Generative AI: Propelling Amazon and Walmart in the $1.5 Trillion Retail Transformation
Generative AI, a powerful technology rooted in machine learning, is set to revolutionize the retail industry and create new revenue streams for leading retailers. According to the Retail AI Readiness Index released by the IHL Group, generative AI has the potential to drive over $1.5 trillion in additional financial impact through 2029 for the top 212 North American public retailers and restaurants. Notably, retail giants Amazon and Walmart are expected to account for a significant portion of this windfall, with a combined share of more than $580 billion, representing 38.5% of the total forecasted impact.
At its core, generative AI leverages machine learning algorithms to generate new and unique content such as conversations, stories, images, videos, and music. This technology goes beyond the traditional AI/ML improvements currently used in the retail market, acting as a catalyst for exponential financial growth. It is a culmination of a company’s preparedness to adopt the advancements in generative AI, including data readiness, infrastructure scalabilty, and available investment capital. When combined with the foundational work accomplished in cleaning, tagging, and managing customer, inventory, and product data, generative AI propels retailers towards unprecedented growth opportunities.
The Retail AI Readiness Index not only offers an AI readiness score for individual companies but also provides insights into the potential financial impact through sales growth, gross margin improvement, and sales/general administrative cost reduction. The index’s research covers various retail segments, ranking the top seven companies in Fast Moving Consumer Goods, Apparel/Shoes, Hard Goods, Health and Beauty, Restaurant Chains, and Pure Play E-commerce.
Furthermore, a recent forecast from the IHL Group predicts that generative AI will have a staggering $9 trillion impact on the retail industry. Although it currently represents only 9% of the overall financial impact, generative AI is projected to account for 78% of the total impact by 2029, reaching a colossal $4.4 trillion. The benefits of generative AI will stem from increased sales (51%), improved gross margins (20%), and lowered selling and administrative costs (29%). As a result, retailers embracing this transformative technology can expect substantial returns on their investments.
The forecast also reveals that over the next decade, 47% of cumulative AI impact will come from traditional AI/ML technologies in closed systems, while generative AI functions will contribute to 48% of that impact. Additionally, 5% is projected to come from artificial general intelligence tools, which are expected to become available later in the decade.
Generative AI holds the key to unlocking unprecedented growth and profitability for retailers. By harnessing its capabilities, companies can create unique and engaging content that resonates with customers, leading to increased sales and improved gross margins. Furthermore, by leveraging generative AI’s ability to streamline operational processes and reduce costs, retailers can optimize their business efficiency and profitability.
As the retail industry continues to evolve, it is crucial for companies to recognize the immense potential of generative AI and invest in building their AI readiness. Retailers that embrace this technology and leverage its transformative power will be well-positioned to thrive in the rapidly changing landscape, securing their place among the industry leaders. With Amazon and Walmart leading the way, generative AI is set to reshape the future of retail, pushing the sector towards unprecedented heights of success and innovation.
