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Writer's pictureJaykishan Vansadawala

What If Failing to Embrace AI in Retail Costs You Your Competitive Edge?

Updated: Oct 18

AI is not just a trend, for various industries it’s now a necessity. For retail businesses, ignoring it could mean losing your competitive edge. From revolutionizing customer experiences to driving operational efficiency and skyrocketing revenue, AI is transforming the retail landscape. AI is already reshaping everything from personalized marketing to supply chain optimization, driving down costs and boosting profits.


The question is, can your business afford to fall behind?

 

This article attempts to delve deeper into the business value of AI for the retail sector:

 

A glimpse into the projected market size of AI in retail by 2030

The 2024 retail market is already AI-powered and is set for rapid and significant growth backed by AI. Here’s a breakdown of the global AI in retail market size currently & expected by 2030:

  • In 2023, the market was valued at $7.14 billion¹, and many retailers benefited by integrating cloud computing into their operations.

  • By the end of 2024, the retail market is expected to grow to $9.36 billion¹, driven by increasing investments in AI technologies.

  • AI in retail market size is projected to reach $17.64 billion[2] in 2025, as retailers enhance personalization efforts and customer engagement.

  • In 2026, the expected growth is to reach $20.5 billion[3], with further adoption of AI in supply chain management.

  • Market size expected to hit $36.99 billion[2] in 2028, as dynamic pricing strategies become more prevalent.

  • Growing with a CAGR of 32.68%, the AI in the retail market is expected to reach $40.49 billion [4] in 2029.

  • By the end of the decade, the global AI’s retail market size is projected to reach $40.74 billion in 2030, reflecting a CAGR of 23.9%, and $ 99.29 billion[2] in 2032.




But How Will AI Propel the Retail Industry's Explosive Growth?

There’s no doubt that AI has revolutionized many facets of the retail industry. Here are some key applications of AI that are significantly impacting market size and driving business value:


  • Personalized Experience: AI can personalize customer experience by increasing conversion rates by 15-25% and boosting average order values by 10-20%[8].

  • Customer Support Automation: AI chatbots can reduce customer service costs by 30% while handling up to 70% of inquiries [12].

  • Marketing Optimization: AI improves marketing ROI by 20-30% through targeted campaigns and customer segmentation[14]. AI boosts marketing Return on Investment by 20-30% by enabling better customer segmentation and personalized outreach​[16].

  • Conversion Rate Optimization (CRO): AI enhances the conversion rates by up to 46% by personalizing product recommendations​[16].

  • Sales Forecasting: AI improves sales forecasting accuracy by over 50%, helping businesses manage resources and predict trends effectively​[17].

  • Inventory Management: AI enhances demand forecasting accuracy by up to 85%, reducing inventory holding costs by 15-20%[9].

  • Supply Chain Optimization: AI can cut logistics costs by 20-30% and shorten delivery times by 25%[11].

  • Dynamic Pricing: Implementing AI for dynamic pricing can lead to a 3-5% increase in revenue and improve pricing accuracy by 15% [10].

  • Fraud Detection: AI technologies can lower fraud-related losses by 40-50%, enhancing security and trust[13].

  • Cybersecurity: AI reduces response times to cyberattacks by 60%, enhancing security systems and preventing future threats​[17].


Will AI in retail have a global impact by 2030?

The next question that arises is, will AI have its impact in retail sector globally? AI's economic impact on retail is substantial and varies by region. Here are some key statistics on the economic contribution of AI in leading economies:

  • United States: According to the precedence research report on AI in the retail market, 2023 AI in the retail market size was valued at $2.74 billion in 2023, and is estimated at $64 billion by 2033[5].

  • China: By 2030 China is expected to add $600 billion to its economy, because of the implementation and integration of AI in its retail industries[6].

  • Japan: It shows that AI in the retail industry of Japan is expected to grow at a CAGR of 5.6% and will have a market value of US$ 6.3 billion in a few years[7].

  • South Korea: According to future market insights, the retail AI market is expected to grow a CAGR of 4.8%[7].

  • United Kingdom: From the same report, it is predicted that the U.K.’s AI retail market to grow at a CAGR of 4.66%[7].

  • India: India is expected to register the highest CAGR due to the high demand for automation tools to improve decision-making capabilities and operations[15].




Well, as AI continues to revolutionize retail, the question isn't whether it will change the industry – but how soon your business will harness its power.


 

Is your business ready to move beyond the AI fad and tap into real growth potential? Let’s connect and unlock the potential together!


So, are you ready to step into the future?




References:

  1. https://www.fortunebusinessinsights.com/artificial-intelligence-ai-in-retail-market-101968

  2. https://www.futuremarketinsights.com/reports/artificial-intelligence-in-retail-market

  3. https://www.forbes.com/personalization-in-retail

  4. https://www.mordorintelligence.com/industry-reports/artificial-intelligence-in-retail-market

  5. https://www.precedenceresearch.com/artificial-intelligence-in-retail-market

  6. https://www.mckinsey.com/capabilities/quantumblack/our-insights/the-next-frontier-for-ai-in-china-could-add-600-billion-to-its-economy

  7. https://www.futuremarketinsights.com/reports/artificial-intelligence-in-retail-market#:~:text=Japan%20AI%20in%20the%20retail,the%20expansion%20of%20mobile%20technologies

  8. https://www.researchgate.net/publication/382110524_The_Role_of_Artificial_Intelligence_in_Personalized_Marketing_Strategies

  9. https://www.gartner.com/en/digital-markets/insights/stand-out-in-your-category-with-inventory-management-buyer-insights

  10. https://www.businessinsider.in/policy/economy/news/pricing-is-really-weird-lately/articleshow/111639852.cms

  11. https://www.statista.com/statistics/1346717/ai-function-adoption-rates-business-supply-chains/

  12. https://chatbotsmagazine.com/how-with-the-help-of-chatbots-customer-service-costs-could-be-reduced-up-to-30-b9266a369945

  13. https://www.businessinsider.com/insurance-fraud-artificial-intelligence-detection-2023-10?IR=T

  14. https://www.forbes.com/councils/forbestechcouncil/2024/08/20/how-ai-is-transforming-efficiency-in-marketing/#:~:text=AI%20is%20no%20longer%20just,how%20to%20use%20AI%20effectively.

  15. https://www.fortunebusinessinsights.com/artificial-intelligence-ai-in-retail-market-101968

  16. https://landingi.com/blog/conversion-rate-optimization-with-ai/

  17. https://wisernotify.com/blog/ecommerce-personalization-stats/

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