What is Impeding AI-Led Retail Growth?

By
Staff Writer
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C-Suite Agrees AI is a Retail Priority

Despite enthusiasm around the benefits of AI, only 40% of retailers are fully prepared to implement AI projects.

Virtual try-ons are the latest example of AI innovation in retail. Customers are increasingly finding the concept of “going shopping” irrelevant and want shopping to come to them. AI has significantly transformed the shopping experience for customers, thereby fuelling growth for retailers. 

Marketing leaders agree that AI is a priority–research from Riverbed reveals that 96% of business and IT decision-makers in retail agree that AI will have a notable impact on delivering a better digital experience for end users. However, only 40% of retailers are fully prepared to implement AI projects now, raising the question—what is the hindrance impeding AI-led growth for the retail sector? 

The Riverbed Global AI & Digital Experience Survey polled 1,200 decision-makers across seven countries and published results on the retail sector, showing that 95% of those surveyed at retail organisations believe AI is a top C-Suite priority and 84% agree it provides a competitive advantage. 

In a fast-paced industry where customer service is a priority, the opportunity to use AI to personalise products and services, revolutionise delivery channels, and effectively manage peaks in demand are vast. By leveraging AI to streamline demand forecasting, optimise inventory, personalise customer interactions, and adjust pricing, retailers can have a better handle on these stress points, and deliver a seamless digital experience.

Despite this enthusiasm and the benefits of AI, only 40% of retailers are fully prepared to implement AI projects now, as organisations address challenges ranging from data quality to scalability that are impacting their ability to realise the full benefits of AI. 

However, rapid expansion is anticipated during the next three years, which is crucial as retailers seek to implement practical AI approaches and solutions that improve the shopping experience. By 2027, 93% of retail leaders expect their organisation to be fully prepared to implement their AI strategy and initiatives. This is higher than the overall industry average, in which 86% expect to be fully prepared within three years.

Currently, 54% of business and IT decision makers in retail say the primary reason for using AI is to drive operational efficiencies versus growth (46%). However, during the next three years, when AI is anticipated to mature, those numbers flip, with 56% of organisations saying AI will primarily be a growth driver versus driving efficiencies (44%). 

GenZ and Millennials Show Highest Preference

Across all sectors, GenZ are perceived as the standard-bearers for AI, but business and IT decision-makers in the retail sector perceive millennials as equally comfortable with the technology. When asked which generation is most comfortable with AI in the workplace, retail leaders said GenZ (47%) and Millennials (46%), followed by GenX (6%) and Baby Boomers (1%). 

The research also found that most retail organisations have moved past the stages of assessing and experimenting with AI. Today, 65% are accelerating their AI strategies with growing investment in infrastructure and talent; and another 25% are in the final transformative stage where AI is fully integrated into their business processes.

Where are the Gaps?

Despite widespread AI enthusiasm, the research identified three major gaps that organisations must overcome to ensure their AI adoption results in benefits and enterprise success. Like other sectors, retailers must overcome these gaps in order to achieve successful AI adoption. 

  • Reality Gap. Retail organisations are especially confident about their AI implementation for IT services and digital experience, with 84% claiming to be ahead of their peers, including 35% who say they are significantly ahead. Only 4% say they are slightly behind. This gap between perception and reality indicates many leaders are overconfident about where their IT function is on their AI journey relative to their industry peers.
  • Readiness Gap. As stated earlier, there’s a readiness gap as only 40% of retail leaders say their organisation is fully prepared to implement AI projects now. Additionally, 77% say with AI still maturing, it’s challenging to implement AI that works and scales.
  • Data Gap. Nearly all retail leaders (87%) acknowledge that great data is critical for great AI. However, of those surveyed, 72% are concerned about the effectiveness of their organisation’s data for AI usage, and only 45% rated their data as excellent for accuracy, with 42% saying their data quality is a barrier to further AI investment. 

There are also growing concerns in the sector about data confidentiality and security risks, with 91% concerned that AI will access their organisation’s proprietary data in the public domain due to their organisation using AI. As the Retail sector handles increasingly sensitive consumer data, it’s critical for organisations to adhere to stringent data protection regulations, and minimise risks associated with the leakage of customer information. 

Moving Past the Challenges

Enterprises are taking several steps to overcome challenges and drive successful AI strategies that deliver tangible results. To address AI preparedness, 55% of retail sector organisations have formed dedicated AI teams, and 50% observability and/or user experience teams. 

For this sector, investment in AI talent is becoming a priority, as retailers recruit data scientists, AI specialists, and engineers to maintain a competitive edge in a rapidly evolving landscape. 

Retailers are exploring other initiatives to drive successful AI integration. When it comes to data, the vast majority of retail leaders (88%) say using real data, rather than synthetic data, is crucial in AI efforts to improve the digital experience.