What: Retailers face significant barriers in scaling agentic, physical, and sovereign AI, with operational, regulatory, and workforce challenges slowing industry transformation.

Why it is important: The ongoing struggle to scale AI in retail demonstrates the need for continuous investment in upskilling, infrastructure, and governance, reflecting the latest market insights.

The retail industry is accelerating its adoption of advanced AI technologies, including agentic, physical, and sovereign AI, to enhance operations, customer engagement, and supply chain efficiency. However, despite widespread enthusiasm, only 10% of retailers have succeeded in scaling these solutions, revealing a persistent gap between potential and realised value. Key obstacles include the integration of AI with legacy systems, high costs associated with physical AI deployment, and the complexity of evolving regulatory and data sovereignty requirements. Workforce readiness remains a critical concern, as only 36% of retail employees feel adequately prepared for AI-driven change, highlighting the urgent need for systematic upskilling and talent development. While 71% of employees now use AI tools weekly and 87% of retailers report revenue growth from AI initiatives, the sector’s progress is hindered by fragmented compliance landscapes and mounting cybersecurity risks. Sustainable transformation will depend on retailers’ ability to invest in workforce capabilities, modernise infrastructure, and implement robust governance frameworks that can adapt to regulatory shifts and technological advances.

IADS Notes: As observed in July 2025, the retail sector’s AI adoption is marked by high usage rates and measurable efficiency gains, but only a small fraction of companies have scaled these solutions successfully. March 2025 data confirms the shift toward value creation, while September 2025 research highlights the urgent need for workforce transformation. The regulatory and geopolitical complexity described in December 2024 is now a defining factor, and the September 2025 Bain report underscores the critical importance of cybersecurity and compliance in sustaining AI-driven growth.

AI trends 2025: Adoption barriers and updated predictions