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Artificial Intelligence In Retail Market Analysis

ID: MRFR//3574-HCR | 100 Pages | Author: Shubham Munde| May 2024

Artificial Intelligence (AI) in the retail industry is undergoing a revolutionary change in the way firms function and interact with their clientele. Customer experiences that are personalized are a major factor in this dynamic. With the use of artificial intelligence (AI), merchants can now evaluate enormous volumes of consumer data, such as preferences, past purchases, and online activity, in order to provide tailored product suggestions and focused marketing campaigns. The retail scene is becoming more customer-centric as a result of this customization, which not only raises consumer pleasure but also boosts sales and customer loyalty.

Another important market aspect is the use of AI-powered solutions in supply chain optimization and inventory management. Retailers are using artificial intelligence (AI) algorithms to estimate demand, effectively manage inventory levels, and optimize supply chain processes. AI lowers costs, increases operational efficiency, and guarantees that businesses can quickly satisfy customer expectations by eliminating stockouts and overstock situations. This dynamic helps to create a retail ecosystem that is more flexible and adaptable, enabling companies to adjust to changes in the market and improve their supply chains.

AI-driven automation is changing the retail business in many ways, including backend operations and customer service. AI-powered chatbots and virtual assistants are being used to answer questions from customers in a timely and accurate manner. Optimizing operational efficiency and resource allocation may be achieved via automating backend tasks like data input and order processing. This dynamic improves the overall speed and precision of retail processes while also lessening the workload for human personnel. The emergence of omnichannel experiences is being aided by the incorporation of AI in the retail sector.

Retailers may integrate consumer interactions across several channels—online, mobile, and in-store—by using artificial intelligence (AI). Through the examination of consumer information from several channels, merchants may design a smooth and uniform purchasing journey. In addition to increasing customer pleasure, this omnichannel strategy gives merchants a thorough grasp of consumer behavior and preferences, enabling more focused marketing and sales tactics.

Artificial Intelligence (AI) in Retail Market Overview

Artificial Intelligence (AI) in Retail Market is projected to grow from USD 8.13 Billion in 2024 to USD 41.7 billion by 2032, exhibiting a compound annual growth rate (CAGR) of 22.67% during the forecast period (2024 - 2032). Additionally, the market size for Artificial Intelligence (AI) in Retail was valued at USD 6.44 billion in 2023.

The progress of big data, the use of AI-enabled gadgets and services across many sectors, and increasing technological advancement in retail businesses are the key market drivers contributing to the market’s growth and development.

Figure 1: Artificial Intelligence (AI) in Retail Market Size, 2024-2032 (USD Billion)

Artificial Intelligence (AI) in Retail Market Overview1

Source: Secondary Research, Primary Research, MRFR Database, and Analyst Review

Artificial Intelligence in Retail Market Trends

The growing big data and the use of AI-enabled gadgets drive market growth.

The rising big data and AI-enabled gadgets drive market CAGR for artificial intelligence in the retail. Two significant causes have contributed to the expansion of AI in the Retail Market. First is the growing popularity of online changing rooms, which allow customers to have an exceptional buying experience, particularly during COVID, since one doesn't require any actual touch with the merchandise. The second aspect is the rise in demand for all-purpose chatbots. While organizations have concentrated on offering personalized customer support, al-driven bots save time and cash while being user-friendly.

Additionally, efficient customer service and artificial intelligence-powered chatbot help are gaining widespread favor in retail. To improve the client experience, the virtual assistant provides focused and personalized replies. According to Accenture data, 91% of consumers expressed interest in purchasing from firms that provided personalized suggestions and services in 2018. NLP and ML technologies are used to power the AI chatbots. These technologies provide real-time information on client preferences. It also assists the chatbot in understanding the consumers' thoughts and behavioral patterns, which aids in responding to customer queries and creating relationships. As a result, the AI-powered chatbot is projected to propel artificial Intelligence in the retail business sector.

Almost every firm in the world has suffered a significant setback since the outbreak of this devastating epidemic. While every organization seeks measures to mitigate loss, businesses also want assistance to guarantee that they can continue operating efficiently and effectively. Conversely, people have yet to determine when the pandemic will finish. Some aspects of the work routine must be adjusted to guarantee an ideal working atmosphere, and specialists do AI in Retail Market Research flawlessly. Artificial Intelligence assists retailers in realigning supply networks, recognizing changing demand, understanding novel market developments, and more. Retailers are expected to increase their investments in artificial intelligence technologies to comprehend better shifting client preferences.

