Retail

From potential to performance by design Retail Report TCS AI for Business Study

2 TCS AI for Business Study – Retail Report About the TCS AI for Business Study What’s driving AI implementations? How is AI redefining Retail businesses? How are employees, skills and roles shifting? What customer engagement AI trends are emerging? Where is AI strategy headed? Are business results aligning with aspirations? TCS surveyed senior executives at nearly 1,300 companies in 12 sectors across 24 countries, approximately half of which had annual revenues over US$5 billion . This report includes study findings from 166 survey respondents in the Retail industry.

3 TCS AI for Business Study – Retail Report The findings in this report reflect a survey sample of 166 senior executives — CEOs, divisional and business unit heads, and senior VPs or VPs with profit-and-loss responsibility — working for major Retail companies headquartered in the following countries: Additionally, seeking to find correlations between a company’s business success and its approach to implementing artificial intelligence, each executive’s company was ranked alongside the others in that same industry for its financial success, as measured by a combination of revenue growth and profit growth over the last three years. These “Pacesetters” represent the top 34% of companies — 57 companies – among the Retail executives we surveyed. Where relevant, this report notes differences between the industry’s overall survey answers and the responses of its Pacesetters.  Australia  Belgium  Brazil  Canada  Chile  Colombia  Denmark  Finland  France  Germany  India  Ireland  Japan  Luxembourg  Mexico  Netherlands  New Zealand  Spain  Sweden  Switzerland  UK  USA

4 TCS AI for Business Study – Retail Report A new era in retail Krishnan Ramanujam President, Consumer Business Group, TCS 61% A majority of retail executives say they’ve moved beyond chatbots to develop more personalized marketing initiatives 45% Nearly half of retail executives also say they are exploring AI beyond chatbots for more personalized customer loyalty and support The retail industry has often led the way in technology adoption, and AI is opening new customer engagement opportunities. The TCS AI for Business Study shows that retail executives aim to use AI for highly personalized customer experiences in-store and online to foster lasting loyalty. To deliver these experiences, a strong cloud and data strategy is essential. TCS's value-based methodology and AI-first approach ensure retailers are ready to leverage AI now and in the future.

The transformative potential of AI

6 TCS AI for Business Study – Retail Report An optimistic outlook on AI’s impact Q. How would you compare AI's potential impact on your business model with the following technological developments: Internet; smartphone. Q. Which of the following is closest to how you're feeling about AI's potential impact on your business? Few technology advancements have gripped the public imagination like artificial intelligence. The majority of senior executives in the Retail industry believe AI’s impact on their business model will be greater or equal to earlier disruptive technologies, and they’re optimistic about its potential. Half of them say they are optimistic or excited about AI’s potential impact on their business 50% More than half believe the impact of AI will be greater than or equal to the smartphone 55% 46% Almost half believe the impact of AI will be greater than or equal to the internet

7 TCS AI for Business Study – Retail Report Humans, not AI, expected to remain the competitive differentiator Q. In your business, which of these statements most closely matches your own expectations for how AI will impact decision m aki ng in the next 3 -5 years? Most Retail executives believe that rather than replacing human workers, AI will augment and enhance human capabilities, enabling people to focus on higher-value activities that require creativity, empathy, and strategic thinking. 60% Nearly two-thirds of Retail executives say human creativity or strategic thinking will remain their company's competitive advantage. expect AI to make more tactical decisions, freeing up workers to think more strategically believe human intuition and creativity will remain central to their company’s competitiveness 36% 25%

8 TCS AI for Business Study – Retail Report Executives want to innovate and make money with AI The Retail industry is more focused on using AI to spur innovation and grow revenue than are most other industries. On a 10-point scale between “optimization” and “innovation,” Retail executives averaged 6.96, compared to an average of 6.69 for all other industries. Q. On a scale of 1 to 10 — where 1 is solely interested in using AI to lower costs and optimize operations and 10 is solely focused on spurring innovation and revenue growth — where would your company's current approach toward AI fall? Retail Solely or mostly focused on using AI to lower costs and optimize operations Focused on optimization, but with an eye toward innovation Focused on innovation, but with an eye toward optimization Solely or mostly focused on using AI to grow revenue and spur innovation of Retail Pacesetter executives said they are more focused on innovation and revenue growth than on lowering costs and optimizing operations. 82% 51% 22% 19% 8% 60% 23% 11% 7% PACESETTERS

