Artificial Intelligence (AI) in Retail Market Size, Share | 2031

Report Description

Artificial Intelligence (AI) in Retail Market Outlook 2031

The global Artificial Intelligence (AI) in Retail Market size was USD 4.50 Billion in 2022 and is likely to reach USD 58.13 Billion by 2031, expanding at a CAGR of 33.5% during, 2023–2031. The increasing usage of AI in retail to optimize customer behavior and personalization as well as to enhance customer experiences is driving the market.

Artificial Intelligence (AI) in retail has helped to manage the e-commerce industry, as retailers operate their online stores and brick-and-mortar efficiently with AI. AI is expected to transform the online and physical shopping experiences for customers through analytical data of consumer behaviors and demands in the coming years.

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Rising demand for AI benefits retailers in automating their operations by optimizing businesses and increasing profits by reducing operational costs. The applications of AI in the retail industry for superior video surveillance & monitoring at a physical store and enhanced user experience to improve productivity resulted in optimized inventory management and automated intelligent shopping experience.

Factors such as supply chain optimization, return on investment (ROI), mainlining inventory accuracy, and others are fueling the market growth. For instance,

• In June 2021, Amazon rolled out its just walk-out cashless technology at its new Amazon Fresh grocery store at Bellevue, Washington, US to offer customers a fully autonomous checkout option.

COVID-19 Analysis

COVID-19 hampered global Artificial Intelligence (AI) in the retail market. During the pandemic, government restrictions such as social distancing resulted in changing customers purchasing patterns and behaviors. The distribution of the supply chain has affected the retail, logistical, and manufacturing sectors, as the import and export services stopped during that period.

Additionally, brick-and-mortar retailers have been affected by the closures of non-essential venues and stores in several nations. The COVID-19 outbreak has consequently enhanced the significance of online retail channels.

Artificial Intelligence (AI) in Retail Market Dynamics

Drivers

Growing adoption of AI integration in the retail industry resulting in the demand forecasting, which is driving the market. It plays a vital role in the retail sector to understand the customer behavior and requirements. Thus, it helps retailers to manage the supply chain management and optimize the inventory levels to avoid markdowns. Moreover, key companies are implementing AI algorithms to embrace the power of the demand forecasting using AI tools to understand their customer base. For instance,

• In September 2023, SymphonyAI Retail CPG announced that Marks & Spencer selected the company for AI-based store intelligence to transform store operations and customer experience.

Increasing demand for AI-powered checkouts for improved in-store shopping experiences is fueling the market. Many retailers have started to use AI-powered tools such as in-store apps, chatbots, and physical robots to limit the number of in-store customers and staff. For example, the AI-powered tools for checkouts don’t require cashiers, instead the customer has to pay through an AI-powered mobile app with zero human interaction. For instance,

• In March 2022, Kroger Co. and NVIDIA collaborated to enhance their customer shopping experience with the help of AI-enabled applications. It provides a enhanced shopping experience in stores through digital twin solutions.

Restraints

High implementation and maintenance costs associated with AI solutions are hindering the market growth. Major brands are investing in cutting-edge technology to improve customer engagement. However, small and medium-scale industries are unable to implement these solutions, due to a lack of budget capital tends that restrict the market growth.

Lack of infrastructure and technical expertise is a major concern for Artificial Intelligence (AI) in the retail market. According to IBM's cloud data service insights, 37% of respondents identified a shortage of AI expertise as limiting the implementation of this technology.

Opportunities

Growing demand for customer service from automated assistance to cashless stores is creating lucrative opportunities in the market. AI is taking over customer service at online and physical stores. It measures customer satisfaction, using recognition of facial expressions, and customer behavior. AI identifies the situations where the customer needs help and enables assistance preference. Moreover, AI integrates with the checkout processes resulting in a charge of the payment from the linked payment card when customers exit the stores. For instance,

• In January 2023, EY launched the EY retail intelligence solution using Microsoft Cloud. Its technologies include artificial analytics and image recognition to provide valuable customer insights.

Increasing adoption of logistics supply chain optimization is creating opportunities for the market. With the help of deep learning and analysis, the supply chain is optimized to deliver products in specific locations. Additionally, AI also analyzes the information such as where the product sold quickly and where the demand for such products is growing. Furthermore, AI algorithms help in finding cost-effective and optimal shipping routes, boosting the market growth.

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Scope of The Artificial Intelligence (AI) in Retail Market Report

The market report includes an assessment of the market, trends, segments, and regional markets. Overview and dynamics have also been included in the report.

Artificial Intelligence (AI) in Retail Market Segment Insights

Component Segment Analysis

On the basis of component, the global Artificial Intelligence (AI) in the retail market is divided into solutions and services. The solutions segment is expected to dominate the market during the forecast period. Growing challenges in various retail operations are likely to drive the development of innovative solutions in the retail industry. Some of the well-known solutions include e-commerce, intelligent customer insights, smart stores, and others.

