- October 2024
Retail and Consumer Packaged Goods are some of the leading UK industries when it comes to leveraging AI to become an augmented organisation
Based on a recent study of over 700 C-Suite level executives globally, including 129 executives from retail and consumer packaged goods organisations (including luxury goods) with over €500 million in revenues, BearingPoint has recognised the UK Retail and CPG industries as leaders in AI adoption, with a significant 74% of respondents identifying as either AI Experimenters (37%) or AI Enthusiasts (37%), making it one of the most proactive sectors in embracing AI, second only to Financial Services in terms of engagement. The sector is poised for significant transformation, driven by AI, which is rapidly disrupting traditional practices and redefining customer experience.
UK Retail and CPG C-Suite's Position and Attitude in Organisation towards AI Transformation
Despite this strong engagement with AI, only 17% of respondents from the Retail and CPG sectors are directly involved in AI-related decision-making, while the remaining 83% are informed but not actively engaged in these initiatives. Furthermore, 30% of organisations are actively adopting AI technologies across their operations, with another 57% in the process of adoption. These figures indicate a steady move toward AI integration, with a significant portion of the sector actively testing or piloting AI solutions. However, only 27% of organisations report having a clear prioritisation methodology for AI-driven projects and initiatives.
The industry is highly focused on enhancing customer experience through AI, with 70% of customers now preferring AI-powered self-service options in stores. Personalisation, a key area of AI application, has been embraced by companies like Amazon, which uses AI to recommend tailored products based on customer behaviour, driving sales conversions. AI is also transforming supply chain optimisation, with 30% of major retailers using AI to optimise stock levels and reduce waste, following the example of Walmart’s predictive analytics. We see a clear distinction between back office and front office use of AI, with the back office prevailing as the most commonly used area for AI, but we will see further implementation into the front office moving forward.
Additionally, 73% of UK retail organisations have a well-documented strategy for AI adoption, supported by regular training on AI initiatives (73%). The integration of AI into marketing strategies is also gaining traction, with companies like Zara using AI to analyse real-time fashion trends and quickly adapt their product lines to meet consumer demand.
The findings also demonstrate a high level of data readiness, with 77% of organisations stating they are mostly ready in terms of data availability and quality, and 10% indicating they are fully ready. However, based on experience this isn’t always the case, and organisations should be aware of the importance of ensuring accurate data, both initially and ongoing, so that AI models are trained correctly. Without this, the impact of using poor quality data to train the models could be disastrous, with widely reported examples of AI being sexist or racists. It also highlights the importance of using ‘closed’ AI databases, not open ones that could be subject to external bias
However, significant challenges remain. Data privacy (80%) and the talent gap for skilled personnel (77%) are among the top barriers to further AI implementation. Ethical considerations around AI, particularly regarding automation and job displacement, are also being closely monitored by retailers. Understanding the different types of AI, from machine learning to natural language processing and generative AI, is critical for businesses aiming to harness the full potential of these technologies for growth. While Machine Learning and Natural Language Processing are subsets of AI, it is a broad field with multiple types powering innovation in retail. From simple automation tasks to advanced generative AI, each type serves a distinct function. Here are some key types of AI relevant to the retail industry:
Retail and CPG organisations are also focused on sustainability and social responsibility as key success measures for AI adoption, uniquely prioritising these over more traditional goals like increased revenue and market penetration. These concerns mirror the broader UK perspective and underscore the need for a careful, measured approach to AI adoption, balancing potential benefits with the risks and challenges involved.
Looking ahead, the Retail and CPG sectors are optimistic about AI's impact. 67% of respondents believe that AI will have a significant impact over the next 5-10 years, while 33% expect a moderate impact. This outlook suggests that while the sector recognises AI's potential, there is a need for more tangible evidence of its benefits before fully committing to transformational change.
In summary, while the UK Retail and CPG sectors lead in AI adoption, with substantial strategic planning and data readiness, ongoing challenges in decision-making engagement, talent acquisition, and balancing ethical considerations with business objectives persist. AI is reshaping the future of these sectors by streamlining operations, improving supply chains, and enhancing customer experience, offering a significant competitive advantage for those who fully embrace it.
Please note all data is rounded to the nearest whole number
