Artificial Intelligence in Retail Market Size, Share & Trends Analysis Report By Offerings (Solutions, Services), By Type (Online, Offline), By Technology (Machine Learning and Deep Learning, Natural Language Processing, Others), By Deployment Model (Cloud, On-Premises), By Applications (Predictive Merchandising, Programmatic Advertising, Market Forecasting, In-Store Visual Monitoring and Surveillance, Location-Based Marketing, Others) and By Region(North America, Europe, APAC, Middle East and Africa, LATAM) Forecasts, 2025-2033

Artificial Intelligence in Retail Market Size

The global artificial intelligence in retail market size was valued at USD 5.43 billion in 2024 and is projected to reach from USD 7.12 billion in 2025 to USD 41.23 billion by 2033, exhibiting a CAGR of 26.5% during the forecast period (2025-2033).

AI technology is becoming indispensable in transforming the retail industry by enhancing customer experiences, optimizing supply chains, and improving inventory management. Retailers leverage AI for various applications, from personalized product recommendations to demand forecasting, enabling them to stay competitive.

Increased investments in AI, particularly in e-commerce, focus on enhancing online shopping through chatbots, tailored suggestions, and dynamic pricing models. For example, Amazon utilizes generative AI for voice shopping via Alexa, optimizing supply chains, detecting fraudulent transactions, and managing cashierless stores.

As of 2024, a notable trend reveals that over 60% of major retailers with annual revenues exceeding USD 500 million are integrating AI into their operations, compared to about 45% of all retailers. Moreover, while approximately 30% of all retailers have experimented with AI but found it premature for their needs, only a small percentage of large retailers share this sentiment.

Interestingly, around 15% of all retailers report being unfamiliar with relevant AI technologies, a figure significantly lower among larger firms. This disparity highlights the need for broader education and accessible AI solutions for smaller retailers, who may not yet recognize the potential benefits. As larger retailers continue to adopt AI to enhance customer experience, inventory management, and personalization, those lagging may face a competitive disadvantage.

Artificial Intelligence in Retail Market Trends

Predictive merchandising and personalization

AI technology is increasingly important to transform the retail industry through enhancing customer experience, streamlining supply chains, and optimizing inventory management. Along with personal product recommendations and AI-driven demand forecasting, there are personalization and dynamic pricing models all through chatbots.

Retailers use AI to gain a competitive edge. There have been increased AI investments as companies ramped up e-commerce activities, aiming to optimize online shopping experiences through chatbots, personalized recommendations, and dynamic pricing models.

• For instance, a fashion retailer, Zara, applies the GenAI algorithms to process real-time information about sales, customer feedback, and market trends and adjust its production and stock volumes correspondingly.

Consequently, the company saves on holding costs while ensuring that products are always in stock.

Artificial Intelligence in Retail Market Drivers

Increased adoption of machine learning in supply chain optimization

AI-driven solutions are transforming retail supply chain management by streamlining processes such as demand forecasting and inventory control, ultimately reducing logistics costs. Machine learning algorithms analyze vast datasets to predict product demand with remarkable accuracy, thereby minimizing both overstock and out-of-stock situations.

• For instance, Walmart successfully implemented AI-powered inventory management systems that optimize stock levels and enhance delivery times. This ensures that products are available when and where customers need them, improving overall customer satisfaction and operational efficiency.

The ability to make data-driven decisions also allows retailers to respond swiftly to market trends and consumer preferences, further solidifying their competitive edge.

Growing e-commerce and Omnichannel Presence

The rise of e-commerce and omnichannel strategies has prompted retailers to harness AI to effectively manage vast amounts of data, automate processes, and maximize customer engagement across various platforms. AI tools help manage inventory, optimize pricing strategies, and offer personalized promotions, ensuring a cohesive experience across both physical and online stores.

• For example, Alibaba utilizes AI to enhance its Tmall platform, providing personalized product recommendations based on customer interactions. This tailored approach has led to improved sales performance and increased customer retention.

Moreover, as consumers expect seamless shopping experiences, the integration of AI in omnichannel strategies enables retailers to meet these demands, driving growth in the global retail market.

Restraining Factors

High implementation costs and lack of infrastructure

Well-established retail brands are investing in new innovative technologies that help improve customer engagement, but various factors will restrain the growth of the retail AI market. Walmart and other international retailers are using artificial intelligence for their in-store as well as online operations.

