Artificial Intelligence (AI) in Retail Market

Artificial Intelligence (AI) in Retail Market Outlook (2023 to 2033)

The global artificial intelligence (AI) in retail market is predicted to advance at a stupendous CAGR of 30.3% and reach a valuation of US$ 85 billion by 2033, up from US$ 6 billion in 2023.

The concept of digital transformation has permeated nearly every industry. However, if there is one industry that has undergone substantial transformation due to the continual expansion of technology, it is the retail sector.

Artificial intelligence in retail allows for faster business decisions based on findings from cognitive technologies while also saving time and money by automating and streamlining routine procedures and operations. Large corporations are seeking ways to strengthen their position and are integrating AI to enhance standards, customer experience, revenue, and processing speed.

The outbreak of COVID-19 had a significant influence on the retail industry globally. The pandemic and lockdown regulations substantially altered purchase patterns, product demand, consumer behavior, and in-store operations.

• According to Tata Communication research, American spending dropped by 7.5% in March 2020.

As a result of this significant drop, retailers began employing artificial intelligence technology to boost their customer experiences and online sales. Artificial intelligence is assisting retailers in realigning supply networks, recognizing demand, understanding new market trends, and more.

• Zara's parent company, Inditex, switched to automation to handle order management and purchasing during the outbreak.

Artificial intelligence and big data analytics are critical to digital business; they have the ability to change everything from operational processes to the customer experience. Due to the increasing penetration of smart devices and applications, the proliferation of IoT, the acceptance of cloud services, and technological breakthroughs, the basic understanding and acceptance of AI and big data analytics in retail have increased.

Moreover, demand for AI-enabled visual and voice search is boosting the market growth. E-commerce websites and virtual shops are fast expanding. Consumers can now look for new products using innovative approaches such as product photos, videos, and voice. Artificial intelligence in visual search improves its functionality by analyzing inquiries and mining metadata. The visual search engine employs artificial intelligence elements to evaluate, follow, and predict rising buying patterns, hence improving shopper engagement and experience.

• According to the Syte Visual Conception Ltd. 2020 research, nearly 80% of shoppers began their shopping experience with a visual search.

As a result, retailers must employ AI-based search engines to improve customer experience and increase revenue growth. Furthermore, AI-powered searching abilities assist retailers in gaining vital insights into customer patterns and making sound business decisions. AI-powered search engines are projected to provide a vast data pool as well as possible growth prospects to retailers in the coming years.

As per Fact.MR, a market research and competitive intelligence provider, such factors are expected to spur the global demand for artificial intelligence to be used in the retail industry over the coming years.

Report Attributes	Details
AI in Retail Market Size in 2023	US$ 6 Billion
Projected Market Value (2033)	US$ 85 Billion
Global Market Growth Rate (2023 to 2033)	30.3% CAGR
North America Market Share (2022)	38.5%
Machine learning Segment Market Share (2022)	30%
Key Companies Profiled	Amazon Web Services Salesforce.Com, Inc Bloomreach, Inc Google LLC Intel Corporation Microsoft Corporation IBM Corporation Oracle Corporation

Why is AI Becoming More Important in the Retail Industry?

“Chatbots Driven by AI Help Improve Customer Experience”

Artificial intelligence-driven chatbot assistance is rapidly gaining acceptance in the retail industry due to its highly effective customer service. To improve the customer experience, the chatbot provides dedicated and personalized responses.

• As per Accenture research, 90% of customers were more interested in purchasing from brands that provided personalized suggestions and services in 2019.

Machine learning and natural language processing (NLP) technologies are used to power the AI chatbots. These technologies provide real-time information on customer preferences and assist the chatbot in understanding the consumers' sentiments and behavioral patterns, which aids in answering customer queries and creating relationships.

Which Factor Poses a Major Challenge to AI in Retail?

“Dearth of Technical Skills and Infrastructure”

Prominent retail brands are constantly investing in innovative technologies to improve customer interaction; nevertheless, certain constraints are likely to impede the adoption of artificial intelligence technology in the retail market.

Major firms and global retailers like Walmart have already adopted artificial intelligence technology for in-store operations and online portal management. However, due to a dearth of technical skills and infrastructure, small and medium-sized organizations encounter difficulties adopting the technology. Moreover, the high installation cost of the intelligent retail solution is also a significant hurdle for small merchants, limiting implementation.

Country-wise Insights

Why is the United States the Dominant Power in North American Market?

“Increasing Investments in AI Technology”

• North America accounted for 38.5% of the AI in retail industry in 2022.

North America is the leading provider of AI solutions and an early adopter of AI technologies. Numerous retailers in this region have implemented AI-based solutions to improve inventory management and supply chain operations. AI is assisting retailers in managing and retaining customers and comprehending consumer purchasing trends. AI technologies are being used by both online and offline retail businesses to engage customers and increase total revenue.

The United States is a dominant market in North America due to increasing investments in AI technology. The country's leading market players are striving to develop AI-enabled digital platforms for a variety of end-user industries.

