Artificial Intelligence: What does it hold for the Retail industry?

In the previous blog, we briefly discussed how artificial intelligence is transforming the manufacturing industry. We talked about the use cases of AI in manufacturing and how it is guiding the fourth industrial revolution, industry 4.0. The final blog of the series discusses in detail the impact of Artificial Intelligence on another significant industry – retail.

Jesper Brodin, the current CEO of one of the biggest retail businesses in the world, IKEA, once mentioned that like most retailers, they are not sure about where exactly they will land at the end of it but their curiosity and willingness to create will be a guide. Today, the meaning of guiding light in the retail industry has become synonymous with artificial intelligence.

Just like other industries, retail is also experiencing a transformative shift and ushering in the age of artificial intelligence. Largely due to the meteoric rise of e-commerce businesses, generational shifts, and changing customer behaviors, AI has become the key force driving the change. Consumers today find convenience in shopping from the comfort of their home rather than visiting traditional brick-and-mortar stores, and this trend is particularly pronounced among Millennials and Generation Z. For instance, a survey, 67% of millennials prefer shopping online over in-store shopping. Moreover, 52% of Gen Z in the US prefer shopping online, and the number of Gen Z who buy products online at least weekly has increased by 20% since 2020.

The retail industry evolves based on customer demand, buying behavior, and technological advancement. Of course, the move to online shopping is not a simple either/or between online shopping and brick-and mortar stores.  Today, customers demand seamless omnichannel shopping experiences and may walk away if their expectations are not met. Fortunately, AI integration can help open doors to new opportunities. Per a report by Grand View Research, the global AI in retail market size was valued at USD 5.79 billion in 2021 and is expected to expand at a CAGR exceeding 23.9% from 2022 to 2030. Another research by Fact.MR suggests that the global AI in the retail market is set to achieve a valuation of USD 85 billion by 2033.

Use cases of artificial intelligence in the retail industry

Artificial intelligence helps retail businesses enhance customer experiences, optimize supply chains, and provide data and insights to meet the evolving demands of the digital age. Retail leaders are investing significantly in AI-powered solutions to grow sales, adjust planning processes, and improve customer relations. For instance, per a recent global survey, 92% of US retail respondents plan to increase AI investment in 2024 compared to 100% in China and India.

Let us look at some of the use cases of AI in the retail industry.

Demand Forecasting

Demand forecasting is one of the foremost and most anticipated areas of AI in the retail industry. Understanding customers and their product preferences is crucial to managing the supply chain, optimizing inventory levels, and keeping markdowns at bay. AI-powered tools can mine insights from marketplaces, consumer, and competitor data, and help forecast industry and demand shifts. Harnessing these data and insights can help retail businesses make proactive changes to a company’s marketing, pricing, and business strategies.

In 2019, the largest shoe company in the world, Nike, acquired a Boston-based retail predictive analytics start-up, Celect. The company integrated Celect’s technology into its mobile applications and website to better understand consumer demand in real-time and optimize inventory management. With Celect, Nike was able to analyze the demand, help reduce out-of-stock rates, control the inventory, and manage and curb the overflow of goods in the warehouse. Nike CEO, John Donahoe later said that the acquisition enabled the company to “impressively pivot” to a more direct-to-consumer supply chain and helped them get the right product in the right place at the right time.

Inventory Management

Having excess goods in the inventory is a nightmare for any retailer as it requires extra maintenance costs and markdowns. While AI in retail aids better demand forecasting, it simultaneously helps improve supply chain planning and inventory management. For instance, AI-powered logistics management systems can help a retailer adjust inventory, staffing, distribution, and delivery schemes in real time.

The biggest retail organization in the world and the first of the Fortune 500 companies, Walmart, uses AI technologies for its inventory management. The system uses cameras to record inventory levels on shelves and send the information to an AI-powered data center to facilitate better decision-making about the inventory. Walmart takes advantage of its massive data sets to power artificial intelligence. For example, it is reported that the inventory intelligence towers installed in Sam’s Club can take more than 20 million photos of everything on shelves “every day”.

But this is not all. Walmart also uses conversational AI to help customers and associates save time and have a better shopping experience. Walmart’s Voice Order uses base natural language understanding (NLU) to help customers shop as fast as they can talk or text. Moreover, “Ask Sam” – the AI chatbot of Walmart helps in-store associates locate items, access store maps, look up prices, view sales information, check messages, and more.

Cashless Transactions/Self-Checkout

Among other applications of AI in retail, enabling cashless transactions and self-checkout stands out. Over the years, retailers have been experimenting with making payment more efficient for customers, and AI delivers just what is needed. AI-powered solutions can automate checkout processes and eliminate lines. They speed up the rate of processing orders by allowing more customers to buy and pay without additional staffing. Amazon Go is a perfect example.

Amazon Go is Amazon’s full-size cashier-less grocery store, referred to as a new kind of corner store by the company. First launched in 2018, it is an AI-powered convenience store where customers walk in, pick up the goods, and simply walk back home without the hassle of standing in checkout queues.

Amazon worked for years to develop their AI-based “Just Walk Out” technology for the Go stores. It uses computer vision-based machine learning and a series of cameras to track and estimate the intention of store occupants. Customers just need to scan the app and let the smart system do the work. The cameras track products picked up by the customers, and the latter are automatically invoiced through their Amazon account when they leave the store.

Unfortunately, use of AI in cashless transactions is likely to take a heavy toll on cashier jobs. Per BLS data, a combination of technology and automation in the form of self-checkout and online commerce will result in the loss of more than 336,000 cashier jobs by 2030.


The increasing adoption of AI in the retail industry also increases the need for AI preparedness. Per a new KPGM study, 90% of retail business leaders indicated that their employees are prepared and have the skills for AI adoption. However, the rising speed of AI adoption also raises a caution flag for retailers. They need to put in place proper processes and controls together with change management and effective training to address AI adoption risks.

At Celsior , we can help you develop competitive advantage, reduce costs, and improve customer experience through innovative use of AI and ML. Our retail IT solutions can assist you in unleashing the power of your data and empowering you to make data-driven decisions.

Shobhit Kulesh

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