AI-based retail solutions help retailers manage supply chain operations and warehouse management that improve customer experience. All these factors are fueling the segment. The service segment is anticipated to witness significant growth during the forecast period. The retailers need specific support from their vendors such as management of the products and installation. Thus, the rapid implementation of AI solutions is boosting segment.

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Technology Segment Analysis

In terms of technology, the global market is segregated into computer vision, machine learning, natural language processing, and others. The machine learning technology is expected to dominate the market in the coming years. It helps retailers to understand customer emotions, behaviors, personalities, and other characteristics to provide customized services for improved customer engagement. Furthermore, it also offers deep insights from the collected data and is beneficial to provide a personalized experience to the customers. For instance,

• In December 2022, Amazon Web Service announced eight new Amazon SageMaker Capabilities, which make it easy for administrators to control access and define permissions for improved machine learning governance.

The computer vision segment is expected to witness significant growth during the forecast period. Retailers use AI-based technology for monitoring and anti-theft purposes, as AI is integrated with the CCTVs within the system. It is adopted to gain insights from video searches and facial recognition that enhances efficiency.

Deployment Mode Segment Analysis

Based on deployment mode, the global market is segregated into online and offline. The offline segment is projected to dominate the market during the forecast period. The need for AI technology is growing, due to its capabilities such as managing in-store operations, automating personalized products, and enhancing merchandising to enhance customer shopping experience.

The online segment is expected to witness significant growth in the coming years. The growing demand for e-commerce and online shopping is driving the segment. Retailers are improving their online customer-serving capabilities by implementing AI technology. These factors expected to boost the segment in the coming years.

Function Type Segment Analysis

In terms of function type, the global artificial intelligence (AI) in retail market is segregated into operations-focused and customer-facing. The operations-focused segment dominated the market in the year 2022, due to the high retail market share as compared to the other segment. Some of the popular operation-focused solutions include Taskdesk Virtual Agents, ReatailNext Store Layout, and others.

Retailers are implementing AI to boost the efficiency of their operations, such as logistics supply chain and on-time delivery. Additionally, proper management of backend functions helps retailers to focus on making growth strategies and increasing profitability.

The customer-facing segment is expected to witness significant growth during the forecast period. The increasing demand for solutions that improve customer engagement helps in a improved understanding of customer needs. Retailers are adopting AI-driven solutions to enhance brand loyalty and reduce customer complaints.

Application Segment Analysis

On the basis of application, the global market is segmented into predictive analytics, in-store visual monitoring & surveillance, customer relationship management, market forecasting, inventory management, and others. The predictive analytics segment is expected to dominate the market. Retailers are implementing AI-based predictive analytics to understand the upcoming market opportunities and customer behavior.

The AI is also used to gain real-time analysis of different locations, countries, and cultural demographics. Some of the key solutions are labor optimization, inventory management, and others. The customer relationship management segment is expected to witness significant growth during the forecast period, due to the increasing demand for enhanced customer engagement.

AI-driven virtual assistance such as chatbots and others help retailers to maintain customer relationship management. Moreover, the use of AI in-store visual monitoring and surveillance is likely to showcase steady growth in the coming years. Furthermore, the surveillance offers high security and customer insights, control fraud & shrinkage, and face recognition.

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Regional Analysis

In terms of region, the global Artificial Intelligence (AI) in retail market is classified as Asia Pacific, North America, Latin America, Europe, and Middle East & Africa. North America dominated the market in 2022, due to its highest revenue share among all the regions. Retailers in this region are focusing on extracting data on customer preferences and demands to boost their services for improved customer engagement.

The region is witnessing notable growth in the network of new small-scale enterprises and new startups, due to rising demand for AI technology. These factors are projected to boost the region in the forecast period. For instance,

• In September 2023, SYmphonyAI Retail CPG solutions implemented its predictive artificial intelligence technology to spot customer trends and behavior and shopper insights.

The market in Asia Pacific is estimated to witness lucrative growth during the forecast period. The retail industry in the region is going through a rapid transition phase, due to increasing urbanization. This is driving the use of AI technology to enhance customer experience. For instance, as per the report in 2021, China has secured a 23.4% share of AI investments for its retail and e-commerce industry.

Moreover, countries such as India and South Korea are projected to register the high CAGR, due to the high demand for automation tools to improve customer enhancement and operations. For instance,

In October 2022, the IDC released the data from the Worldwide Artificial Intelligence Spending Guide. It is expected that AI investment by China to reach USD 26.69 billion in the year 2026, accounting for about 8.9% of global investment.

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