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The global artificial intelligence in retail market size was valued at USD 5.50 billion in 2022 and is projected to grow from USD 7.14 billion in 2023 to USD 55.53 billion by 2030, exhibiting a CAGR of 34.1% during the forecast period.
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.
Rapidly Changing Customer Purchasing Patterns Surged AI Adoption in Retail amid COVID-19
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, demand for various products and services, and in-shop operations. For instance, as per the Tata Communication report, in March 2020, spending in the U.S. dropped by 7.5%. As a result of this, retailers focused on adopting AI technology to augment their online sales and enhance customer experiences.
The implementation of AI is helping retailers realign their supply chains, recognize dynamic demand, understand new market trends, and boost their efficiency. For instance, to manage order management and purchasing operations, Zara’s parent company Inditex, shifted to automation during the pandemic. Similarly, the demand for Machine Learning (ML) grew rapidly during the pandemic owing to its robust multivariate forecasting models. Thus, retailers are likely to invest more in AI technology to understand the changing customer preferences.
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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 October 2022, Google Search rolled out new tools to boost visual and voice shopping. 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. Furthermore, AI-powered searching capabilities help retailers gain valuable insights into consumer trends and make excellent business decisions. In the coming years, AI-driven search engines are expected to offer a rich data pool along with potential growth opportunities to retailers.
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.
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.
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 is dominating the market. 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 significant growth 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.
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 Artificial Intelligence in the retail market share. 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 rapid 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.
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 expected to maintain its dominance 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. The online segment is expected to record rapid growth owing to a strong rise in online shopping. Retailers are improving their online customer-serving capabilities by implementing AI technology. For instance, ViSenze offers a wide range of intelligent e-commerce solutions, such as cross-device experience, smart recommendations, discovery, and inspiring SEO marketing.
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 2022. 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 rapid growth 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.
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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.
North America Artificial Intelligence in Retail Market Size, 2022 (USD Billion)
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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 dominates the global revenue share. 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.
Asia Pacific is likely to showcase rapid growth 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.
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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.
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.
April 2022 – Unilever joined hands with Perch, a retail marketing platform provider, to launch Perch's digital engagement platform. This in-store platform, with the help of computer vision, automatically senses product behavior on the shelf.
March 2022 – The Kroger Co., a grocer network enterprise, and NVIDIA collaborated to enhance their customers’ shopping experience with the help of AI-enabled applications. With this partnership, the companies built an AI lab expanding Kroger’s freshness initiatives and creating a better shopping experience in stores through digital twin simulations.
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.
CAGR of 34.1% from 2023 to 2030
Value (USD billion)
Offering; Function; Type; Application; Technology; and Geography
The market is projected to reach USD 55.53 billion by 2030.
In 2022, the market size stood at USD 5.50 billion.
The market is projected to record a CAGR of 34.1% during the forecast period of 2023-2030.
Predictive analytics is likely to lead 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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