Retailers are seeing real returns on their AI investments, with more than half reporting strong financial and operational gains. According to KPMG’s latest report on AI-driven transformation in retail, 55% of retailers have achieved a return on investment (ROI) of more than 10%, while 21% have recorded returns exceeding 30%. AI is making its mark across critical functions such as IT (61%), marketing (53%), and customer service (53%), highlighting its deepening role in reshaping the industry.

Despite early scepticism and cautious adoption, AI is now proving its value in retail, driving efficiency, innovation, and cost reduction. The study found that 67% of retailers have leveraged AI to enhance operational efficiency, while 47% have introduced AI-driven innovations, from hyper-personalised customer experiences to dynamic pricing and supply chain optimisation.

“AI is revolutionising the retail landscape by enabling retailers to deliver seamless, personalised experiences that meet the evolving expectations of consumers,” says Puneet Mansukhani, co-lead consumer & retail and head of global retail digital technology and transformation at KPMG in India.

The report also highlights that retailers are increasingly integrating AI with complementary technologies. Generative AI leads adoption at 64%, followed by predictive analytics (58%) and robotic process automation (51%). Retailers are using AI for demand forecasting, reducing losses due to overstocking and stockouts, and ensuring better inventory planning. Additionally, AI-powered chatbots and virtual assistants are streamlining customer service, cutting response times, and improving engagement.

“By leveraging AI, retailers can deliver hyper-personalised experiences, optimise 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,” adds Mansukhani.

However, challenges persist. While 83% of retail leaders express confidence in AI outputs, concerns around data privacy, regulatory compliance, and workforce adaptation remain. The report identifies that 61% of retailers have implemented extensive employee training on responsible AI usage, while 38% are focusing on practical AI applications to mitigate risks associated with biased algorithms and data security issues. Additionally, 56% of respondents cited concerns over AI providers exerting too much control over their business operations.

Pressure from shareholders to demonstrate immediate AI-driven ROI is also mounting, with 62% of retailers stating they face significant pressure to justify their AI investments. At the same time, the outlook remains optimistic, as 71% anticipate a substantial ROI from AI-driven initiatives in the coming year. Furthermore, AI spending is set to surge, with 58% of retailers planning to increase their AI budgets by more than 20% in the next 12 months.

Beyond cost savings and efficiency, AI is also unlocking new revenue streams and reshaping customer interactions. Retailers are using AI for personalised marketing, AI-powered fashion avatars, and even AI-generated product designs to appeal to evolving consumer preferences. Not only that but AI-driven pricing models are also helping brands remain competitive by dynamically adjusting prices based on real-time market conditions.

As AI adoption moves from experimentation to large-scale implementation, it is becoming clear that those who invest strategically in AI will have a competitive edge.