9 TCS AI for Business Study – Retail Report Revenue from anywhere and everywhere Even at companies primarily focused on using AI for cost-savings and optimization, many AI projects have direct ties to revenue, whether that is increasing current revenue from existing products and services, earning revenue from new offerings, or both. In fact, among Retail executives, only 14% said weren’t leveraging AI at all for revenue growth. Q. In terms of revenue growth, which area are you most actively pursuing (regardless of whether that growth has been achieved ye t)? are equally enhancing current revenue streams and creating entirely new revenue streams with AI 28% are using AI to enhance their current revenue streams 31% are using AI to create entirely new revenue streams 27% 86% of Retail companies have AI projects aimed at growing revenue

10 TCS AI for Business Study – Retail Report Productivity is an AI benefit, but quality will be its lasting value The Retail industry is today more focused on using AI to enhance productivity, compared to improving quality, than is any other industry we surveyed. But over time, the more balanced the approach to integrating AI – through optimization, productivity, innovation and quality – the better the outcomes and the elevation to excellence. Q. On a scale of 1 to 10 — where 1 is solely focused on using AI to improve quality and 10 is solely focused on using AI to enhance productivity — where would your company's current approach toward AI fall? On a 10-point scale between “improving quality” and “enhancing productivity,” Retail executives scored an average of 7.12, compared to the 6.87 average across other industries. 53% 22% 17% 8% 55% 16% 23% 5% PACESETTERS Retail Solely or mostly focused on using AI to improve quality Focused on quality, but with an eye toward enhancing productivity Focused on productivity, but with an eye toward improving quality Solely or mostly focused on using AI to enhance productivity

11 TCS AI for Business Study – Retail Report Personalized interactions are top AI customer focus areas When it comes to customer engagement, organizations say they’re moving beyond commonplace chatbots. While chatbots for sales and product support remain important to Retail companies, their use is being supplanted by other AI-driven means to accomplishing these goals. 2% 25% 34% 45% 61% 37% 18% 4% Q. I n what ways are you exploring AI's impact on your relationships with customers? 53% 68% P A C E S E T T E R S Gaining insights by analyzing customer behaviors and data Chatbots for product/service support Chatbots for marketing/sales support We are not exploring the use of Al in any customer interactions More personalized, Al-driven interactions with our products/services themselves More personalized interactions/engagements for post-sales support (other than chatbots) More personalized interactions/engagements with our marketing initiatives (other than chatbots) Al-designed go-to-market strategies

The journey to AI

13 TCS AI for Business Study – Retail Report One size fits one? AI adoption strategies vary AI is not plug-and-play technology with a one-size-fits-all strategy, and the findings from Retail executives reflect their varied approaches to AI. Nearly one-third favor establishing an enterprise-wide AI strategy and almost a fifth want bold experimentation and fail-fast methods. Overall, however, the industry is conservative. Over one-third of the most successful retailers are taking a wait-and-see approach to implementing AI. Q. Rank three areas in order of importance to your company's leadership regarding the use of AI in the enterprise. want to establish an enterprise-wide Al strategy to maximize its benefits to the company 29% 19% 25% 28% want to stay true to their purpose and success model in exploring how they might leverage Al want to experiment and take risks with Al to maximize its benefits want to wait and see how Al gets used in their industry and follow the lead of others 35% P A C E S E T T E R S

14 TCS AI for Business Study – Retail Report Fast or slow, Retail organizations are adopting AI Q. What is the state of implementation for AI- enabled operations in the following areas of your company? While the pace of AI adoption differs, the ultimate objective is overwhelmingly consistent. The vast majority of Retail executives (93%) have AI implementations planned, in process or already completed. of departments are planning Al implementations 33% of corporate functions have Al implementations in-process or completed 60% 66% P A C E S E T T E R S

15 TCS AI for Business Study – Retail Report A gap between aspiration and reality Q. L ooking at your organization overall, which most closely describes your company's current relationship to AI? The merging of reasoning and recognition intelligence into generative models offers tremendous potential to help companies reimagine entire value chains and transform the way they do business . But the majority of Retail respondents say they have a long way to go to realize these outcomes. 11% P A C E S E T T E R S haven’t even moved beyond the initial AI exploration phase 28% say it’s currently a differentiating factor for business transformation Only 2% are cleaning up their data and moving it to the cloud 24% 33% P A C E S E T T E R S

16 TCS AI for Business Study – Retail Report What’s really driving investment in AI today? Despite some of their long-range goals for AI deployment, when we asked Retail executives which 3 business objectives were currently driving their company’s investments in artificial intelligence, they often cited rationales more tactical than strategic. Q. In order of importance, please select the three top business objectives driving investments in artificial intelligence in your organization. Savings on capital expenditures Increased customer retention Replacing legacy technology Replacing legacy technology Improving customer support Enabling innovation 1st 3rd 2nd Retail All others