The newly started ventures and small to medium-sized enterprises fail to implement due to a lack of infrastructure as well as technical skills. According to IBM's cloud data service insights, 37% of participants reported that a lack of Al expertise prevented the development of technology. For small retailers, high costs are one of the reasons why they cannot implement the intelligent retail solution. The factors mentioned above could hinder the market growth.

Market Opportunities

Expansion of AI-powered visual search

AI-powered visual search is revolutionizing the shopping experience by allowing consumers to search for products using images instead of text. This technology provides a seamless and engaging shopping journey, especially advantageous for industries like fashion, home décor, and electronics, where visual appeal is paramount.

Through visual search, customers can simply upload an image or click on a similar product to find exact matches or similar items, catering to consumers’ desire for instant product discovery and convenience.

• For instance, Pinterest’s AI-powered visual search tool, “Lens,” enables users to snap photos of an item, such as a piece of clothing or furniture, and immediately receive links to similar products or styles available online.

This approach has significantly enhanced user engagement, especially within fashion and home décor, where visuals strongly influence purchasing decisions. Retailers leveraging this technology can meet growing consumer demand for intuitive, image-based shopping experiences, unlocking new opportunities for conversion and customer retention.

Regional Insights

North America: Leading Region with a 40% Market Share

North America will continue to lead AI in the retail market with significant growth characteristics. Early adoption of AI technologies, a strong presence of key technology players like Amazon and Microsoft, and a leadership position of the United States in research and development related to AI have so far allowed the region to claim aggressive solutions for the optimization of supply chain management, customer engagement, and marketing automation.

With AI rapidly helping integrate the retail industries for optimal performance and better customer experience, North America will mark its position as an essential hub in the global market for such a solution.

Europe: Fastest growing region with the highest market CAGR

Europe is emerging as one of the fastest-growing regions in the AI in retail industry, driven by increased investment in digital transformation and AI technologies. Countries like the UK, Germany, and France are adopting AI solutions for personalized shopping, supply chain optimization, and customer analytics. Strong government support and regulations promote innovation in AI and benefit the growing ecosystem of AI startups in the region. European retailers are venturing into AI to create better customer experiences, improve operational efficiency, and lead in the highly fluid nature of retail.

Country Insights

The market dynamics in major key countries reflect a global trend toward increasing AI adoption in retail, aimed at enhancing customer experience, optimizing operations, and improving market forecasting.

Below are a few countries that illustrate the diverse contributions and advancements in artificial intelligence in the retail market.

• US.: The U.S. is the leader in the AI retail market, with extensive investments made into AI technologies and the presence of big e-commerce players like Amazon and Walmart. These companies are leveraging AI in providing personalization to recommendations, dynamic pricing, and supply chain optimization.

Amazon introduced a "$1 billion Industrial Innovation Fund" in 2022 to invest specifically in companies developing such technologies into warehouse automation, supply chain management, and logistics through heavy investment in AI and robotics.

• China: China stands out in AI-driven retail, particularly in e-commerce. Pioneers like Alibaba have integrated AI for logistics, personalized customer experiences, and real-time pricing. These advancements position China as a leader in AI innovation, making its retail sector a key player on the global stage.
• South Korea: South Korean retailers such as Lotte leverage AI to enhance customer experiences, analyze data in real-time, and optimize inventory. South Korea’s advanced tech infrastructure supports these AI-driven improvements, fostering rapid innovation in the retail sector.
• Germany: Renowned for engineering excellence, Germany integrates AI in retail to automate supply chains, perform predictive analytics, and improve in-store experiences. E-commerce companies like Zalando drive AI adoption, demonstrating Germany’s strategic focus on technology-led retail solutions.
• United Kingdom: The UK embraces AI for predictive analytics and personalized marketing. In 2024, Tesco introduced an AI-powered loyalty program offering personalized discounts based on shopping habits, resulting in boosted engagement and sales—a testament to the UK’s commitment to consumer-focused AI applications.
• France: France is heavily investing in AI to advance e-commerce and in-store experiences. Carrefour, for example, uses AI-driven demand forecasting to manage inventory more effectively and reduce waste, leading to significant cost savings across its stores.
• Japan: Japan is a pioneer in AI-driven robotics for retail, exemplified by SoftBank’s customer service robots. Companies like Uniqlo and Rakuten also invest in AI for inventory management and customer engagement, solidifying Japan's role in integrating AI with traditional retail.
• Canada: Canadian retailers are rapidly adopting AI to enhance customer experiences and streamline supply chains. Shopify, a Canadian e-commerce leader, introduced AI-driven product description tools in 2023, enabling more accurate and personalized search results for online shoppers and further enhancing Canada’s AI retail capabilities.

