Globally retailers will spend $7.3 billion on AI-enhanced software by 2022, up from an estimated $2 billion in 2018, according to a new study from Juniper Research.
The spending will be driven by a decline in the cost of AI products, as well as, retailers looking for new ways to improve customer experience, marketing and demand forecasting.
The research, AI in Retail: Disruption, Analysis and Opportunities: 2018-2022, found that retailers will heavily invest in AI tools that allow them to differentiate and improve the services they offer customers.
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It noted that the cost of AI tools, currently uneconomical for many players, will drop by 8 per cent over the next four years, helping realise a 300 per cent increase in software spend.
These range from automated marketing platforms that generate tailored, timely offers, to chatbots that provide instant customer service.
By 2022, retailer spending on AI will be shared between customer service and sentiment analytics (54 per cent), AI-based automated marketing (30 per cent) and demand forecasting (16 per cent).
Customer service and sentiment analytics is tipped to lead the spending thanks to AI’s ability to understand customer reaction to the products purchased and the service received. Juniper argues this will become a key tool for retailers measuring and improving customer experience.
“Retailers are looking to replicate the success of Amazon in making AI a core part of their operations, with retailers increasingly turning to solutions such as AI-optimised pricing and discounting, as well as demand forecasting,” said research author Nick Maynard.
The research found that AI-backed demand forecasting is increasingly becoming a key tool for retailers. With the advent of specific days for shopping, such as the Black Friday phenomena, understanding customer demand and correctly planning based on this is more important than ever.
Juniper argued that retailers must invest in this area in order to stay competitive, particularly in low-margin retail segments.