For instance, according to IBM Corporation research, AI usage in commerce and consumer goods is predicted to increase from 40% of enterprises to over 80% in the next three years. Furthermore, the retail business is expanding its investment in AI technologies. During that period, expenditures in AI-powered prescriptive and predictive analytics will increase two folds. Thus, it is anticipated that demand for Artificial Intelligence in the Retail market will increase throughout the projection timeframe due to the rising big data and the use of AI-enabled gadgets. Thus, driving Artificial Intelligence in Retail market revenue.

Artificial Intelligence in Retail Market Segment Insights

Artificial Intelligence in Retail Application Insights

The Artificial Intelligence (AI) in Retail market segmentation, based on Application, includes advertising, merchandizing, market forecast, and surveillance. The merchandising segment dominated the market, accounting for 57% of market revenue (USD 2.9 Billion) in 2022 this is due to increasing requirements for virtual fitting rooms and personalized shopping experiences for clients to bring more satisfaction and growth to businesses. Advertising is expected to grow and expand significantly during the projected timeframe, boosting the overall market growth.

Artificial Intelligence in Retail Technology Insights

The Artificial Intelligence (AI) in Retail market segmentation, based on Technology, includes Deep Learning, Neural Networks, and Natural language processing. The deep learning category generated the highest market revenue of about 42% (USD 2.1 billion) in 2022. Natural language processing (NLP) is expected to grow and expand significantly during the projected timeframe due to its wide application in retail market analytics, boosting the overall market growth. NLP will advance as data analysis becomes more sophisticated and chatbots driven by AI grow more prevalent.

Artificial Intelligence in Retail Component Insights

The Artificial Intelligence (AI) in Retail market segmentation, based on components, includes Solutions and Services. The solutions category dominated the market, accounting for 51% of market revenue (USD 2.6 Billion) in 2022. Due to existing issues in management technologies, retailers utilize AI-powered solutions for handling the operations of the supply chain, transportation, and warehouse administration while enhancing the customer experience.

Figure 2: Artificial Intelligence (AI) in Retail Market, by Component, 2022 & 2032 (USD Billion)

Artificial Intelligence (AI) in Retail Market, by Component

Source: Secondary Research, Primary Research, MRFR Database, and Analyst Review

Artificial Intelligence in Retail Regional Insights

By region, the research provides market insights into North America, Europe, Asia-Pacific, and the Rest of the World. The North American Artificial Intelligence in the Retail market will dominate this market during the projected timeframe; owing to improved customer service efficiency, shops in the region focus on obtaining accessible data on client preferences. Because of the increased need for Technology, new entrepreneurs and small enterprises are also emerging. This is likely to enhance the expansion of AI in the retail business.

Further, the significant countries studied in the market report are the US, Canada, German, France, the UK, Italy, Spain, China, Japan, India, Australia, South Korea, and Brazil.

Figure 3: Artificial Intelligence in Retail Market Share by Region 2022 (USD Billion)

Artificial Intelligence in Retail Market Share by Region

Source: Secondary Research, Primary Research, MRFR Database, and Analyst Review

Europe region’s Artificial Intelligence in the Retail market accounts for the second-highest market share and revenue due to large retailers in the beauty products, fashion, and clothing sectors, which are aggressively investing in innovative Technology to improve the consumer experience. Further, German Artificial Intelligence in the Retail market holds the largest market share, and the UK Artificial Intelligence in the Retail market is anticipated to expand and grow rapidly in the European region during the projected timeframe.

The Asia-Pacific Artificial Intelligence in the Retail market is anticipated to expand quickly during the projected timeframe. This is due to growing retail businesses undergoing a rapid transformation, resulting in greater demand for modern Technology to enhance processes and the customer experience. Moreover, China’s Artificial Intelligence in the Retail market dominates the market share, and Indian Artificial Intelligence in the Retail market is anticipated to expand and grow quickly in the Asia-Pacific region during the projected timeframe.

Artificial Intelligence in Retail Key Market Players & Competitive Insights

Leading market players invested heavily in research and Development (R&D) to scale up their manufacturing units and develop technologically advanced solutions, which will help Artificial Intelligence in the Retail market grow worldwide. Market participants are also undertaking various organic or inorganic strategic approaches to strengthen and expand their footprint, with significant market developments including new product portfolios, contractual deals, mergers and acquisitions, capital expenditure, higher investments, and strategic alliances with other organizations. Businesses are also coming up with marketing strategies such as digital marketing, social media influencing, and content marketing to increase their scope of profit earnings. Artificial Intelligence in the Retail industry must offer cost-effective and sustainable options to survive in a moderately fragmented and dynamic market climate.