Segmentation Analysis

By Offerings

The solutions segment holds the largest share, driven by retailers' growing adoption of AI-powered software tools to enhance customer experience and streamline business operations. Common solutions include chatbots for real-time customer support, recommendation engines for personalized product suggestions, and dynamic pricing systems to adapt to changing demand. These tools empower retailers to boost engagement, refine marketing efforts, and improve operational efficiency. 

By Type

The online segment dominates the market share. E-commerce companies have rapidly adopted AI technologies to optimize customer experiences, personalize recommendations, and streamline supply chains. The trend accelerated with COVID-19, as consumers turned to online shopping, driving major investments in AI by companies like Amazon and Alibaba. The online segment leverages AI for predictive analytics, customer segmentation, and dynamic pricing, offering targeted shopping experiences.

By Technology

The machine learning and deep learning segment holds a significant position in the global market. These technologies are integral to demand forecasting, customer behavior analysis, and personalized recommendations, allowing retailers to analyze massive datasets to identify patterns, forecast trends, and adjust stock and marketing strategies accordingly. Machine learning applications like Amazon’s predictive analytics for inventory management and Google’s recommendation algorithms enhance the ability to meet demand.

By Deployment Mode

The cloud segment is expected to grow significantly, driven by its scalability, cost-effectiveness, and flexibility. Cloud deployment grants retailers easy access to advanced AI tools without needing heavy on-premises infrastructure, making it ideal for both large retailers and small-to-medium enterprises.

Companies like Google Cloud and AWS provide scalable AI platforms that offer real-time data processing and model updates, benefiting retailers looking to stay agile in a competitive landscape.

By Application

Predictive merchandising dominates the global market, as retailers seek to accurately forecast demand and optimize in-store placement. AI-driven predictive tools analyze buying patterns and market trends, helping retailers place the right product at the right time to maximize sales and streamline inventory management.

Company Market Share

Key players in the AI in the retail market, including Google LLC, Microsoft Corporation, IBM Corporation, and Amazon Web Services, Inc., hold the highest market revenue and are actively working to strengthen their market presence. These companies are leveraging AI technologies to provide advanced solutions such as real-time inventory management, dynamic pricing, and personalized customer engagement.

By expanding their product portfolios and integrating machine learning, deep learning, and natural language processing technologies, these companies are positioned to meet the growing demand for AI-driven retail solutions.

Vue.ai: An Emerging Player in the Artificial Intelligence in Retail Market

Vue.ai is an emerging player of AI in the retail industry. Vue.ai provides AI-driven solutions that help retailers automate workflows, enhance customer experiences, and improve operational efficiency. Its offerings include personalized product recommendations, AI-powered visual search, and inventory management.

The company leverages computer vision and machine learning to provide detailed customer insights, automate product tagging, and enable personalized marketing strategies, making it a key player in the AI retail space.

Recent developments at Vue.ai include:

• In February 2023, Vue.ai, the retail vertical of AI startup Mad Street Den, partnered with Meta to offer AI-generated, inclusive ad creatives for fashion brands. Through its patented VueModel technology, Vue.ai enables brands to showcase outfits on diverse AI-generated models across different body types, sizes, and complexions, significantly reducing the time and cost of traditional photoshoots.

Recent Developments

• October 2024 - Microsoft Corp. and Rezolve AI formed a strategic partnership to enhance AI-driven retail solutions. Rezolve AI’s Brain Suite, including Brain Commerce, Brain Checkout, and Brain Assistant, will be powered by Microsoft Azure and available globally through Microsoft's Azure Marketplace. This collaboration aims to transform retail customer engagement and operations, with Microsoft providing extensive go-to-market support to accelerate Rezolve AI's market penetration.
• October 2024 - Walmart revealed its strategy to accelerate Adaptive Retail, focusing on creating hyper-personalized shopping experiences through proprietary AI, Generative AI, Augmented Reality (AR), and Immersive Commerce platforms. These innovations aim to enhance customer engagement and convenience across Walmart stores, Sam’s Clubs, apps, and virtual environments.

Analyst Opinion

As per our analysts, artificial intelligence in the retail market is expected to witness rapid growth, driven by advancements in machine learning, predictive analytics, and natural language processing technologies. These innovations are enabling retailers to enhance customer engagement, improve supply chain efficiency, and optimize pricing strategies.

However, challenges such as data privacy concerns and the high costs associated with AI implementation may slow adoption, especially for smaller retailers. Addressing these barriers while continuing to innovate in AI technologies will be crucial for the market’s sustained growth.