Retail riding on tech, AI wave

For nearly the first half of the 20th century, artificial intelligence (AI) meant little to anyone except science fiction fans. However, in recent years, all sectors across the world have started to realise the huge potential of AI and began adopting it in their businesses to yield maximum productivity. In the same vein, AI has transformed from being mere tools to being the bedrock of profitable growth for India’s consumer retail business.

So much so that Deloitte predicts that by 2025, 20% top global retailers will use distributed AI systems to achieve holistic results, revolutionising sales, marketing, supply chains, and operations. Furthermore, around 45% marketing leaders plan to invest in GenAI in the next 12-24 months.

According to the report by Deloitte and the Retailers Association of India (RAI), the Indian retail industry presently contributes 10% to GDP and 8% to employment. Recent years have seen remarkable growth fueled by urbanisation, rising incomes, improved logistics, expanded product offerings, and digital consumer accessibility. India is amongst the top five $1 trillion retail markets and could be the world's third-largest consumer market by 2030, with a 10% CAGR growth to US$1.9 trillion.

“The retail industry is experiencing a significant turning point, driven by changes in the global economic environment that are fundamentally reshaping consumer habits,” says Anand Ramanathan, consumer products and retail sector leader, Deloitte India.

He believes that technology is pivotal in this transformation, no longer merely a tool but the essential foundation upon which retailers must build to meet the expectations of modern consumers and guarantee the success of their investments.

“AI is revolutionising retail, offering personalised recommendations and solutions, with 71% consumers expecting tailored experiences. This signals a move towards experiential engagement beyond mere transactions across consumer touchpoints,” Ramanathan explains.

India has become a global leader in the digital space, ranking second globally with 830 million internet users and 750 million smartphone users. India is the third largest online shopping country in the world with 220 million users.

“The Indian consumer market has a strong affinity for innovative technologies, and their widespread usage has catalysed increased investment, product development, and technological advancements in the retail sector,” says the report titled ‘Future of Retail: Profitable growth through technology and AI’.

The report highlights some interesting trends. In ease of product discovery, high-income households have a 50% higher preference for automation than medium-income households to elevate their shopping experience.

Meanwhile, in prompt post-purchase support and service, 70% of consumers prefer high-to-moderate human interaction. Also, 50% more millennials & Gen X prefer this in comparison to Gen Z.

In a recent survey by Deloitte, 91% of executives voted AI to be the top game-changing retail technology in the next three years. “Retailers can benefit from AI across personalisation, marketing, supply chain, operations, etc. With personalisation, brands achieve benefits, 18% lower acquisition costs, 20% higher customer spend, 30% higher customer satisfaction, etc,” says the report.

Nevertheless, at present, consumers still have a stronger inclination towards brick-and-mortar for grocery, jewellery, and pharmacy categories, seeking physical experience and trusting stores for essential or high-value purchases. In these sectors, consumer preference for physical stores is 2–4 times higher than digital channels.

On the other hand, for consumer electronics and beauty/personal care, shoppers predominantly use online marketplaces due to their competitive pricing and wider choices.

“These innovations are not just trends; they are the building blocks for future-proofing our retail industry. The insights in this report not only showcase the transformative power of emerging technologies but also provide a roadmap for retailers to navigate this new era,” says Kumar Rajagopalan, CEO, Retailers Association of India (RAI).