17 TCS AI for Business Study – Retail Report What’s hampering AI progress? Retail executives say short-term thinking, industry standards and regulations , and their customers’ expectations are slowing their AI efforts. Q. What are the top 3 challenges to making effective use of AI in your company? Short-term thinking Customers’ expectations Industry standards/regulations Current IT infrastructure Current IT service providers Customers’ expectations 1st 3rd 2nd Retail All others

18 TCS AI for Business Study – Retail Report Generative AI brings its own set of challenges 47% of Retail executives surveyed expect up to half of their employees to be using GenAI on a daily basis within the next 3 years . Retail executives say they are exploring partnerships and collaborations within the larger cloud and AI ecosystem to maximize the benefits of GenAI. Q. In three years, what percentage of your employees do you believe will be using/interacting with Generative AI capabiliti es on a daily basis? Q. Rank the top 3 statements which most closely reflect how recent attention to Generative AI (specifically) has changed your company's assessment of AI's benefits and risks more generally Retail All others Top ranked GenAI adoption concerns Digital ecosystem participation Security and privacy focus 1st Shift towards automation and efficiency Ethical and responsible AI use Security and privacy focus Lack of IT readiness Ethical and responsible AI use Cultural shifts Increased focus on talent development and training Increased focus on talent development and training 2nd 3rd 4th 5th

Balancing risk with opportunity

20 TCS AI for Business Study – Retail Report Making way for AI Q. Have you given any thought to how your company's strategic direction needs to be revised due to AI's potential benefits or risks for your organization or your industry? Introducing such powerful technology into organizations comes with a great weight of responsibility. Extensive preparation and stringent governance that foster trust in outcomes and investment values must go hand in hand with AI adoption. Retail businesses are not only aware of the changes involved, but actively planning for them. of Retail companies are currently reworking or are planning to rework how they operate across the enterprise 72% 89% P A C E S E T T E R S

21 TCS AI for Business Study – Retail Report Homegrown implementation prevails for now Q. On a scale of 1 to 5, how much are you relying on external vendor and partnerships (including academic or government partn ers ) for your AI implementations and how much are you doing in-house?; Q. Are you planning to create your own enterprise- specific LLMs for use in Generative AI implementations? Over two-fifths plan to create their own enterprise-specific LLMs for use in GenAI implementations 42% Nearly half say they are relying solely or mostly on in-house talent to implement this new technology 46% As AI preparation turns to implementation, organizations face numerous decisions to achieve the right mix of artificial intelligence and investment. Despite the complexity, nearly half of Retail companies are likely to rely on internal teams to develop and implement AI — even for tasks as difficult as creating their own enterprise-specific large language models (LLMs).

22 TCS AI for Business Study – Retail Report Implementation metrics fall short Retail executives say they need better KPIs to measure the success of their AI implementations. Without KPIs, organizations will struggle to demonstrate AI’s value and gain internal traction for its adoption. Only 15% say they have “good enough” metrics and KPIs for their current stage of AI deployment. 11% said they aren’t even aware of any useful metrics for AI implementations. Q. Which statement most closely matches how you feel about measuring the success of and financial return on AI implementations? Need both 25% need better non-financial KPIs for Al-enabled operations 25% need better financial KPIs for Al-enabled operations 23% 73% need better metrics to measure the success of their Al implementations

23 TCS AI for Business Study – Retail Report Navigating ethical, security and privacy dimensions The debut of sophisticated AI applications has intensified the focus on security and privacy concerns, and the ethical dimensions of AI use have also garnered significant attention. Most senior Retail executives prefer global standards, debating whether specific use cases are better covered at this scale or more locally. Q. Which regulatory landscape is most appropriate for your business's use of AI? 3% think it's too early or unnecessary to regulate Al 19% prefer a heterogenous environment of local regulations 39% prefer global Al standards, plus specific regional controls 39% prefer global Al standards regulating specific use cases and outcomes

24 TCS AI for Business Study – Retail Report A regulatory partnership between industry and government A majority of Retail executives think regulations should be jointly established between industry voices and government agencies. Close to half also think academic expertise deserves a seat at the table given how complex this technology already is and how quickly it is evolving. Q. Which organizations should be involved in establishing regulations about AI? NGOs 34% Academia 49% Industry 57% Government 54% 58% P A C E S E T T E R S 49% P A C E S E T T E R S 58% P A C E S E T T E R S

