AI in Retail and e-Commerce market size, Share, Growth, and Industry Analysis, By Type (Sales and Merchandise Planning, Reduced Fraud and Shrinkage, Logistics and Delivery, Trade Promotions Management, Others) By Application (Brick & Mortar Stores, E-commerce Stores) and Regional Forecast to 2033

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AI IN RETAIL AND E-COMMERCE MARKET OVERVIEW

The global AI in Retail and e-Commerce Market was valued at USD billion in 2024 and is projected to reach USD billion in 2025, steadily progressing to USD billion by 2033, with a CAGR of % from 2025 to 2033.

The retail and e-commerce artificial intelligence space is changing dramatically as organizations are leveraging artificial intelligence to run better organizations, enhance customer experience, and facilitate supply chains. Organizations are using AI tools for demand forecasting, product recommendations, fraud detection, and dynamic pricing. As organizations move from being primarily or solely brick-and-mortar to serving customers online and as organizations continue to rely more on data to inform their decision-making, AI has become a necessary selection. Retailers that sell online and brick-and-mortar organizations are using AI solutions to improve operational efficiency, reduce costs, and increase customer satisfaction. Expectations are that this trend will continue to affect the competitiveness of the retail and e-commerce industries.

COVID-19 IMPACT

AI in Retail and e-Commerce market Had a Positive Effect Due to Increased Reliance on Digital Technology During COVID-19 Pandemic

The global COVID-19 pandemic has been unprecedented and staggering, with the market experiencing higher-than-anticipated demand across all regions compared to pre-pandemic levels. The sudden market growth reflected by the rise in CAGR is attributable to the market’s growth and demand returning to pre-pandemic levels.

The COVID-19 pandemic created a tremendous opportunity for the uptake of AI in the retail and ecommerce sector. The implementation of lockdowns and social-distancing protocols changed consumer behavior and increased reliance on digital technology that created urgency for businesses with the capacity to employ digital technology. AI-based chatbots, virtual shopping assistants and automated customer service tools offered businesses an opportunity to manage overwhelming online traffic and improve customer engagement and experience. Speedy adoption of AI occurred in inventory and supply chain management tools to mitigate disruption and optimize access to goods. Moreover, AI also provided a reliable tool during continuous forecasting of demand and use of trend data, particularly as models of predictability when purchasing, for example, had either diminished, or were not applicable, when buyers changed direction. The crisis accelerated the experimentation of new automation and omnichannel strategies in ways that many legacy and traditional businesses may not have been able to if they had put in place their own debugging processes. Through the chaos of the pandemic, AI has been embedded as a facet of resilience and adaptability across many sectors and businesses affected by the pandemic.

LATEST TREND

Rise of Generative AI in Customer Experience to Drive Market Growth

One significant development in the AI market for retail and e-commerce is the growing use of generative AI for customer engagement and content generation. Many retailers are starting to integrate generative AI models that can generate not only product descriptions and offers for customer personalization, but also can dynamically generate visual content to engage individual shoppers, whether that is brands pivoting to use generative AI models across their marketing funnel or retailers simply implementing generative AI that will provide individuals with a contextual response assessing users' behaviors and sentiment to create a human-like interaction. According to AI experts from the International Data Corporation (IDC), "Generative AI is enabling businesses to reward and offer hyper-personalized marketing at massive scale, while outsourcing the work away from their employees". Generative AI is also developing AI-functionality-enabled chatbots and voice assistants that are providing real-time customer assistance, while claiming to communicate with the customer in a deeper way that adding the analysis of their behavior and sentiment will allow the generative ai model to engage them with contextual replies to their inquiries that simulated the human response. As competition increasingly heats up, brands are using generative AI to provide customers with unique and immersive shopping experiences to help generate purchasing behaviors.

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AI IN RETAIL AND E-COMMERCE MARKET SEGMENTATION

BY TYPE

Based on Type, the global market can be categorized into Sales and Merchandise Planning, Reduced Fraud and Shrinkage, Logistics and Delivery, Trade Promotions Management, Others:

• Sales and Merchandise Planning: AI is revolutionizing the sales and merchandise planning function by allowing retailers to process data in near real-time and develop behavioral predictive models. Retailers are using AI algorithms to process historical sales data; long-term demand patterns; past seasonal patterns; and behavioral predictive modeling of customer data to reach a more reasonable estimation of future demand. With the predictive abilities of AI, retailers can make more intelligent business decisions about inventory levels or optimal stock levels, assort patterns based on customer wants, and forecast future markdowns. AI takes predictive abilities to the next level by supporting and enhancing retailers' use of dynamic pricing models that ignore the seasons and reactively develop pricing based on market realities. In the end, companies are enhancing their accuracy in sales and merchandise planning. They are more able to make profit-maximizing decisions while providing an improved shopping experience for the customer with more relevant and timely prices.
• Reduced Fraud and Shrinkage: AI has become important in reducing fraud and shrinkage across retail and e-commerce operations. Using machine learning algorithms, retailers can examine transactions for anomalies that may mean fraud as they happen. In traditional retail stores, computer vision systems using AI can monitor the in-store behavior of customers and make detections related to theft. The intervention improves security, reduces operational losses, and complies with the law. Additionally, AI-driven systems adapt, meaning they continually learn and improve their precision in detecting suspicious behavior over time. Consequently, AI technologies have become key elements in organizations' efforts to sustain trust and diminish risk.
• Logistics and Delivery: AI is changing logistics and delivery systems by prompting suggested routes, predicting delivery times, and managing warehouses. AI technologies pull data, and advanced algorithms analyze that data, including traffic, delivery and order amounts, and then provide suggested routes to avoid delivery delays. AI improved access to advanced materials handling robotics in warehouses allow automation of the picking and packing process of items to improve speed and accuracy. AI systems for delivery can give retailers predictive information regarding shipping demand to assist in planning to offer available resources. AI can help streamline and refine logistics processes improving customer satisfaction, while potentially lowering costs and minimizing the environmental impact of the retail supply chain.
• Trade Promotions Management: Artificial intelligence is useful in marketing promotions management and provides a wealth of insight into promotional merchandising as well as consumer behavior. Retailers could utilize AI behavioral models to give more targeted discounts based on previous buying history, demographic, and behavioral data. These systems can also assess the chances of each promotional attempt succeeding with each customer, which helps businesses with investment in promotions that have the optimal chance for success. AI can also give real time tracking of a campaign as it develops; this feature is important because it allows retailers to be more dynamic in adapting their offerings. The result of these capabilities would deliver greater returns on promotional activities with minimal adjustment costs, and consistent with what the customer wants, which would likely drive shopper engagement and further purchases.
• Others: This includes several newly emerging applications of AI that are beginning to emerge in retail and e-commerce such as visual search, sentiment analysis, and AI-enabled loyalty programs. Visual search refers to a capability that allows users to upload a picture of a product and find the matching product. Visual search greatly improves discovery for the user. Sentiment analysis is displayed in the retail space as a capability to understand how people feel about products and brands. Because sentiment analysis observes sentiment regarding brands and products in real-time, retailers can make adaptive real-time decision-making to enhance their customer engagement tactics. AI-enabled loyalty programs offer a more adaptive, data driven approach of providing customers personalized rewards linking them to the brand. Each of these new applications of AI offer exciting and meaningful opportunities that help create a more intelligent and adaptive retail ecosystem. At a suggested time when customer expectations are changing overnight, solutions as described would keep businesses relevant and innovative, and ready to be adaptive to what’s next.

BY APPLICATION

Based on application, the global market can be categorized into Brick & Mortar Stores, E-commerce Stores:

• Brick & Mortar Stores: AI is transforming traditional physical retail in their efficiency and customer engagement. Smart shelves, facial recognition technology, and real-time inventory management tools are helping to better run the store. In addition, AI video analytics is examining foot traffic patterns and suggesting optimal store layout as well as security routing. The in-store personalization of customer items through first parties’ customer data and loyalty programs allow to personalize the shopping experience. Voice-activated kiosks and cashier-less checkout systems continue to trend upward, which enhance customer convenience and decrease customer wait times. These innovations in technology enable previously distributed ideas to compete with online versions by using online intelligence that connects the digital world to stores.
• E-commerce Stores: AI in e-commerce helps to personalize, automate, and service customer requests. Algorithms read user data to produce personalized product suggestions and tailored advertisements, and dynamic pricing. AI-enabled chatbots can give 24/7 customer service, answering questions, facilitating returns, and letting customers find their tracking updates. Visual search tools allow users to find products in reference to pictures, removing barriers to browsing. Fraud detection algorithms protect payments transactions, building trust with consumers. AI also has in-factory uses from warehouse automation to source-to-delivery visualization in optimized routes. These technologies let online retailers provide best-in-class data-driven purchasing experiences, ease of purchase, and customer satisfaction, increasing conversion in an ever-increasing competitive environment.

