Retail, consumer brands to boost AI investments by 52% in 2025

Companies plan to allocate an average of 3.32% of their revenue to AI this year.

Spending on artificial intelligence (AI) in retail and consumer products is set to increase by 52% outside traditional IT budgets in the next year, according to a global study from the IBM Institute for Business Value.

The report said that companies plan to allocate an average of 3.32% of their revenue to AI by 2025, which translates to $33.2 million annually for a $1b business. This investment is expanding beyond IT functions into areas like customer service, supply chain operations, talent acquisition, and marketing.

The study showed that 81% of executives and 96% of their teams are already using AI to a moderate or significant extent. As part of their future plans, executives expect to increase AI usage by 82% in areas such as integrated business planning by 2025.

Additionally, 31% of employees will need to acquire new AI-related skills within the next year, rising to 45% within three years. AI applications in customer service, particularly for personalised responses, are expected to grow by 236% over the next 12 months, with 55% of these advancements relying on human-AI collaboration.

Investment in AI ecosystem platforms is also anticipated to grow, with companies projecting an increase from 52% today to 89% within three years. These platforms, which enable the exchange of data and AI models, are central to accelerating innovation and driving operational efficiencies. However, the report also highlights a critical gap in AI governance, with fewer than 25% of executives having fully implemented risk management tools for challenges such as bias, transparency, and security.

"AI is no longer just a tool; it's a strategic imperative," said Dee Waddell, global industry leader, Consumer, Travel & Transportation Industries at IBM. "Retail and consumer product companies are at a tipping point where embedding AI across their operations can help define not just productivity gains, but the future of brand relevance, engagement and trust."