Retail titans to surge AI spending by 52% in 2025, redefining customer service and operations beyond IT

SINGAPORE:  A new global study by the IBM Institute for Business Value featured by Retail Asia reveals that artificial intelligence (AI) spending in retail and consumer products will skyrocket by 52% outside of traditional IT budgets in the coming year.

As businesses look to transform their operations, AI is becoming a key driver of growth and efficiency, expanding well beyond its initial use in IT departments.

Strategic AI expansion across business functions

According to the report, companies are expected to allocate an average of 3.32% of their revenue to AI by 2025, equating to approximately $33.2 million annually for a $1 billion business.

This spending shift is not limited to IT but is increasingly spreading into critical areas like customer service, supply chain operations, talent acquisition, and marketing.

A significant 81% of executives and 96% of their teams are already leveraging AI to a moderate or significant degree, with plans to expand usage by 82% by 2025, especially in areas such as integrated business planning.

Additionally, AI’s role in personalized customer service is poised for rapid growth.

Over the next 12 months, AI-driven advancements in customer service—specifically in providing personalized responses—are expected to increase by 236%.

Many of these developments will be fueled by collaboration between AI and human workers, a model that is expected to reshape customer engagement and satisfaction.

Workforce adaptation and the need for AI governance

As AI adoption accelerates, the workforce will also need to evolve.

The study forecasts that 31% of employees will require new AI-related skills within the next year, with this figure rising to 45% in the next three years.

To support these changes, companies are investing more in AI ecosystem platforms, which facilitate the exchange of data and AI models across businesses.

These platforms are crucial for driving innovation and operational efficiency, with investment expected to grow from 52% today to 89% in just three years.

Despite the optimism, the report highlights a concerning gap in AI governance, with fewer than 25% of executives having implemented comprehensive risk management tools to address challenges such as bias, transparency, and security.

As AI continues to shape the future of business, effective governance will be critical to its long-term success and sustainability.

Dee Waddell, global industry leader for Consumer, Travel & Transportation Industries at IBM, emphasized the growing importance of AI, stating, “AI is no longer just a tool; it’s a strategic imperative.”

Retail and consumer product companies are at a pivotal moment where the successful integration of AI could redefine productivity, brand relevance, and consumer trust.