KPMG Report Reveals AI Transforming Retail Industry

KPMG International has unveiled a new report titled, ‘Intelligent Retail: A Blueprint for Creating Value through AI-Driven Transformation’. This comprehensive study delves into the transformative power of artificial intelligence (AI) in the retail sector, offering strategic insights for retailers to harness AI’s potential and drive sustainable growth. As consumer expectations continue to escalate, the report highlights how AI is revolutionizing retail by enabling hyper-personalized customer experiences, optimizing inventory management, and automating customer service with near-human precision.

The retail industry is at a pivotal moment, where traditional operating models are being pushed to their limits by the collision of e-commerce, social commerce, omnichannel shopping, and rapidly shifting buying behaviors. KPMG’s report provides a clear, strategic roadmap that addresses these challenges, emphasizing the need for modernized systems and collaborative teams to bridge gaps between data, technology, customer experience and unlock new opportunities for growth.

Some key highlights of the report include:

Significant ROI from AI Investments: Over 55% of retailers have reported an ROI of over 10% from their AI investments, with 21% seeing returns exceeding 30%. AI has driven productivity gains (33%), enhanced efficiency through cost reductions (67%), and innovation in new products and services (47%).

AI Spending and Budget Allocation: 56% of retailers have been using AI for over 3 years. With 67% believing that AI spending in the next year will significantly increase the global budget spent on AI.

Customer Experience and Engagement: AI-powered applications like fashion avatars, smart shopping carts, and virtual influencers are enhancing customer engagement. 47% of retailers state that AI has led to new product and service developments.

Data Management and Integration: 74% of retailers identify data management as a primary challenge to scaling AI in retail. With only 28% having achieved system-level data integration, and just 7% having fully automated data integration.

Strategic AI Roadmap: 24% of retailers have a clear, ambitious vision for AI as a central driver of organizational transformation.

Puneet Mansukhani, Co-Lead Consumer & Retail and Head of Global Retail Digital Technology and Transformation at KPMG in India, said, “AI is revolutionizing the retail landscape by enabling retailers to deliver seamless, personalized experiences that meet the evolving expectations of consumers. Our latest report underscores the critical role AI plays in enabling retailers to meet and exceed the evolving expectations of today’s consumers. By leveraging AI, retailers can deliver hyper-personalized experiences, optimize their operations, and drive significant value across their entire business. As we look to the future, those who embrace AI at the core of their strategy will not only keep pace with the industry but will set new standards for innovation and customer engagement.”

Artificial intelligence (AI) is no longer a futuristic concept in retail—it is delivering real financial returns today. According to the same report by KPMG International, more than 55% of retailers report an AI-driven return on investment (ROI) exceeding 10%, with 21% seeing gains surpassing 30%. The report highlights how AI is reshaping the retail landscape by enhancing customer experiences, optimizing operations, and driving innovation.

Retailers leveraging AI have reported increased productivity (33%) and significant cost savings (67%), making AI a critical tool for efficiency and profitability. Innovations such as AI-driven demand forecasting and automated supply chain management are enabling businesses to reduce waste and maximize margins. AI is becoming an integral part of retail operations, with 56% of retailers having used AI for over three years.

The trend shows no signs of slowing down—67% of retailers anticipate a significant increase in AI spending in the coming year, demonstrating a strong commitment to AI-powered growth. From smart shopping carts to virtual influencers, AI-driven applications are revolutionizing how customers shop. Nearly half (47%) of retailers credit AI for enabling the creation of new products and services tailored to evolving consumer preferences. Hyper-personalized shopping experiences powered by AI are setting new standards for customer engagement.

Mansukhani stated, “Retailers who embed AI at the core of their strategy will not only enhance operational efficiency but also elevate customer experiences and set new industry benchmarks.” Despite AI’s potential, many retailers struggle with data integration. A striking 74% identify data management as a key challenge, while only 28% have achieved full system-level data integration. Just 7% have fully automated data processes, highlighting the need for improved infrastructure to scale AI effectively.

The report reveals that only 24% of retailers have a clear, long-term AI strategy. Industry experts emphasize that businesses embracing AI as a core part of their transformation strategy will not only stay competitive but also drive the future of retail innovation.