Manufacturing locally to minimize operational expenses and offer aftermarket services to customers is one of the critical business strategies organizations use in the Artificial Intelligence in the Retail industry to benefit customers and capture untapped market share and revenue. Artificial Intelligence in the Retail sector has recently offered significant advantages to the technology industry. Moreover, more industry participants are utilizing and adopting cutting-edge Technology has grown substantially. Major players in the Artificial Intelligence in Retail market, including NVIDIA Corporation (US), Intel Corporation (US), Salesforce (US), Sentient Technologies (US), Microsoft Corporation (US), Google Inc (US), IBM Corporation (US), Amazon Web Services (US), Oracle Corporation (US), and SAP SE (Germany), are attempting to expand market share and demand by investing in R&D operations to produce sustainable and affordable solutions.

Oracle is the world's most extensive database management firm, with revenues of $100 million and 4,500 end users in 55 different nations. It provides services and goods to enterprise IT settings across the world. Oracle software for the cloud as a solution includes a variety of cloud software programs. Oracle and NVIDIA cooperated in October 2022 to help clients overcome business issues with enhanced computing and AI. The partnership aims to provide Oracle Cloud Infrastructure with the entire NVIDIA-enhanced OCI comprising GPUs, structures, and applications.

IBM (International Business Machines) is a computer, Technology, and IT consulting firm headquartered in the United States. It is the world's largest technology business and the second most valuable worldwide brand. It produces and sells software and computer components, web hosting, and consulting services in fields including mainframe systems and nanotechnology. On June 16, 1911, Charles Ranlett Flint and Thomas J. Watson Sr. created the corporation, which is located in Armonk, New York. IBM and Nielsen cooperated to introduce Watson Advertising Weather Targeting, an innovative technology that provides weather and product sales information, in September 2020.

Key Companies in the Artificial Intelligence in Retail market include

Artificial Intelligence in Retail Industry Developments

January 2024: Microsoft unveiled new generative AI and data solutions and capabilities for retailers that cover the whole retail customer journey. These solutions and capabilities help businesses more effectively engage their audiences, unlock, and unify retail data, and enable personalized shopping experiences and store associate empowerment. Microsoft Cloud for Retail now gives retailers more options to integrate copilot experiences throughout the shopper journey, including new copilot templates on Azure OpenAI Service that enable retailers to create personalized shopping experiences and support store operations, retail data solutions in Microsoft Fabric, new copilot features in Microsoft Dynamics 365 Customer Insights, and the introduction of Retail Media Creative Studio in the Microsoft Retail Media Platform.

January 2024: IBM and SAP announced their partnership to build solutions that help customers in the retail and consumer packaged goods industries use generative AI to improve their supply chain, finance operations, sales, and services. IBM and SAP are collaborating to develop new generative and traditional AI solutions that will be concentrated on addressing the complexities of the direct store delivery business process and product portfolio management. This is due to the companies' shared legacy of technological expertise and the successful integration of IBM Watsonx, an enterprise-ready AI and data platform, and AI assistants into SAP solutions.

January 2023: Google unveiled four new and updated AI technologies to assist businesses in transforming their in-store shelf monitoring operations and improving their e-commerce sites by providing customers with smoother and more natural online shopping experiences. A new shelf-checking AI solution based on Google Cloud's Vertex AI Vision uses Google's library of facts about people, places, and things, allowing businesses to identify billions of products to guarantee in-store shelves are properly proportioned and stocked. Additionally, Google Cloud updated its Discovery AI solutions with a new browsing feature powered by AI and a new customization AI capability to assist retailers in modernizing their digital storefronts with more dynamic and user-friendly purchasing experiences.

Artificial Intelligence in Retail Market Segmentation

Artificial Intelligence in Retail Application Outlook

  • Advertising

  • Merchandizing

  • Market forecast

  • Surveillance

Artificial Intelligence in Retail Technology Outlook

  • Deep Learning

  • Neural networks

  • Natural language processing

Artificial Intelligence in Retail Component Outlook

  • Solution

  • Services

Artificial Intelligence in Retail Regional Outlook

  • North America

    • US

    • Canada

  • Europe

    • Germany

    • France

    • UK

    • Italy

    • Spain

    • Rest of Europe

  • Asia-Pacific

    • China

    • Japan

    • India

    • Australia

    • South Korea

    • Australia

    • Rest of Asia-Pacific

  • Rest of the World

    • Middle East

    • Africa

    • Latin America

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