MARKET DYNAMICS

Market dynamics include driving and restraining factors, opportunities and challenges stating the market conditions.                         

DRIVING FACTORS

Rising Demand for Personalized Customer Experiences to Boost the Market

The call for a more individualized customer experience is driving the use AI in Retail and e-Commerce market growth. Customers expect brands to treat them differently based on the individual customer's various preferences, and the expectation is that through AI, brands can personally associate / connect the consumer together with relevant content, recommendations, goods and services. AI enables retailers to see every single data point about a customer in real-time - the browsing history, purchase behavior, product reviews / feedback, and therefore giving retailers the opportunity to provide the customer a curated marketing and product recommendation.  Personal engagement not only provides the customer with a pleasurable in-store experience, it builds loyalty and repeat purchasing. As expectations for ongoing personal engagement increases, businesses will employ more and more technology and AI to make them more competitive in maintaining and connecting with the "deeper" relationship with consumers - meaningful engagement.

Operational Efficiency and Cost Reduction to Expand the Market

More and more merchants are taking advantage of AI to improve operational efficiencies and reduce costs in stores and supply chains. All the tasks that can be automated such as inventory management, demand forecasting, and customer support can be electronically facilitated using AI tools to allow people to do better and more profitable work. Predictive analytics can help streamline supply chains to reduce instances of over-ordering and shortages. Merchants can use chat bots, or virtual assistants to cut labor costs in customer support operations. When the company realizes the improvements that AI represents, they improve performance and therefore profits. Companies need to add the ''good'' part of AI noted, because AI can be used to create smarter, faster decisions and is a necessary investment to assist all companies grow without growing the cost.

RESTRAINING FACTOR

Data Privacy and Security Concerns to Potentially Impede Market Growth

While AI has the capacity to significantly alter retail and e-commerce, privacy and security of data are an obstacle to progress. AI systems are fueled by consumer data, including browser histories, buying behaviors and identifiers. Aside from the serious privacy issues related to how or where that data might be collected, stored or used to produce products and services there seems to be additional scrutiny from the regulator and society in general. Companies must comply with a vast majority of data protection regulation, and they must also protect themselves against data breach. For many companies, compliance is one of the deterrents - how to comply and innovate?

Integration of AI with Augmented Reality (AR) to Create Opportunity for the Product in the Market

Opportunity

There are many interesting opportunities in the AI in retail and e-commerce space, including AI's integration with augmented reality (AR) to enhance customer engagement. Retailers are increasingly starting to integrate AI-enabled AR apps where customers can virtually "try on" clothing, for instance, preview furniture in their homes, or visualize usage of a product even before purchasing. This participatory experience helps close the divide between the digital shopping experience while allowing an individual to experience the convenience and confidence of purchasing. AI brings value to the AR experience through personalization and improvements in object recognition. The combination of AI, AR, and a great opportunity are a solid growth offering for brand innovators and visionaries as consumers look to become more engaged and informed throughout their buying journey.

Integration with Legacy Systems Could Be a Potential Challenge for Market

Challenge

One of the biggest challenges to the advancement of AI in retail and e-commerce is the ability to adopt cutting-edge AI capabilities on a legacy infrastructure. Many of the large and well-established retailers are still running on older legacy systems where have little compatibility and may greatly stretch the current capabilities of their infrastructure with AI tools and measures. This often leads to data flowing into, but not being able to optimally flow out, limits to automation across the company against competitor offerings, and limits to opportunities for scaling AI initiatives across the enterprise. Managing the process to upgrade these systems is complicated, costly and time consuming, each requiring characteristics for acceleration that may or may not exist within the organization. Essentially, the infrastructure has created the capability bottleneck to effectively leverage AI. Without seamless integration of systems to allow businesses to be able pursue AI tools effectively, organizations may find a capability gap that increasingly advantages agiler and integrated competitors in an ever-more dynamic digital marketplace.

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AI IN RETAIL AND E-COMMERCE MARKET REGIONAL INSIGHTS

●       NORTH AMERICA

North America is signaling, especially among United States AI in Retail and e-Commerce market. companies, the largest market for AI in retail and e-commerce due to its highly developed digital capabilities and long history of adopting new pertain technologies. North American retailers and technology companies have taken the lead in applying AI market solutions (e.g., predictive analytics, automation, and personalization). Although the U.S. is creating a large market, it has also benefitted from a wealth of professional talent and large venture capital investment in the development of AI start-ups. Similarly, State and Federal Government support for research involving AI and consistent regulations with data will provide further growth opportunity for AI in the retail market. Overall, North America will continue to set trends in AI for e-commerce and retail.

