategic pricing, and positioning.


REPORT COVERAGE


An Infographic Representation of Artificial Intelligence (AI) in Retail Market

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The artificial intelligence in retail market report highlights leading regions across the world to offer a better understanding of the market. Furthermore, the report provides insights into the latest industry trends and analyzes technologies deployed at the global level. It further highlights some of the growth-stimulating factors and restraints, helping the reader gain in-depth knowledge about the market.


REPORT SCOPE & SEGMENTATION










































ATTRIBUTE



DETAILS



Study Period



2019-2032



Base Year



2023



Estimated Year



2024



Forecast Period



2024-2032



Historical Period



2019-2022



Growth Rate 



CAGR of 31.8% from 2024 to 2032



Unit



Value (USD billion)



Segmentation



By Offering



  • Solution

  • Services


By Function



  • Operations-Focused

  • Customer-Facing


By Type



  • Online

  • Offline


By Application



  • Predictive Analytics

  • In-Store Visual Monitoring and Surveillance

  • Customer Relationship Management (CRM)

  • Market Forecasting

  • Inventory Management

  • Others (Payment and Pricing Analytics, Real-Time Product Targeting, etc.)


By Technology



  • Computer Vision

  • Machine Learning

  • Natural Language Processing

  • Others (Speech Recognition, Deep Learning, and Robotics


By Region



  • North America (By Offering, By Function, By Type, By Application, By Technology, and By Country)


    • U.S. (By Technology)

    • Canada (By Technology)


  • Europe (By Offering, By Function, By Type, By Application, By Technology, and By Country)


    • U.K. (By Technology)

    • Germany (By Technology)

    • France (By Technology)

    • Scandinavia (By Technology)

    • Rest of Europe


  • Asia Pacific (By Offering, By Function, By Type, By Application, By Technology, and By Country)


    • China (By Technology)

    • Japan (By Technology)

    • India (By Technology)

    • Southeast Asia (By Technology)

    • Rest of Asia Pacific


  • Middle East & Africa (By Offering, By Function, By Type, By Application, By Technology, and By Country)


    • GCC (By Technology)

    • South Africa (By Technology)

    • Rest of the Middle East & Africa


  • Latin America (By Offering, By Function, By Type, By Application, By Technology, and By Country)


    • Brazil (By Technology)

    • Mexico (By Technology)

    • Rest of Latin America







Frequently Asked Questions

According to Fortune Business Insights, the market is projected to reach USD 85.07 billion by 2032.

The market is projected to record a CAGR of 31.8% during the forecast period of 2024-2032.

In 2023, Predictive analytics led the market.

The rising usage of automation to enhance customer experience is likely to drive market growth.

Amazon.com, Inc., Google LLC, IBM Corporation, Intel Corporation, Microsoft Corporation, Nvidia Corporation, Oracle Corporation, and SAP SE are the top players in the market.

North America is expected to hold the largest market share.

Asia Pacific is expected to record a remarkable CAGR.

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