Artificial Intelligence in Retail Market Size, Share & Trends Analysis Report By Type (Online, Offline), By Technology (Machine Learning and Deep Learning, Natural Language Processing, Others), By Solution (Product Recommendation and Planning, Customer Relationship Management, Visual Search, Virtual Assistant, Price Optimization, Payment Services management, Supply chain management and Demand Planning, Others), By Service (Professional Services, Managed Services), By Deployment Model (Cloud, On-Premises), By Application (Predictive Merchandising, Programmatic Advertising, Market Forecasting, In-Store Visual Monitoring and Surveillance, Location-Based Marketing, Other) and By Region(North America, Europe, APAC, Middle East and Africa, LATAM) Forecasts, 2023-2031

Market Overview

The global artificial intelligence in retail market size was valued at USD 5.91 billion in 2022. It is projected to reach USD 89.79 billion by 2031, growing at a CAGR of 35.3% during the forecast period (2023–2031).

AI simulates human intelligence in machines that think and act like humans. Any machine that learns and solves problems is called a mind. Algorithms drive AI. Mechanical computers follow algorithms. Complex algorithms often build on simpler ones. Retail digital transformation goes beyond linking things. Data into insights drive business outcomes. Machine learning and deep learning in retail can generate these penetrations. That creates exceptional customer experiences, revenue growth opportunities, fast innovation, and intelligent operations that differentiate retailers. AI lets retail systems collaborate to improve customer experiences, forecasting, inventory management, and more. Thus, customers find the right products at the right time. Machine vision gives brick-and-mortar stores near-real-time intelligence. In the cloud, that data can reveal new business insights.

The growing need for monitoring and surveillance at physical stores, increased awareness and app of artificial intelligence in retail market sector, improved productivity, return on investments, inventory accuracy, and supply chain optimization are key factors driving the market during the forecast period. Additionally, AI in retail is transforming the industry by improving results and engaging customers in the digital world, which is expected to increase demand in the coming years. The growth of global artificial intelligence in retail market during the forecast period is driven by multichannel retailing, enterprise demand for streamlining business processes, and the need to improve customer experience to capitalize on market dynamics. AI in retail will grow due to government digitalization efforts. Blockchain and 5G technology are new retail AI trends expected to boost demand in the coming years.

Market Dynamics

What Are The Key Factors Driving Industry Growth?

Customer Experience Improvement Due to Al-powered Chatbots

Due to their efficient customer service, AI-powered chatbots are becoming popular in retail. Chatbot enhances customer experience with personalized responses. Accenture insights found that 91% of customers preferred brands with personalized recommendations and services. Al chatbots use NLP and ML. These technologies provide real-time customer preferences. It also helps the chatbot understand customers' feelings and behavior, which aids in answering questions and building relationships. Levis' Virtual Stylist chatbot makes customer recommendations. The bot asks for quick suggestions for size, fit, material, and preferred brands. Thus, the Al-driven chatbot will drive retail AI.

Growth In the Use of Cloud Computing Technology

AI enhances cloud computing platforms. SaaS (Software-as-a-Service) companies use AI to improve software functionality. AI and cloud computing have improved many lives. Siri, Google Home, and Alexa are used daily to purchase items, adjust smart home temperatures, and play music on connected speakers. Many users don't realize this function's technical and connectivity aspects. Many are unaware that a personalized blend of Artificial Intelligence and Cloud Computing enables intuitive experiences.

What Are the Main Factors That Are Limiting the Market?

High Implementation Costs and Lack of Infrastructure

Well-established retail brands invest in innovative technologies to improve customer engagement, but various factors may limit the retail AI market growth. Walmart and other global retailers use artificial intelligence for in-store and online operations. Due to a lack of infrastructure and technical expertise, new start-ups and small and medium-sized enterprises have trouble adopting the technology. According to IBM's cloud-data service insights, 37% of respondents said lack of Al expertise hinders technology implementation. Small retailers struggle to implement the intelligent retail solution due to its high cost. These factors may slow market growth.

What are the prospects of Artificial Intelligence in Retail?

AI-Driven Voice Search and Visual Search

E-commerce and virtual shops are growing fast. New product search methods include product images, videos, and voice. Visual search AI optimizes functionality by processing queries and mining metadata. AI features help the visual search engine analyze, track, and predict shopping trends, improving shopper engagement. Syte Visual Conception Ltd. found that nearly 80% of shoppers begin with a visual search. Thus, retailers need Al-based search engines to improve customer service and revenue. Al-powered searching helps retailers understand consumer trends and make smart business decisions. Al-driven search engines may offer retailers rich data and growth opportunities in the future.

Regional Analysis

North America Dominates the Global Market

The global artificial intelligence in retail market is bifurcated into four regions: North America, Europe, Asia-Pacific, and LAMEA.

North America is the most significant shareholder in the global market and is expected to grow at a CAGR of 30.5% during the forecast period. Automation and AI-powered solutions are utilized to elevate businesses and improve customer relationships. The inclination of several companies in North America to invest in AI for the retail market to improve the customer shopping experience is enhancing the growth of AI in the retail market. According to Capgemini, 25% of the top 250 global retailers are integrating AI in their organizations. Regional retailers are extracting customer preference data to improve customer service. The US is an early adopter of Al technology and investing heavily in it. This should boost retail AI growth. Due to early retail AI adoption in the U.S., many regional retailers use AI-based supply chain and inventory optimization solutions. North American retailers are using consumer preference data to improve customer service. The US was the first to adopt AI and invest heavily in it. Due to rising technology demand, small businesses and startups are emerging in the US, which will boost Artificial Intelligence in Retail Market.

