AI-enabled retail software revenue to rise nearly eightfold by 2025, as brick-and-mortar stores strive to keep pace with online rivals

Market set to soar to $9.8 billion by 2025

LONDON (April 2, 2020) — With the global retail industry facing intensifying headwinds from online rivals and the virtual elimination of footfall traffic in the wake of COVID-19, stores increasingly are turning to artificial intelligence (AI) software to enhance their efficiency, helping drive nearly an eightfold rise in sales of such software by 2025.

Worldwide spending on AI software for retail uses is forecasted to expand to $9.8 billion in 2025, up from $1.3 billion in 2019, according to the Artificial Intelligence for Retail Applications report from Omdia. Globally, retailers will invest $37.3 billion on AI-driven solutions from 2019 through 2025.

“Giant online sellers like Amazon, Alibaba and Walmart—along with hundreds of hungry startups—have built lean, analytics-driven organizations that leverage their scale and efficiency to drive revenue and reduce costs,” said Mark Beccue, principal analyst, at Omdia. “As a result, revenue and margins for brick-and-mortar retailers are under pressure as these more efficient and scalable online disruptors draw more buyers and sales with sharper pricing, personalized customer journeys and finely tuned product assortments. In response to this challenge, pioneering retailers are adopting AI-driven software solutions to improve the efficiency of customer service and consumer targeting.”

AI allows retailers to cash in on consumer opportunities

Retailers lose hundreds of billions of dollars every year through missed opportunities and excess costs. Increasingly, a broad range of solutions providers and pioneering retailers are launching AI-driven software with capabilities that enable retailers to identify and capitalize on such opportunities, including:

  • Leveraging a wealth of contextual personal data and predictive analytics to serve up personalized recommendations, promotions and marketing.
  • Improving search functionality through sharper meta-tagging and visual search.
  • Creating digital maps of in-store inventory to manage out-of-stock inventory, correct pricing, and label and promotion misplacements.
  • Applying predictive analytics and data science to significantly improve price optimization and demand forecasting/inventory management.

Among the different types of AI-enabled software, supply chain & inventory management is forecast to represent the largest retail use case spending between 2019 and 2025. Other major areas include e-commerce virtual digital assistants, video surveillance, image recognition and stockout management and promotion compliance.

Covid-19 and market drivers for AI retail software

Several key market drivers are spurring the growth of AI use cases in retail.

One major factor is brick-and-mortar retailers’ desire to perform more like pure-play online retailers. Furthermore, retailers that offer both physical and online shopping want to harmonize customer experience among the channels.

Retailers also would like to reduce the cost and improve the effectiveness of inventory management tasks such as demand forecasting, supply chain logistics and in-store stock assortment. Additionally, these retailers would like to personalize product recommendations, pricing, promotions, advertising, and customer service.

With retail stores across the globe opting to temporarily or indefinitely shut their doors to prevent the spread of the novel coronavirus and as they adjust to related supply chain disruptions – AI retail software becomes ever more important. Improving operational flexibility, in-store and for retailer online efforts, being particularly critical with the expectation of production delays and decreased sales due to the virus.

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