25 TCS AI for Business Study – Retail Report TCS recommendations Based on this research, here are our recommended next steps. Embrace an AI strategy based on prioritized initiatives and use cases that have the potential to drive tangible business outcomes. Focus on the business value, not the technology Invest not only in the necessary technology and infrastructure but in a culture that embraces change, experimentation, and continuous learning. Make your business & culture AI-ready Consider the broader strategic value of AI initiatives and how they can be used to improve operational efficiency, reduce risk, and enhance decision-making — all of which can contribute to overall business performance. Adopt a more strategic approach Let business and IT staffs focus on core competencies and strategic objectives, seeking partnerships and external expertise where appropriate, rather than shouldering the entire burden of AI implementation internally. Don’t go it alone Implement AI with the goals of expanding revenue, opportunity, and innovation, which offers the potential to create new jobs and enhance human capabilities. Plan for success, not scarcity Leverage more modern AI to deliver highly personalized, proactive and more value- added experiences across the customer journey for competitive differentiation and to build long-term loyalty. Create higher-level relationships with customers

26 TCS AI for Business Study – Retail Report Demographics: role and revenue Retail n = 166 14% 39% 46% SVP/VP (P&L responsibility) Unit/divisional head CEO Role representation $100bn+ $5bn to $100bn $1bn to $5bn $500m to $1bn Revenue representation (in USD) 1% 53% 43% 3%

27 TCS AI for Business Study – Retail Report Demographics: 24 countries represented in the study United States Canada Mexico United Kingdom Ireland Germany /Austria Switzerland France Netherlands Denmark Spain Luxembourg Belgium Norway Sweden Finland India Australia New Zealand Japan Colombia Brazil Chile Total = 1,272 Retail = 166 Note: All countries except for Austria and Norway are included in the Retail sample

28 TCS AI for Business Study – Retail Report Demographics: 12 industries represented in the study n = 1,272 Life Sciences Healthcare Energy & Resources Consumer Packaged Goods Communications, Media & Information Services Banks, Financial Services & Insurance Logistics Manufacturing Retail Technology Travel & Hospitality Utilities

29 About the study Executive champions Dr. Harrick Vin Chief Technology Officer, TCS Abhinav Kumar Chief Marketing Officer, TCS Siva Ganesan Senior Vice President and Head, AI.Cloud, TCS Krishna Mohan Vice President and Deputy Head, AI.Cloud, TCS Sankaranarayanan “Shanky” Viswanathan Vice President and Head of Business Innovation, Chief Technology Office, TCS Nidhi Srivastava Vice President and Head of Offerings, AI.Cloud, TCS Suranjan Chatterjee Global Head, AI.Cloud Engineering, TCS Ashok Krish Head, Advisory and Consulting, AI.Cloud, TCS Serge Vatin-Perignon Global Head, TCS Thought Leadership Institute Get more insights If you would like to get additional research based on the TCS AI for Business Study, visit on.tcs.com/2024-global-AI-study For more information or any feedback, email the TCS Thought Leadership Institute at TL.Institute@tcs.com The TCS AI for Business Study explores how companies around the world are looking at the strategic implications of AI technologies and how they are responding to its transformative potential. A survey of 1,272 senior executives with profit-and-loss responsibility at their companies was conducted November 28, 2023, through January 17, 2024, with responses from 24 countries across 12 industries, exploring the strategic implications of artificial intelligence and their expected impact on large, for-profit enterprises. Some data presented will not add up to one hundred percent due to rounding, and not every answer is included in the findings reported. About the Thought Leadership Institute Since 2009, the TCS Thought Leadership Institute has initiated conversations by and for executives to advance the purpose-driven enterprise. Through primary research, we deliver forward-looking and practical insights around key business issues to help organizations achieve long-term, sustainable growth. For more information, visit tcs.com/insights/global-studies For the most up-to-date content and news, download the TCS Perspectives app for your iOS and Android device. About Tata Consultancy Services Tata Consultancy Services is an IT services, consulting and business solutions organization that has been partnering with many of the world’s largest businesses in their transformation journeys for over 56 years. Its consulting-led, cognitive powered, portfolio of business, technology and engineering services and solutions is delivered through its unique Location Independent Agile delivery model, recognized as a benchmark of excellence in software development. A part of the Tata group, India's largest multinational business group, TCS has over 601,000 of the world’s best-trained consultants in 55 countries. The company generated consolidated revenues of US $29 billion in the fiscal year ended March 31, 2024, and is listed on the BSE and the NSE in India. TCS' proactive stance on climate change and award-winning work with communities across the world have earned it a place in leading sustainability indices such as the MSCI Global Sustainability Index and the FTSE4Good Emerging Index. For more information, visit www.tcs.com