The retail industry, recognized for its adaptability, is standing at the threshold of a transformative era with the advent of Generation AI (Gen AI). Traditionally relying on data to predict consumer behavior and manage inventories, the industry is now poised to leverage Gen AI for unprecedented insights and efficiency gains across the entire retail value chain. Here we explore the potential impact of Gen AI on the retail landscape.
Traditionally reliant on data for predicting consumer behavior and managing inventories, the retail sector is now gearing up to leverage Gen AI for a seismic shift in operations. Recent findings from a comprehensive survey conducted by EY underscores this readiness, revealing that 6 percent of the surveyed audience has already implemented Gen AI, while a staggering 71 percent within the retail sector plans to adopt it within the next 12 months.
Gen AI touted as the next frontier in artificial intelligence, holds the promise of revolutionizing the retail experience by tapping into vast repositories of unstructured data. The survey projects current AI investments in the retail sector, estimated at $5 billion, to skyrocket to $31 billion by 2028. An overwhelming 88 percent of respondents within the retail sector believe that Gen AI will have a medium to high impact on their business.
While 76 percent of respondents foresee the highest impact on customer experience, the industry is also actively exploring Gen AI's potential impact on product innovation (65 percent), cost reduction (54 percent), and the entire value chain (50 percent). This signals a comprehensive approach, where Gen AI is seen as a catalyst for positive change across various aspects of retail operations.
According to the EY report, by 2025, Gen AI could potentially elevate the retail sector’s profitability by a substantial 20 percent. The technology not only reduces overheads but also has the potential to significantly boost sales through tailored consumer experiences. This economic implication positions Gen AI as a critical driver of financial success for retailers.
Given its IT prowess, India is positioned to emerge as a global nucleus for Gen AI retail solutions. Even local retailers can leverage Gen AI tools to provide 'hyper-local' personalized shopping experiences, contributing to the technology's global adoption.
Angshuman Bhattacharya, National Leader – Consumer Product and Retail Sector, EY India, shared valuable insights, emphasizing that Gen AI is not just a technological leap but a seismic shift in how retailers adapt, innovate, and enhance customer experiences. He stressed the importance of leadership in navigating the AI revolution, balancing innovation with the responsibility to craft a future where technology enriches shopping experiences with integrity and transparency.
Despite the enthusiasm for Gen AI, the retail industry faces challenges and ethical dilemmas, particularly concerning privacy. As the technology promises valuable insights through features like real-time promotions using location tracking, transparency in data usage becomes imperative. The survey reveals that 80 percent of organizations express low-to-moderate readiness, citing unclear use cases and a skills gap. Currently, 82 percent prefer partnerships with external tech providers for Gen AI implementation.
As the retail industry embraces the Gen AI revolution, the integration of this technology brings with it a responsibility to address privacy, ethical considerations, and workforce readiness. Industry leaders must navigate this transformative era, ensuring that Gen AI not only drives profits but also enhances shopping experiences with integrity and transparency. The journey toward a future shaped by Gen AI requires a delicate balance between innovation and responsibility, marking a new chapter in the evolution of the retail landscape.