Indian retailers are increasingly turning to artificial intelligence (AI) to solve brick-and-mortar stores' oldest puzzles: what shoppers do before they buy and why they walk away.
From legacy companies to digital-first brands, retailers are using AI-powered computer vision through CCTVs, speech analytics and predictive inventory systems to understand customer behaviour, improve merchandising and optimize store operations.
The shift reflects a broader transformation in retail as AI becomes central across channels. Nearly nine in 10 retailers (89%) worldwide are either actively using AI or piloting AI projects, while 97% plan to increase AI investments in the next fiscal year, according to Nvidia's 2025 State of AI in Retail and CPG survey.
In India, retailers are moving beyond isolated AI pilots towards enterprise-wide deployment, as shoppers become increasingly "channel agnostic", expecting seamless experiences across physical stores, apps and websites, according to a report by consultancy firm Deloitte.
Deloitte estimates India's $1 trillion retail market will nearly double to $1.9 trillion by 2030, while AI spending is projected to rise from $7-8 billion in FY23 to $20-22 billion by FY27, growing 30-35% annually.
AI in offline retail is evolving from being used in isolated functions to becoming a strategic business tool, said Anand Ramanathan, partner and consumer industry leader at Deloitte. "Many retailers are still experimenting with AI in individual functions. To use AI strategically, retailers first need to get their data in order and decide where AI can add value," he said.
Unlike e-commerce companies, which have long used AI for recommendations, demand forecasting, and to optimize inventory, physical retailers have largely relied on sales and footfall data, offering little visibility into what happens before a purchase is made.
"Traditional metrics like footfall and sales show volume, but miss the journey between entry and purchase," said Satyaki Ghosh, chief executive of apparel retailer Raymond Lifestyle.
The century-old company uses its Vision AI platform to analyse customer movement and identify where shopper interest fails to convert into purchases. Its AI-powered Store Health Cards provide managers with real-time operational insights.
Raymond's AI-generated marketing content has also reduced production and logistics costs by around 73%, while predictive forecasting and automated replenishment systems are helping improve inventory availability and reduce stock-outs, according to Ghosh.
At Titan Co., AI is helping to redesign the customer journey in its jewellery, watch, and eyewear stores by tracking how shoppers move, which sections attract attention, and where they disengage before completing a purchase.
"AI-led heatmap and movement insights are helping us evaluate store layouts and merchandising decisions more objectively," said Nirmal Lobo, chief sales and marketing officer of Titan Eye+.
The company found that many customers browsed products but did not proceed to eye testing, a key step in buying eyewear. It responded by encouraging store associates to recommend eye tests earlier and provide more personalized consultations.
"AI is helping us bring sharper visibility into these in-store behaviours, which were earlier difficult to capture through traditional retail metrics alone," Lobo said.
Eyewear firm Lenskart has embedded AI across merchandising, store expansion, manufacturing and inventory planning as it seeks to become an "AI-first" company.
"Our single biggest priority for FY27 is the transformation of Lenskart from a consumer tech company into a consumer AI company," said Peyush Bansal, co-founder and chief executive, in the company's Q4 and FY26 earnings call.
Lenskart has backed that strategy through acquisitions, buying Tango Eye in 2023 for computer vision capabilities and later acquiring location intelligence platform GeoIQ.
Lenskart combines insights from eye tests, customer preferences and buying patterns to drive merchandising and inventory allocation, while GeoIQ analyses catchment areas, customer travel patterns and market potential before recommending new store locations.
"Being vertically integrated lets us wire intelligence into every layer of our value chain," Bansal said.
For fast-fashion retailer NEWME, AI is helping decode what customers say, not just what they buy. The retailer uses computer vision and audio analytics to analyse conversations between shoppers and sales associates, identifying recurring requests for sizes, colours and styles, as well as reasons customers leave without making a purchase.
"One of our most important metrics is tracking how products move from display racks to trial rooms. It gives us a much better understanding of customer affinity for a style than sales data alone," said Sumit Jasoria, co-founder of NEWME.
In one instance, conversation analytics helped NEWME record a 30-50% improvement in conversion rates in one store. AI-generated heat maps have also prompted the retailer to move new collections and premium products into high-engagement zones instead of slow-moving merchandise.
Much of this transformation is being enabled by technology providers such as Staqu Technologies, whose software works with retailers' existing CCTV infrastructure instead of requiring new hardware.
"Nearly 70% of people who walk into stores leave without making a purchase, and historically retailers had no way of knowing why," said Atul Rai, founder and chief executive of Staqu.
The company is expanding beyond video analytics to process audio, body-camera feeds and smart-glass inputs, while also targeting neighbourhood kirana stores and regional retailers with lower-cost AI software.
As AI-powered CCTV analytics become more common, privacy concerns have also come into focus. Deloitte's Ramanathan said the technology relies on aggregated, statistical insights rather than tracking individuals.
"The analytics are statistical in nature. They are used to identify patterns, such as how customers move within the store," he said. Most retailers have adopted the latest compliance standards.
Beyond customer insights, AI is helping retailers improve productivity, operational efficiency and overall business performance.