Artificial Intelligence (AI) in Retail Market Size By Component (Solution [Chatbot, Customer Behavior Tracking, Customer Relationship Management (CRM), Inventory Management, Price Optimization, Recommendation Engine, Supply Chain Management, Visual Search], Service [Professional Service, Managed Service]), By Technology (Machine Learning, Natural Language Processing (NLP), Computer Vision), By Application (Automated Merchandising, Programmatic Advertising, Market Forecasting, In-Store AI & Location Optimization, Data Science), Industry Analysis Report, Regional Outlook (U.S., Canada, UK, Germany, France, Spain, Sweden, Switzerland, Australia, China, India, Japan, South Korea, Singapore, Brazil, Mexico, UAE, Israel, South Africa), Growth Potential, Competitive Market Share & Forecast, 2018 - 2024
Published Date: May 2018 | Report ID: GMI2568 | Authors: Ankita Bhutani, Preeti Wadhwani Report Format: PDF
Artificial Intelligence (AI) in Retail Market size was estimated to be over USD 650 million in 2017 and is anticipated to grow at a CAGR of about 40% over the forecast timespan.
U.S. Artificial Intelligence (AI) in Retail Market Share, By Technology, 2017 (USD Million)
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The growth of the artificial intelligence in retail market is attributed to the growth of the mobile commerce industry and the emergence of various start-ups in the retail space. The industry participants are heavily focusing on leveraging the new technologies to enhance the sales and value proposition. The integration of the IoT, augmented reality, virtual reality, 3D printing, blockchain, and digital traceability is disrupting the retail industry by offering unprecedented opportunities. These technologies assist organizations in developing unrivaled efficiencies for businesses and are shaping the online and offline experience that is becoming the benchmark of the consumer journey. This encourages companies to adopt more advanced technologies and high potential models to improve the sales and consumer benefits.
The change in the consumer demand and the development of new business models in the retail industry also fosters the artificial intelligence in retail market growth. The gap between the online and offline retailers continues to blur as organizations constantly evolve to cater to the growing customer needs. As the new business models thrive in the online space, offline retailers are also leveraging from their distribution channels to merchandise products, process purchase, convey information to better serve the consumers, and develop the next frontier of digital retail.
However, the lack of public-private partnerships in the retail industry space directly hinder the growth of the market. Furthermore, the privacy issues associated with the use of AI are the major constraints in the artificial intelligence in retail market growth.
Artificial Intelligence in Retail Market, By Component
The solution segment is dominating the artificial intelligence in retail market, accounting for more than 85% share in 2017. The growth is attributed to the wide adoption of the analytics solutions by online retailers to increase their customer base and offer a better customer experience. Retailers are increasingly leveraging the technologies to understand the customer behavior and the requirement to fulfill their demand. Also, the high intensity of competition among the retailers is encouraging them to adopt advanced technologies to have a competitive edge.
Recommendation engine solutions lead the artificial intelligence in retail market space, with more than 30% share in the revenue in 2017. The increasing adoption of the e-commerce website is the primary factor driving the growth. E-commerce companies are utilizing the capabilities of the AI-powered engines to personalize the users’ shopping experience by analyzing the browsing pattern and on-site content. The solution works on the machine learning and deep learning algorithms to understand the customers’ requirement and recommend them with relevant products.
The service market is anticipated to grow substantially with a CAGR of more than 45% over the forecast timeline. The market is driven by the increasing deployment and integration of AI-based solution among online and offline retail stores. Furthermore, the rising need among organizations to focus on the core business competencies will also affect the market growth.
Artificial Intelligence in Retail Market, By Technology
The Natural Language Processing (NLP) technology accounts for more than 40% of the global artificial intelligence in retail market revenue. The increasing adoption of the NLP technology among the retail companies is to analyze customers and improve their experience in stores. NLP technology complies with customer information and analyzes the information and uses it to improve the overall shopping experience for customers.
The technology offers several other benefits, such as virtual assistance and concierges, social media analysis, foreign language translation, and improving search results, driving the market growth. The technology has transformed the retail and e-commerce industry landscape to more real and more accessible than ever before. It has simplified the online shopping with advanced algorithms and refined search queries and better search results.
Artificial Intelligence in Retail Market, By Application
Automated merchandising was the leading application of the artificial intelligence in retail market with more than 35% share in 2017. The market is driven by the growing demand for the customer behavior tracking solution among the retailers. The automated merchandising solutions assist companies in analyzing the purchasing behavior and provide relevant suggestions to increase the sales. The solution collects all the relevant information of the user during the online shopping process to provide a personalized shopping experience.
The growing demand to enhance the customer experience is also one of the major factors augmenting the artificial intelligence in retail market growth. As the digital data is rising and the competition among the market players is increasing, enterprises are focusing more on providing a better experience to the customers to gain customer loyalty. Organizations are integrating advanced analytics tools and solutions to analyze customer data to fulfill their requirements, understand the customer experience, and make smarter predictions about their requirements.
Artificial Intelligence in Retail Market, By Region
North America is leading the artificial intelligence in retail market, accounting for more than 50% share in 2017. The growth of the market is attributed to high investments in the AI technology in the region. For instance, the U.S. accounts for more than 65% of investments in AI (including venture capital, private equity, and mergers & acquisitions) across the globe. The presence of major players, such as Microsoft, Google, and IBM, also fosters the growth. Furthermore, the region is the biggest hub for the start-ups. Silicon Valley and New York are homes for over 15,000 active start-ups with more than two million tech workers.
The Asia Pacific artificial intelligence in retail market is going to experience a high CAGR during the forecast period due to improvements in the retail industry and the growth of e-commerce in countries including India and China. Around 30% of the CIOs have already made investments in AI and more than 20% will be investing in another three years, making APAC the fastest growing region. Moreover, the market will grow in the region due to the need for surveillance & security, ROI, user-experience, improved productivity, and real-time inventory data.
Competitive Market Share
Some of the major vendors present in the artificial intelligence in retail market are AWS, Baidu, Google, Intel, Microsoft, IBM, Salesforce, Interactions, Lexalytics, NEXT IT, Nvidia, Oracle, RetailNext, SAP, Sentient, and Visenze. AI in the retail industry is characterized by the presence of both major players and start-ups. The major players are leveraging on their global presence and aggressive strategic initiatives to gain the share. These players are using merger and acquisition strategy to expand their product portfolio and acquire talent and start-ups are adopting the product innovation and development strategies to capture the artificial intelligence in retail market.
AI in Retail Industry Background
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As the demand of the consumer is increasing and competition among the players is rising, the retailers are moving toward the artificial intelligence to enhance their businesses. Retailers are leveraging on the rapidly-developing advanced technologies such as machine learning, deep learning, and natural language processing to take advantage of the digital data to update their operations, manage their supply chain, inventory, and develop new business models to enhance the sales and provide an enhanced customer experience.
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