Artificial Intelligence And Retail Sector Of Saudi Arabia - Assignment Solution

• Introduction

The retail sector of Saudi Arabia has played a major role in enhancing the economy. With recent major economic reforms, the retail sector has been affected by major subsidy cuts by the government where subsidies given to retail sector have been reduced, escalated utility cuts, increased labor cost and stagnation of real disposable income (AlGhamdi, Drew, & Al‐Ghaith, 2011). However, with these reforms and changes, the retail trends in Saudi has also enhanced the future growth through usage of e-commerce, artificial intelligence and omni-channel strategies (Al-Ghalayini, 2018). 

With growing importance of Artificial Intelligence (AI), the impact of it on customer relations and retailers across the world cannot be undermined. The world is exponentially investing in AI with increased global annual spending that has expected to reach by 7.3 billion by 2022 (Oommen, 2019). As AI has become future strategic imperative for the retailers, the automated process, customers’ experience personalization and the future customer demand prediction can improve the overall productivity and revenue of the sector in Saudi Arabia (PWC, 2019). 

The investment in AI in Saudi Arabia is expected to reach at USD135.2 by 2030 (12.4% of GDP) which is more than Egypt, GCC4 and UAE (see the figure 1 below). According to the report issued by PwC (2019), Saudi Arabia is expected to see the largest impact of AI on the economy by 2030. The positive impact of AI in Saudi Arabia is seen on jobs, product enhancements and productivity. On the side of production AI has enhanced labor productivity while on the consumption side, AI has enhanced product consumption through escalated quality and personalization of products (Saponaro, 2018). 

Figure 1: Future Prediction of Investment in AI by 2030

Source: (PWC, 2019) 

AI has the potential of disrupting market by creation of innovative new services and establishing new business models. The major opportunity already tapped by Saudi Arabia retail sector is the automation of labor processes, enhancement of product personalization and establishment of customer engagement platforms (Lundin & Eriksson, 2016). The high/tech, telecom, automotive and financial services have embraced AI at the most while retail, CPG and entertainment sectors have adopted AI at medium level (see figure2 below).

Figure 2: Strong AI Adopters 

Source: (McKinsey Global Institute, 2017)

However, there are still untapped opportunities and challenges that the retail sector in Saudi Arabia are facing (McKinsey Global Institute, 2017).  For instance, the retail sector in Saudi Arabia is still to compel benefits from online marketing campaigns, improved inventory forecasting and automation of customer operations. Still around 20% of retail companies in Saudi Arabia are still to adopt AI in their operations (McKinsey Global Institute, 2017). Hence, the aim of this research report is to identify the challenges and untapped future opportunities that can still be used by Saudi Arabian retail sector for improving their productivity, effectiveness and profitability