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According to a report by Honeywell, the retail sector is currently in an advanced stage of Artificial Intelligence (AI) implementation. Retailers are no longer asking “should we implement AI,” but rather “how to effectively scale and optimize it.” The vast majority of retail companies have deployed AI-based solutions, and over half of them are actively expanding these systems. From personalized product recommendations to precise demand forecasting, AI is beginning to influence the way retailers conduct their business.
Market leaders agree – the era of AI in retail has arrived
One of the most important findings in Honeywell’s report, “AI in retail: executives embrace automation to improve shopping experience,” is that a significant 85% of retail companies have implemented AI-based solutions, and 60% of those are actively expanding them. What’s more, only 1% of market-leading enterprises in the retail sector are currently neither using AI-based solutions nor considering their implementation.
A quarter of companies that have already implemented these tools do not plan further development for the time being. Among companies that do not yet have AI solutions, 14% plan to pilot them in selected areas. The subsequent implementation phase is expected to start quickly – 89% of surveyed companies planning to invest in AI intend to do so within the next one or two years.
India is the global leader in implementing AI-based tools, with 96% of its retailers having already deployed AI solutions. Meanwhile, the Middle East, with 76% of deployments, has the greatest growth potential – 44% of retailers in that region plan AI investments within the next two years.
Competitive advantage is no longer solely a result of AI presence, but rather the outcome of the effectiveness of its implementation, the scale of deployments, and the ability to manage the increasing complexity of the systems.
From personalizing customer experience to supply chain management
In light of the data contained in the report, AI is perceived by retail companies as a tool for both revenue generation and cost reduction. Hyper-personalization of the customer experience is one of the three main motivators for AI implementation, cited by 34% of retail executives.
They anticipate that AI will bring the greatest benefits to customer service (27%) and the overall customer experience (26%). As many as 39% of retail businesses have established special teams for developing AI projects within their customer experience departments, which may translate into a future competitive advantage.
A slightly lower percentage of managers, compared to those focused on hyper-personalization, view AI as a tool for optimizing internal operations. Both: implementing AI for supply chain and last-mile logistics optimization, and for intelligent demand forecasting and inventory management, received 33% of mentions.
Barriers to implementing and scaling AI-based solutions
Despite widespread acceptance of AI-based solutions, their implementation and scaling often encounter significant obstacles. The two biggest challenges, cited by 43% of surveyed executives, are the complexity of AI models and compliance with legal regulations. Notably, for companies that have already invested in AI, regulatory compliance becomes the single largest operational challenge (50%).
Obstacles related to acceptance are only slightly less significant: 40% of managers consider customer acceptance of AI-based solutions a major challenge, and 38% are concerned about workforce adaptation to the new reality. Furthermore, 34% of respondents believe that trust in suppliers and their reliability can constitute a barrier to the further implementation of AI-based solutions.
From QR codes to machine vision
AI implementation often depends on the existence of solid technological foundations that enable effective data collection. In addition to general AI systems, retailers use a variety of tools to feed data into their algorithms. The most common are traditional barcodes: 64% of companies use 2D barcoding (e.g., QR codes), and 61% use 1D barcoding.
Close to half of the companies also use RFID technology (47%) and sensors (45%). This high level of reliance on traditional, yet reliable, technologies proves they form the foundation upon which more advanced systems are built.
Machine vision and cameras are utilized by 42% of retailers, although in Europe (likely due to strict privacy regulations) this figure is 27%. Conversely, in India, where it is also perceived as a key area, the rate is 68%. It is also worth mentioning that 31% of retailers use Augmented Reality (AR).
Data quality matters greatly
The effectiveness of AI depends on data quality. A significant 76% of retail managers believe their companies are very proficient at acquiring quality data. However, this confidence can be surprising, as 46% simultaneously admit that the level of automation in their enterprise data collection processes is only partially or slightly automated. This is quite concerning, as feeding low-quality data into AI can lead to it making incorrect decisions.
This article is based on the report “AI in retail: executives embrace automation to improve shopping experience”. which relies on a survey conducted by Honeywell and Wakefield Research. The survey covered 450 executives from leading retail companies across five key regions: the United States, Europe (UK, Germany), Brazil, India, and the Middle East (UAE, Saudi Arabia).