Europe is expected to grow at a CAGR of 38.7% during the forecast period. The UK, Germany, France, Italy, Spain, and the rest of Europe are all included in the analysis of Europe's artificial intelligence in retail market. In Europe, Retailers are expected to be the primary value creators. This has resulted in retailers adopting advanced and innovative technologies for improved regional customer experience. Additionally, increasing demand for predictive analysis and machine learning for retail is further expected to influence AI in the retail market in the European region. Great cosmetics, fashion, apparel, and more retailers are investing in advanced technologies to improve customer experience. Global Data Insights reported a 26.7% increase in European artificial intelligence in the first quarter of 2020. This will increase retail AI demand.

Segmental Analysis

The market is segmented by type, component, technology, and application.

Based on type, the global market is bifurcated into online and offline.

The offline segment is the highest contributor to the market and is expected to grow at a CAGR of 34.6% during the forecast period. Offline generates the most revenue and will continue to do so. The technology's ability to manage in-store operations, improve merchandising and assortment, automate personalized product recommendations, and improve customer shopping experiences is driving demand. Due to virtual and ordinary shopping, online is expected to proliferate. Artificial intelligence helps retailers serve online customers. ViSenze offers intelligent e-commerce solutions like cross-device experience, smart recommendations, discovery, and inspiring SEO marketing.

Based on components, global market is bifurcated into solutions and services.

The solution segment is the highest contributor to the market and is expected to grow at a CAGR of 36.2% during the forecast period. Solution dominates the market. Smart stores, digital commerce, customer insights, delivery, supply chain, and more are considered. New retail automation solutions may be driven by growing retail operations management challenges. The Al-based retail solution improves logistics, supply chain, warehouse, and customer experience. This should boost retail Al’s adoption. Services are forecast to grow significantly. Retailers need vendor support for installation, management, maintenance, and more. Thus, rapid Al solution implementation is driving service demand.

Based on technology, global market is bifurcated into machine learning, natural language processing (NLP), analytics, and others.

The machine learning segment is the highest contributor to the market and is expected to grow at a CAGR of 35% during the forecast period. Natural language processing is forecast to proliferate. To provide personalized services, retailers want to understand customer behavior, emotions, personality type, and more. Machine learning will dominate segment revenue. Machine learning can quickly and deeply analyze data to personalize customer experiences. Optimizing supply chain plans and demand forecasts helps retailers increase inventory productivity. Al-based computer vision is being used for facial recognition and video searches.

Based on application, global market is bifurcated into predictive merchandising, programmatic advertising, in-store visual monitoring and surveillance, and others.

The predictive merchandising segment is the highest contributor to the market and is expected to grow at a CAGR of 33.7% during the forecast period. In 2022, predictive analytics led the segment with solutions like demographic segmentation, store operations, shelf management, inventory management, labor optimization, and more. Al-based predictive analysis helps retailers predict market opportunities and customer behavior. The Al also analyzes by location, country, culture, gender, age, and other demographics. Due to rising customer engagement needs, customer relationship management will proliferate. Al-driven virtual assistance, chatbots, search engines, and more help retailers retain customers.

Impact of covid-19

The COVID-19 pandemic has caused a global healthcare crisis, resulting in a change in healthcare delivery in most areas. Most unrelated surgeries were postponed in the first half of 2020 to slow the spread of the virus and reduce the strain on healthcare infrastructure. According to Indiana University researchers, healthcare visits declined by approximately 40% in the first six weeks of the pandemic in the U.S, from early March to mid-April.

Following the relaxation of constraints, there has been a general decrease in people postponing seeking care and treatment in healthcare facilities. Furthermore, the slowdown in clinical trial enrollment has pushed back the launch of novel treatments. These considerations may have had a detrimental influence on the autoinjector industry, particularly with its usage in healthcare facilities beginning in early 2020.

However, the overall effect on the autoinjectors market is considered positive, especially during the forecast period, due to several factors. In the biologics space, there has been a shift toward higher delivery volumes and less frequent dosing, which can be achieved through suitably customized autoinjectors.

The COVID-19 pandemic has accelerated the trend of self-injection, allowing patients to be more involved and in charge of their treatment. The trend boosted newer technology in the autoinjector market for improved regulation of injection speed, injection site discomfort, and treatment of anxiety.

Recent Developments

• October 2022, Oracle Unity, a Customer Data Platform, now has 15 baseline AI models to help organizations across industries improve customer engagements (CDP). Oracle Unity, part of Oracle Fusion Cloud Customer Experience, delivers personalized industry-specific experiences using built-in artificial intelligence and customizable industry-specific data models.

• June 2022, Intel Corporation, ASUSTeK Computer Inc., and Microsoft Corporation released AI DevKit, the first AI on PC Development Kit. The AI on PC Development Kit uses deep neural networks and PC vision applications. Software-hardware integration with tutorials and source code to create compelling AI applications and enable new ones.