This article first appeared in Digital Edge, The Edge Malaysia Weekly on March 10, 2025 - March 16, 2025

Retail and consumer product organisations are at a pivotal point in their artificial intelligence (AI) journey.

An IBM study, The AI Readiness Barometer: Asean’s AI Landscape, reveals that only 8% of the retail industry surveyed in Malaysia is prepared to adopt and implement AI technologies. However, organisations are accelerating their AI adoption, and both traditional and generative AI have permeated all functions in the enterprise to some degree.

While AI adoption in the country’s retail sector is still in its early stages, the foundation is being laid for significant growth.

Retailers who embrace AI strategically — focusing on personalisation, workforce development, infrastructure improvements, operational efficiency and customer engagement — will be well-positioned to thrive in an increasingly digital and competitive market.

Another IBM study, titled Embedding AI in Your Brand’s DNA, reveals that by 2025, retail and consumer product companies surveyed plan to allocate an average of 3.32% of their revenue to AI — equivalent to US$33.2 million (RM148.3 million) annually for a US$1 billion company.

This investment is set to cover functions such as customer service, supply chain operations, talent acquisition and marketing innovation, highlighting AI’s expansion beyond traditional IT applications.

The question is, are they taking enough of the right steps to become AI-led brands, or are they just tacking on ad-hoc AI solutions that deliver short-term gains?

IBM Malaysia managing director and technology leader Dickson Woo tells Digital Edge that he believes it is time for the industry to move beyond productivity and efficiency.

This means extending AI’s power enterprise-wide to boost process effectiveness, spark new business models and ecosystems, and ignite engagement with innovative employee and customer experiences.

Customers today want real-time, contextual information, no matter where or when they shop. According to IBM’s 2024 consumer study, nearly two-thirds of consumers surveyed said they have used or want to try AI applications.

Woo says this interest sets the stage for retail and consumer product companies to hasten integration of AI in their business while having an eye towards becoming AI-led brands, leveraging the technology to reimagine operations, inspire loyalty and expand the size of customers’ wallets for long-term competitive advantage.

The challenge now will be implementation. Woo says integrating AI across an organisation requires significant time and effort from decision-makers and stakeholders to determine how the technology will fit into existing structures. This process often involves managing large volumes of data and necessitates substantial computing power to achieve the desired outcomes. 

“AI-driven systems rely on high-quality data to function effectively. Retailers must ensure their data is accurate, complete and up to date, which can be a complex and resource-intensive task. Poor data quality can lead to ineffective AI applications and misguided business decisions,” he says.

“Incorporating AI solutions into legacy systems can be challenging as well, as it requires significant modifications or complete overhauls of current infrastructures. This integration process can be time-consuming and costly, often necessitating specialised expertise.”

The successful implementation of AI technologies also demands a workforce that is proficient in AI and data analytics. As such, retailers may face hurdles due to skill gaps and require comprehensive reskilling or upskilling programmes to equip employees with the requisite competencies. 

It is also essential for retailers to establish robust governance frameworks to address ethical concerns, such as data privacy and algorithmic bias. Retailers must navigate these issues carefully to maintain consumer trust and comply with regulatory standards.

“Addressing these challenges requires a strategic approach, including investing in infrastructure, fostering a culture of continuous learning and developing clear governance policies to guide AI adoption,” Woo says.

Significant trends in the retail space highlight a pivotal shift towards AI-driven strategies, emphasising the need for investment in technology, workforce skills and innovative business models to stay competitive.

Based on IBM’s Embedding AI in Your Brand’s DNA report, 81% of executives surveyed and 96% of their teams are already using AI to a moderate or significant extent. The executives indicated they want to expand AI usage to more sophisticated use cases, such as integrated business planning, where they plan to increase usage in 2025.

The executives surveyed expect that 31% of employees will need to learn new skills to work with AI in the next year, increasing to 45% within three years. AI use in customer service, particularly for personalised responses and follow-ups, could grow by 236% in the next 12 months. Notably, responses indicate that 55% of these improvements are expected to involve human-AI collaboration.

On top of that, investment in ecosystem platforms — tools that facilitate exchange of data and AI models — could skyrocket. Respondents indicated they expect investment to grow from 52% today to 89% within three years as their companies look to blend AI capabilities with business and technology partners to accelerate innovation and drive efficiencies.

Despite 87% of surveyed executives claiming to have clear AI governance frameworks, fewer than 25% have fully implemented them and continuously review tools to manage risks such as bias, transparency and security. This reveals a critical gap in operational oversight.

Woo says this proves that AI is no longer just a tool, but an imperative strategy. Retail and consumer product companies are at a tipping point where embedding AI in their operations can help define not just productivity gains, but also the future of brand relevance, engagement and trust.

“To fully capitalise on the benefits of AI in retail, tailored support for SMEs [small and medium enterprises] will be crucial. With continued collaboration between the public and private sectors, Malaysia has the potential to become a leader in retail digital transformation in the Asean region.”

In terms of talent readiness, in Budget 2024, Prime Minister Datuk Seri Anwar Ibrahim highlighted that the government was allocating RM6.8 billion to develop local talent through technical and vocational education and training, or TVET.

In Malaysia, IBM SkillsBuild has formed collaborations with institutions such as Politeknik Balik Pulau and non-profit organisation SOLS Foundation to provide practical training and digital credentials, in line with the government’s broader digital talent strategy which benefits learners ranging from university students and adults to TVET segments from the beginner to the intermediate levels.

“Through our education programme IBM SkillsBuild, we are offering free, accessible training in various technology-related courses, which equip individuals — from students to professionals — with the necessary skills to succeed in the modern workforce,” says Woo.

“These efforts also aim to foster a more inclusive and diverse Malaysian workforce. IBM has committed to training one million women and girls across the Asia-Pacific region, including Malaysia, as part of our global goal to skill 30 million people by 2030. To date, 650,000 women and girls have benefited from the programme.”

“The National Artificial Intelligence Roadmap under MyDIGITAL [Malaysia Digital Economy Blueprint], which aims to produce 20,000 data professionals by 2025, is another key initiative that IBM supports. The road map promotes collaboration between the public sector and private companies, especially tech giants like IBM, to build a robust ecosystem of AI expertise.”

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