confidence, set-up, usage and spending on AI, was 56, but retail scored a mere 51, largely due to lack of know-how and usage compared to other sectors. The result surprised James O’Callaghan, partner and head of technology consulting in Hong Kong for KPMG China, which conducted the research.  “We thought it might be a little bit further forward than it actually came out,” he told Inside Retail at a virtual presentation of the findings on Thursday.   “What we find in the retail sector is…a reluctance to really invest a significant amount of money in the adoption of AI and actually digital more broadly. People [and] organisations need to start,” O’Callaghan said. “They also need to really harness the value of data.”  Barriers and use cases According to the report, more than half of retailers have no dedicated AI strategy and no dedicated AI leadership. The biggest barriers to adoption are a knowledge gap on how AI can be deployed and concerns about the cost and ROI of AI. Confidence in the technology and regulatory concerns, around privacy, for instance, are not major barriers to adoption. The report recommends retailers start their AI journey by focusing on data strategy and management. While capturing data can be particularly challenging for bricks-and-mortar businesses that don’t have an omnichannel presence, the report notes that Covid-19 has accelerated the shift to digital in retail.  “During the pandemic, there’s been a shift from thinking about physical shelf space to virtual shelf space,” Leonie Valentine, Google Hong Kong’s managing director of sales and operations, told Inside Retail.  “There’s also been a huge rise in terms of the adoption of e-commerce, not just click and collect but also click and deliver…we’re actually seeing more and more inquiries from the retail sector about how they can embrace e-commerce, how they can build out their own brand website and how they can truly own more data about their own customers, so that they can drive their own businesses,” she said.  A competitive edge Both Valentine and O’Callaghan expect to see retail score higher on the next Business AI Readiness Index, but say it will need to be driven by businesses and consumers. In other words, retailers can’t wait for customers to demand AI-enabled features and services. “There’s an element of bravery that needs to be taken on by our friends in retail in terms of the adoptions and technologies,” Valentine said.  “I think what happens is, as consumers get exposed to these things, you then go and look for them on other websites, or with other providers because you think this one has and it creates a little bit of a competitive advantage for that organisation, because they were a bit more innovative in terms of how they wanted to fit in with that consumers lifestyle.”  According to the report, the top use cases for AI in retail involve improving the customer experience, optimising marketing spending, driving online/offline integration and creating new products.  Examples include automated stock-taking and replenishment using pattern recognition, AI deployment to drive personalised marketing campaigns, customer analytics through online stores, and analytics to predict customer churn.