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The retail industry in India is on the cusp of a major transformation, driven by the rapid adoption of Generative AI (GenAI). According to EY India's latest report, retail productivity is expected to see a significant boost of 35 to 37 percent over the next five years. This shift is poised to redefine how businesses approach pricing, promotions, supply chain management, and customer engagement.
As more organizations integrate GenAI into their operations, retail in India is set to become more agile, efficient, and customer-centric. With 48 percent of survey respondents already initiating proofs of concept (POCs) for GenAI in their businesses and 32 percent either planning to invest or having already allocated budgets, the momentum for AI-driven retail transformation is undeniable.
Revolutionizing Retail Operations with GenAI
The introduction of GenAI is reshaping the retail landscape in unprecedented ways. From insights-driven pricing strategies to personalized customer experiences, retailers are leveraging AI to enhance decision-making and operational efficiency.
Angshuman Bhattacharya, Partner and National Leader - Consumer Product and Retail Sector at EY-Parthenon highlighted the significance of GenAI’s role in India’s retail and e-commerce sectors. He notes that insights-driven pricing and promotions, alongside enhanced customer experiences, will be crucial. Productivity improvements are projected at 40 percent to 45 percent in these areas, with store operations also expected to see efficiency gains of 38 percent to 40 percent.
However, Bhattacharya emphasizes that while AI opens new doors, retailers must strike a balance between automation and human-centric experiences to ensure sustainable success.
GenAI across the Retail Value Chain
Retailers are prioritizing specific functions for GenAI implementation, with sales emerging as the primary area of focus. Currently, 52 percent of organizations are utilizing GenAI-powered recommendation engines to elevate consumer shopping experiences. These AI-driven tools help analyze vast amounts of consumer data to offer personalized suggestions, ultimately boosting sales and customer engagement.
In addition to sales, supply chain optimization is another crucial area where GenAI is making a difference. Around 48 percent of retailers are employing AI-driven solutions for demand forecasting, route planning, and warehouse management. These improvements help minimize errors, reduce costs, and enhance overall supply chain efficiency.
Meanwhile, 40 percent of organizations are leveraging GenAI to enhance manufacturing capabilities. AI-powered quality control, predictive maintenance using digital twins, and advanced worker training programs are enabling manufacturers to maintain higher product quality and reduce operational disruptions.
Global Retail Giants and Their AI Strategies
While Indian retailers are increasingly investing in AI, global industry leaders have already harnessed GenAI to redefine their operations. H&M, for instance, is using AI to drive sustainability initiatives, enhance product development, and streamline marketing efforts. Similarly, Coca-Cola is optimizing delivery routes and stock management with AI-driven logistics solutions. Amazon Go has pioneered cashier-less checkout experiences, providing seamless in-store transactions powered by GenAI.
These global benchmarks serve as inspiration for Indian retailers, demonstrating the vast potential of AI in driving business growth, sustainability, and customer satisfaction.
The Future of AI in Retail: What Lies Ahead?
The future of retail in India is poised for a dramatic shift as GenAI continues to evolve. In the short term, AI is expected to enhance personalized marketing, improve product recommendation engines, and refine AI-driven market research and consumer insights. These applications will enable retailers to better understand and cater to the diverse preferences of Indian consumers.
In the long term, GenAI is anticipated to bring about a complete digital transformation of supply chains, making logistics and manufacturing more autonomous. The integration of augmented reality (AR) and virtual reality (VR) into customer experiences will further elevate engagement levels, potentially leading to new AI-enabled business models. Retailers who adapt to these innovations early will have a competitive edge in a rapidly evolving market.
The Business Impact: Cost Reduction, Revenue Growth, and Customer Satisfaction
The adoption of GenAI is already yielding tangible benefits for businesses. According to EY’s report, 56 percent of respondents cited organizational cost reductions as a direct result of AI implementation. Additionally, 44 percent of businesses reported increased revenue and improved customer satisfaction due to AI-driven efficiencies.
Retailers leveraging AI-powered analytics and automation tools are better equipped to make data-driven decisions, streamline operations, and create hyper-personalized shopping experiences. As a result, they can optimize resource utilization, reduce waste, and maximize profitability.
Challenges and Considerations for Retailers
Despite its potential, the widespread adoption of GenAI in retail comes with its own set of challenges. One of the key concerns is ensuring a seamless balance between automation and human interactions. While AI-driven chatbots and virtual assistants can enhance customer service, human touchpoints remain crucial for building brand trust and loyalty.
Additionally, skill gaps and workforce training are significant hurdles in AI adoption. Retailers need to invest in upskilling employees to work alongside AI-driven systems effectively. Without proper training and AI literacy, businesses may struggle to fully harness GenAI’s capabilities.
Another challenge lies in data privacy and security. As AI systems rely on vast amounts of consumer data to function efficiently, retailers must implement robust data protection measures to safeguard customer information and comply with regulatory requirements.
GenAI as a Strategic Imperative for Retail
GenAI is more than just a technological advancement—it is a strategic imperative for retailers looking to thrive in an increasingly digital world. By leveraging AI, retailers can drive operational excellence, improve customer engagement, and unlock new growth opportunities.
As GenAI continues to evolve, businesses that proactively embrace AI-driven innovations will be well-positioned to lead the future of retail in India. Whether through smarter supply chains, enhanced customer interactions, or AI-driven product development, the possibilities are limitless.
However, for GenAI to deliver long-term success, businesses must prioritize a balanced approach—combining automation with human expertise, bridging skill gaps, and maintaining ethical AI practices. With the right strategy in place, the retail sector in India is set to witness an AI-powered revolution that redefines the shopping experience for consumers while driving unprecedented business growth.
(Courtesy: Indian Retailer, from the house of Franchise India)
