The artificial intelligence in retail market was valued at US$ 5,195.94 million in 2022 and is expected to grow at a CAGR of 30.6% during the forecast period of 2022 to 2028 to reach US$ 25,830.55 million by 2028.
Market Insights – Artificial Intelligence in Retail Market
The proliferation of enhanced technological awareness and varied product choices among consumers has resulted in a noteworthy shift in the global retail industry landscape. Artificial intelligence has empowered retail businesses with high-level data and information to improve retail operations and explore new business opportunities. AI tools in the retail forecast industry shift and proactively change an organization's marketing, merchandising, and business strategies. Artificial intelligence in retail includes functions such as inventory management, adaptive homepage, interactive chat, visual curation, conversational support, and customer engagement. The growth of the artificial intelligence in retail market is fueled by factors such as increasing number of internet users and smart devices, rising need for surveillance and monitoring at physical stores, and increasing digitization in the retail industry.
The huge growth in the e-commerce industry during the pandemic has significantly contributed to the growth of the artificial intelligence in retail market. The pandemic accelerated digital adoption and digital service delivery around the world. In the scenarios of lockdown where physical stores were temporarily shut down, business providers and customers rapidly moved toward e-commerce platforms. AI was widely used as a strategy in the retail sector in COVID-19-related initiatives to impact positively on business operations and to go digital. AI plays an important role in helping retailers automate repetitive tasks and improving online stores' functioning. For instance, in July 2022, according to PwC, 76% of business leaders implemented artificial intelligence into company operations. IBM surveyed 1,900 retail and consumer product companies between July and September of 2018 across 23 countries, out of which 85% of retail firms were planning to implement intelligent automation in the supply chain by 2021. Retailers believe that implementing AI can lead to a 10% annual growth. IBM Watson, Google Inc., ViSenze, Salesforce, and Microsoft Corp are the five key companies contributing to the growth of artificial intelligence in retail market.
Customer experience and management are projected to gain maximum attraction, followed by sales & marketing and supply chain & inventory management in the application segment in the artificial intelligence in retail market. Retailers are increasingly focusing on the enhancement of complete customer experience from purchase through to the after-sales service to drive loyalty as well as repeat customers, thereby contributing to the growth of customer experience and management segment in the artificial intelligence in retail market.
The global artificial intelligence in retail market is segmented into five major regions—North America, Europe, Asia Pacific (APAC), Middle East & Africa (MEA), and South America (SAM). North America is estimated to dominate the artificial intelligence in retail market as the region is the early adopter of technology. The retail industry in North America is undergoing a massive transformation under the influence of the internet and accessibility to various devices such as tablets, laptops, and smartphones. The North America artificial intelligence in retail market is majorly driven by the increasing penetration of big data analytics and other technologies. Also, as the region is the origin of major retailers, including Wal-Mart, Costco, Kroger, The Home Depot, and Target, penetration of artificial intelligence in North America is the highest. Moreover, North America has a vast presence of major artificial intelligence in retail market players who have been increasingly focusing on developing innovative solutions, contributing to the growth of the artificial intelligence in retail market growth in North America.
Asia Pacific is expected to be the fastest-growing region in the global artificial intelligence in retail market owing to the increasing investment in advanced technologies such as AI. Asia Pacific is witnessing a hiring boom in the retail industry for AI roles. Moreover, according to Shopify, China leads in e-commerce sales, accounting for 52.1% of all retail e-commerce sales worldwide in 2021. It also has the highest number of digital buyers worldwide, representing 38.5% of the global total. Rising penetration of smartphones, strengthening internet infrastructure, and immense government support are some of the other factors that are expected to bolster the growth of artificial intelligence in retail in the Asia Pacific during the forecast period.
Lucrative Regions for Artificial Intelligence in Retail Market
Technology-Based Market Insights
Based on technology, the global artificial intelligence in retail market is segmented into chatbots, recommendation engines, and audiovisual analytics. Chatbots are the new emerging trend in the retail industry, where not only online retailers but brick-and-mortar retailers are also anticipated to invest extensively. This technology enables retailers to expand their growth opportunities by interacting with their customers. At present, this technology is majorly implemented by e-commerce retailers. The rising adoption of chatbots is majorly attributed to the several benefits offered by the technology, which include lower cost, consistent customer service, and prompt responses. Chatbots currently being used by retailers include Slackbot and Kik. Slackbot is among the most well-known chatbots used by companies like Taco Bell. KiK is the chatbot used by H&M.
To meet consumers' expectations, leading service providers in the artificial intelligence in retail market are expanding their investments in new services. Mergers and acquisitions and partnerships with service providers are being considered by service providers as ways to diversify their offerings and grow their presence in other areas.
- In April 2021, IBM announced the launch of new Watson capabilities to help businesses build trustworthy AI. The newly launched capabilities include data privacy management module, planning analytics, federated learning, and time series capabilities.
- In February 2021, Microsoft Corporation announced the availability of Microsoft cloud for retailers to bring together stores, products, and marketing systems. Microsoft Cloud for retail businesses connects experiences across the shopper journey to deliver more relevant personalized experiences and operational excellence.
- IBM Watson
- Google Inc.
- Focal Systems
- Sentient Technologies Holdings Limited
- Microsoft Corporation
- Tata Consultancy Services