Artificial Intelligence (AI) in Retail Market is Forecasted to Hit USD 138.3 Billion by 2035, Driven by Omnichannel Retailing

The global artificial intelligence (AI) in retail market is forecast to reach USD 138.3 billion by 2035, up from USD 9.8 billion in 2025. During the forecast period, the industry is projected to register at a CAGR of 30.3%. AI-driven personalization enhances customer engagement through tailored recommendations and experiences. AI-powered demand forecasting optimizes inventory management and reduces operational inefficiencies. This rapid expansion is fueled by the increasing adoption of AI technologies to streamline operations, improve customer experiences, and drive revenue growth in a competitive retail landscape.

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As e-commerce and Omni channel retailing continue to evolve, AI's role in enabling data-driven decisions, automating processes, and providing actionable insights is becoming indispensable, positioning the market for transformative growth over the next decade.

Market Segmentation and Trends:

The artificial intelligence (AI) in retail market is segmented by offering, type, technology, deployment, application, and region, offering a comprehensive view of its dynamics. Offerings include solutions and services, catering to diverse retail needs. Types are divided into offline and online, reflecting the shift toward digital platforms. Technologies encompass machine learning, natural language processing, computer vision, and others, with machine learning dominating due to its versatility in personalization and analytics. Deployment options include cloud and on-premise, with cloud-based solutions growing rapidly for their scalability.

Applications span customer relationship management (CRM), supply chain and logistics, inventory management, product optimizations, in-store navigation, payment and pricing analytics, and virtual assistants, with CRM leading as retailers prioritize customer-centric strategies.

Regionally, North America holds the largest share, while Asia Pacific is the fastest-growing, driven by e-commerce expansion in China and India. Trends include the integration of generative AI for content creation, the rise of conversational commerce via chatbots, and a focus on ethical AI to address data privacy concerns.

Driving Factors Behind Market Growth:

Several factors are driving the artificial intelligence (AI) in retail market forward. The proliferation of e-commerce and omnichannel retailing has heightened the need for AI to manage vast data volumes and deliver seamless experiences across platforms. AI-driven personalization, through tailored recommendations and dynamic pricing, boosts customer loyalty and sales conversion rates. Advancements in machine learning and computer vision enable efficient inventory management, reducing stockouts and overstock by up to 30% through accurate demand forecasting. The shift toward sustainability prompts AI use for optimizing supply chains and minimizing waste.

Regulatory pressures, such as GDPR, encourage ethical AI practices, while government initiatives in digital transformation support adoption in emerging markets. Additionally, the integration of AI with IoT for in-store navigation and virtual assistants enhances shopper engagement, addressing labor shortages and operational inefficiencies in a post-pandemic retail environment.

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Recent Developments and Key Players:

The artificial intelligence (AI) in retail market is highly competitive, with key players focusing on innovation, partnerships, and acquisitions to strengthen their positions. In July 2025, Walmart announced generative AI assistants ("Sparky") for customers, employees, sellers, and developers to streamline operations and personalize experiences, supporting their goal of achieving 50% online sales. Other notable developments include the expansion of AIaaS (AI as a Service) models, enabling smaller retailers to access advanced tools without heavy investments.

Prominent players include IBM Corporation, Google LLC (Alphabet Inc.), Microsoft Corporation, Amazon Web Services, Inc., Salesforce, Inc., Oracle Corporation, SAP SE, NVIDIA Corporation, Intel Corporation. Competitor analysis reveals a focus on cloud-based AI platforms and industry-specific solutions. IBM and Google lead in machine learning and computer vision, while Microsoft excels in CRM integrations through Azure. Amazon dominates e-commerce AI with recommendation engines. Strategic collaborations, such as those with retail giants for pilot programs, enhance offerings. Companies are investing in ethical AI and data privacy tools to comply with regulations, targeting emerging markets with scalable, affordable solutions to capture growth in omnichannel retailing.

Regional Insights and Opportunities:

North America dominates the artificial intelligence (AI) in retail market, holding the largest share due to technological advancements and high digital adoption in the United States, where major players like Amazon and Walmart leverage AI for personalization and logistics. Europe follows, with countries like Germany and the UK focusing on sustainability and ethical AI under GDPR, driving innovations in supply chain optimization. The Asia Pacific region is the fastest-growing, led by China (30.8% CAGR) and India, fueled by e-commerce boom and government initiatives like China's AI development plans.

Latin America, particularly Brazil, offers opportunities through expanding online retail. The Middle East & Africa show potential with smart city projects in the UAE. Emerging markets present growth via affordable AIaaS models and partnerships for localized solutions, addressing the global shift toward omnichannel strategies.

Challenges and Future Outlook:

The artificial intelligence (AI) in retail market faces challenges, including high implementation costs, data privacy concerns under regulations like GDPR, and compatibility issues with legacy systems, which can hinder adoption among smaller retailers. Skill gaps in AI deployment and ethical considerations around bias in algorithms also pose hurdles. However, the market's future is promising, with opportunities in emerging technologies like voice commerce and augmented reality integrations.

As e-commerce continues to grow and sustainability becomes paramount, AI's role in waste reduction and personalized experiences will drive innovation. The market is well-positioned for sustained expansion, nearly quintupling by 2035 through scalable, ethical solutions that enhance retail efficiency and customer satisfaction.