●       EUROPE

The AI in retail & e-commerce market in Europe is continuing a growth parse as countries begin to digitally transform their retail and e-commerce sectors towards consumer-centric strategy. With Germany, the UK, and France taking part, ages from phenomenal investment to AI technology aimed at improving inventory management, engagement with customers, and operational workstreams. Big pain points like complying with the strict restrictions in GDPR for data governing in Europe are forcing companies to include compliance and transparency into motivation where there is AI solution equipping. Although the GDPR brings challenges, European retailers are beginning to adopt AI as they start to compete across borders and collaborative work between retailers and technology providers is increasing to develop customer-friendly, pioneering solutions.

●       ASIA

Asia is becoming a significant competitor in the competitive AI in retail and e-commerce space due to increased digitization and a lively and innovative total e-commerce ecosystem. Countries such as China, Japan, South Korea, and India are utilizing AI for uniquely personalized shopping, real-time customer interaction, and organizations like those of logistics providers. Currently China is leading with uniquely tech-driven retail-based models illustrating how AI can be included within mobile commerce platforms. There is a mixture of start-ups and established firms investing extensively in AI to provide the better user experience and attempting to capture a piece of the retail market. The substantial consumer marketplace based in Asia with mobile-first digital approaches serves as fertile ground for innovative approaches to AI in retail.

KEY INDUSTRY PLAYERS

Key Industry Players Shaping the Market Through Innovation and Market Expansion

Top players in the AI in retail and e-commerce market are focused on developing innovative solutions, consolidating strategic partnerships, and diversifying their technology portfolios to remain competitive. For example, IBM Corporation and Microsoft Corporation are both developing AI platforms (technology) that are driving personalized shopping, inventory forecasts and fraud detection in the retail context. Amazon.com, Inc. is still improving its AI-driven recommendation engines and fulfillment processes, setting the standard in the market. Alphabet Inc. and SAP SE are both incorporating AI as part of their cloud-based retail strategies to facilitate scalability. Companies such as Conversica Inc. and ViSenze Pte Ltd, specialize in conversational AI and visual search, respectively, and are fundamentally changing customer interaction paradigms and establishing next-gen retail experiences.

LIST OF TOP AI IN RETAIL AND E-COMMERCE MARKET COMPANIES

• IBM Corporation (United States)
• Versium Analytics Inc. (United States)
• Amazon.com, Inc. (United States)
• Microsoft Corporation (United States)
• SAS Institute Inc. (United States)
• Conversica Inc. (United States)
• SAP SE (Germany)
• Alphabet Inc. (United States)
• ViSenze Pte Ltd (Singapore)

KEY INDUSTRY DEVELOPMENTS

May 2025: Shopify announced the "AI Store Builder", a generative AI tool that will allow merchants to build a fully functional online store with simple descriptive keywords. The excitement surrounding this ingenious technology will allow users to generate a store layout (images and text) and can complete the store entirely. The AI Store Builder is faster than anything we have witnessed in setting up an online store possibly saving time and expenses through automation and un-measured human input—it is generating a fully functional online store and not individual components. The AI Store Builder has a different concept for use, as it is an integrated feature that automates the website-building process. This experience and path will seriously lower the barriers for entrepreneurs and small businesses than products or services ever have before based on user experience technical barriers. The launch of the AI Store Builder indicates Shopify's continued commitment to utilizing AI technology to improve e-commerce capabilities and in that process implementing a scam-proof methodology for as many merchants as possible as determined by lowering the technical burden on someone who is considering becoming a user.

REPORT COVERAGE 

The study encompasses a comprehensive SWOT analysis and provides insights into future developments within the market. It examines various factors that contribute to the growth of the market, exploring a wide range of market categories and potential applications that may impact its trajectory in the coming years. The analysis considers both current trends and historical turning points, providing a holistic understanding of the market's components and identifying potential areas for growth.

The research report delves into market segmentation, utilizing both qualitative and quantitative research methods to provide a thorough analysis. It also evaluates the impact of financial and strategic perspectives on the market. Furthermore, the report presents national and regional assessments, considering the dominant forces of supply and demand that influence market growth. The competitive landscape is meticulously detailed, including market shares of significant competitors. The report incorporates novel research methodologies and player strategies tailored for the anticipated timeframe. Overall, it offers valuable and comprehensive insights into the market dynamics in a formal and easily understandable manner.