As AI adoption increases in the retail industry, AI preparedness increases – is it moving too fast?

The pandemic accelerated the disruption of the retail industry by an estimated five years in the past 12 months. A new KPMG study shows that artificial intelligence (AI) surged with this acceleration, creating excitement while also raising some concerns.   

Ninety percent of retail business leaders indicated that their employees are prepared and have the skills for AI adoption, up 47 percentage points from the inaugural KPMG study published in early 2020. Half (53 percent) of business leaders in retail said COVID-19 increased their company’s pace of adoption, yet many (49 percent) believe AI adoption is moving faster than it should in their industry.

“Retailers have been investing significantly in their digital transformations to respond to customer expectations and thrive in the new reality, and given the potential benefits, AI and analytics brought to life by improved technologies are indispensable parts of their business strategy,” said Matt Kramer, national consumer and retail sector leader at KPMG. “The concern about the speed of adoption raises a caution flag for retailers, reminding them to ensure proper process and controls along with change management and effective training are put in motion to address the AI adoption risks.”

While business leaders cited cybersecurity breaches (47 percent) and possible AI bias (45 percent) as the top two greatest potential risks of AI adoption, 78 percent said their company has an AI code of ethics, up 34 percentage points compared to last year’s report and in higher rates than total business leaders and government decision-makers.

The significant increase in AI preparedness and pace of adoption may also indicate that some retailers have been able to address three key factors on the road to AI: rapidly transforming and upgrading legacy systems, complying with data security and privacy regulations, and balancing strategic priorities competing for budget and resources.

At the same time, a large majority (75 percent) of retail business leaders, like other industries in the study, believe that AI is more of hype than reality – but that is not unexpected. “That should not be surprising since the use of AI varies significantly between online-only digital natives and traditional retail companies, and clearly quantifying ROI around some of the use cases can be challenging,” said Duleep Rodrigo, national consumer & retail consulting leader at KPMG. He added that, for some retailers, there are more pressing foundational needs, such as upgrading legacy systems, getting process standardization and accurate data across systems, before they can benefit from AI.

Retail business leaders expect that in the next two years, AI will have its biggest impact on the industry  in customer intelligence (53 percent), inventory management (50 percent) and chatbots for customer service (49 percent). 

It’s expected that retailers plan to invest in these three areas to address one of their biggest challenges over the past 10-12 months: demand planning and forecasting.

“We see AI providing a sustainable solution for demand planning and forecasting, and data is at the heart of it. Having the ability to rapidly access and analyze data across your value chain will separate those who thrive from those who just survive,” said Rodrigo.

To speak with Kramer and Rodrigo about the study and AI in the retail sector,  please contact Melanie Batley.


About Thriving in an AI World

The KPMG study, Thriving in an AI World, is an evolution of a study KPMG originally released in early 2020. The findings are based on feedback from a range of 950 full-time business decision makers and/or IT decision makers* with at least a moderate amount of AI knowledge and at companies with over $1 billion in revenue**, across seven industries (150 respondents+ per industry): technology, financial services, industrial manufacturing, healthcare, life sciences, retail, and government. The online survey was fielded between January 3rd, 2021 and January 16th, 2021. The margin of error (MOE) for the total sample at the 95 percent confidence level is +/- 3.2 percentage points.

*Only government respondents included IT decision makers.

**Healthcare and life sciences respondents were from companies with over $100 million in revenue. +Healthcare and life sciences respondents only had 100 respondents per industry.




Mike Alva

Mike Alva

Director, Corporate Communications, KPMG US

+1 925 878-5488

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