AI in Retail: Transforming India’s $1 Trillion Market by 2030

AI in Retail is set to play a crucial role in propelling India’s retail sector, which is currently valued at approximately $1 trillion, towards almost $1.9 trillion by 2030. This insight comes from Deloitte’s latest report titled AI in Retail for the Agentic Era: Aspiration to Action.

The Role of AI in Retail Growth

The report highlights that AI has evolved from a peripheral tool into a fundamental component of enterprise strategy. Retailers are no longer merely testing concepts; instead, they are integrating AI to enhance customer journeys, tailor offerings, and streamline supply chains.

Insights from the Industry Leader

Anand Ramanathan, the Partner and Consumer Industry Leader at Deloitte India, pointed out that AI serves as a catalyst for transforming retail. He remarked that the moment to spearhead this transformation is now.

Core Factors Fueling AI Adoption

• Channel-agnostic consumers: Shoppers anticipate a seamless blend of online and offline experiences, with AI enabling highly personalised interactions across various platforms.
• E-commerce expansion: India’s online retail market is expected to reach ₹27 trillion by 2030, with quick and social commerce accelerating AI utilization.
• Premiumisation trend: The number of affluent households is forecasted to grow fivefold by 2030, increasing the demand for luxury items and personalised retail services.
• Urban migration: With 40% of the Indian population projected to reside in urban areas by 2030, consumption patterns in cities will reshape retail strategies.
• Gen Z influence: This generation is anticipated to have a spending power of $250 billion by 2025, pushing the boundaries of AI-driven digital-first retail.

Current AI Applications in Retail

• GenAI-powered shopping assistants on e-commerce platforms that provide instant product recommendations.
• AI algorithms leveraged by food delivery services for tailored meal suggestions.
• Retail giants employing AI to refine supply chains and store inventories.
• Smart retail environments and digital twins simulating store layouts to improve sales efficiencies.

Projected Growth of AI Investments

Expenditures on AI in India are expected to triple from $7–8 billion in FY23 to $20–22 billion by FY27, reflecting an annual growth rate of 30–35%. Deloitte suggests that this increase will provide significant value through three key aspects:

• Efficiency: Enhanced automation and streamlined operations.
• Experience: Creation of personalised and cohesive customer journeys.
• Intelligence: Access to data-driven insights for quicker decision-making.

Challenges in AI Implementation

Despite the advancements in AI integration, retailers are encountering hurdles like high implementation expenses, concerns surrounding data privacy, and difficulties in integrating legacy systems. Deloitte advises the following approaches:

• Invest in infrastructure designed for AI readiness.
• Encourage collaboration across different functions.
• Focus on responsible AI practices, ensuring transparency and fairness.
• Expand personalisation and automation efforts.
• Adopt a test-and-learn approach to evaluate impact.