• According to a report by the National Venture Capital Association in April 2020, 285 AI-based businesses in the United States raised US$ 6.9 billion in the first half of 2020.

How is the United Kingdom Supporting European Market Growth?

“Growing R&D Activities and Heavy Investments”

The European market is developing at a tremendous pace. The region's current big retailers in the fashion, apparel, and cosmetics sectors, among others, are increasingly investing in innovative technologies to improve customer experience.

• The European technology industry saw more than 25% increase in the artificial intelligence area in the first half of 2020 itself.

The United Kingdom is a major market in Europe due to a thriving ecosystem of investors, clients, and experienced professionals. Moreover, growing research and development activities and increasing commercial investments by leading players in the country are driving market expansion. Germany is following the United Kingdom in terms of growth.

Which Aspect is Boosting Market Growth in Japan and South Korea?

“Thriving e-Commerce Industry in These Countries”

The market in Asia Pacific is benefitting from a significant expansion in all areas, including economic growth, internet infrastructure, spending capability, and consumer goods demand. Moreover, strong government initiatives, the booming e-Commerce industry in countries like Japan and South Korea, and increasing investments in AI technology for enhanced efficiency and real-time inventory management are all contributing to the regional market expansion.

Furthermore, factors such as rising internet and communication infrastructure, increased retailer acceptance of AI-based solutions and services, and growing digitization are all aiding regional market growth.

Japan and South Korea are witnessing considerable growth owing to the expanding e-Commerce and retail industries. To strengthen their portfolios, leading organizations in these countries are emphasizing collaborations.

• Fujitsu struck a partnership deal with Zippin, a provider of AI-based checkout-free technology for shops, in December 2020. The company intends to expand collaboration and offer AI-powered checkout-free solutions in Japan.

Category-wise Insights

Why is Machine Learning Gaining Attention in This Space?

“Ability of ML to Improve Supply Chain Systems and Demand Projections”

• Machine learning held 30% share of the global market in 2021.

Machine learning technology learns quickly and thoroughly from data and is well suited to providing personalized experiences to its customers. The technology assists retailers in improving supply chain systems and demand projections to increase inventory efficiency.

• Amazon Inc.'s Amazon SageMaker is a fully organized service that uses machine learning methods for applications ranging from predictive analytics to the consumer experience.

Moreover, natural language processing (NLP) is expected to grow rapidly over the projected period. An increase in data analysis and the move toward AI-driven chatbots will boost developments in NLP. Furthermore, NLP can aid in sentiment analysis to evaluate customer messages, call center interactions, online reviews, and social media posts.

How is AI Improving Customer Relationship Management?

“Better Understanding of Customers through Artificial Intelligence”

Several advancements in customer relationship management (CRM) software, such as voice and face recognition, have occurred.

• Zoho CRMs, Zia and Salesforce Einstein, are AI-powered CRMs that employ voice commands to access information.

Existing customers account for 65% of the company's revenue, and it costs five times more to acquire a new customer than to keep an existing, pleased one. As a result, CRM is critical. The incorporation of AI tools in CRM will allow companies to better comprehend their customers by analyzing more data. AI technology can assist in automating most operations and ultimately giving more pertinent information to sales personnel

Competitive Landscape

Key providers of artificial intelligence for retail are constantly investing in innovative solutions. Furthermore, key players are using partnership, merger, and acquisition tactics to increase market share. Moreover, many start-ups are focusing on new developments to provide novel AI-driven solutions.

• Niflr, an Indian start-up, is creating an automated platform for cashier-less checkout in retail businesses. The start-up's software tracks customers and detects their interactions with shop merchandise using computer vision and AI. For example, when a customer selects an item off a shelf, the platform immediately scans and adds that information to the store bill. Customers save time by not having to line at checkout points, which improves in-store experiences.
• Tiliter, an Australian start-up, is creating AI-powered product recognition software for retail grocery stores. The system integrates with existing POS systems and store cameras to allow accurate recognition of organic product marks. It also allows customers to check whether perishable items such as vegetables, fruits, and sandwiches are still fresh. Tiliter's simple integration and capabilities, such as shopping bag identification and fraud prevention, enable shops to enhance their customers' experiences.
• Microsoft partnered with Infosys in September 2022. Under this partnership, the organizations hoped to enable enterprises to swiftly reinvent customer experiences, boost systems with cloud and data, and modernize processes.

Key Segments of AI in Retail Industry Research

• By Offering :

  • Solutions
  • Services

• By Type :

  • Offline
  • Online

• By Technology :

  • Machine Learning
  • Natural Language Processing
  • Computer Vision
  • Other Technologies

• By Deployment :

  • Cloud
  • On-premise

• By Application :

  • Customer Relationship Management (CRM)
  • Supply Chain and Logistics
  • Inventory Management
  • Product Optimizations
  • In-Store Navigation
  • Payment and Pricing Analytics
  • Virtual Assistants

• By Region :

  • North America
  • Latin America
  • Europe
  • Asia Pacific & China
  • Middle East & Africa