Indonesian retail enters 'transformative phase' as AI reshapes holiday spending

As Eid approaches, new global research conducted by the National Retail Federation (NRF) and IBM signals a decisive shift in how consumers prepare to shop – and how retailers must respond.

While physical stores remain dominant, with 72% of consumers still shopping in person, nearly half (45%) now use artificial intelligence to support their shopping journeys. From product research (41%) and interpreting reviews (33%) to hunting for the best deals (31%), AI is becoming embedded in decision-making before customers even set foot in a store.

The research frames this moment not simply as a seasonal uplift, but as the beginning of a new competitive era. The implication is clear: the path to purchase is no longer linear. Consumers may still want to see and try products physically, but they are arriving better informed, more intentional and increasingly guided by digital tools.

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“The Indonesian retail industry has entered a critical transformative phase. AI is no longer merely about improving efficiency; it has become the foundation for building deeper, more secure and more intelligent connections with consumers who are increasingly digital and constantly connected. Retailers that integrate AI into their data strategies and customer experiences will define the next era of growth,” said Juvanus Tjandra, managing director, IBM Indonesia.

Rising expectations, digitally shaped

Technology is not only influencing pre-purchase research – it is also redefining what shoppers expect from retail experiences.

Around 35% of respondents still prioritise visually engaging stores with seamless, queue-free checkouts. Yet AI-enabled solutions are fast catching up in importance. One in three consumers is looking for a super app that integrates shopping with other services. Meanwhile, 30% expect smart home ecosystems powered by AI personal shoppers and autonomous delivery, and 29% want easier purchasing via social platforms.

This blended expectation – physical immersion paired with digital intelligence – presents both an opportunity and a strategic test for brands.

The shift is particularly significant in Indonesia. According to the International Trade Administration, the country is Southeast Asia’s largest eCommerce market, accounting for more than 52% of ASEAN’s total online business volume. The market was valued at US$52.93 billion in 2023 and is projected to reach US$86.81 billion by 2028.

Retail remains a pillar of the domestic economy, contributing approximately 12.96% to Indonesia’s GDP. With a population of more than 280 million and a digitally savvy young consumer base, the market offers substantial headroom for AI-led retail innovation.

What brands must do next

As AI increasingly mediates consumer choice, brands are being urged to rethink both operational foundations and experience design.

Key priorities include redesigning customer journeys around future decision-making moments – identifying where consumers rely on AI for comparison, validation and value discovery, and ensuring seamless continuity through to checkout.

Retailers are also encouraged to deploy AI agents to reduce uncertainty early in the journey, positioning them not merely as service tools but as active influencers of purchase decisions – from surfacing promotions to interpreting reviews and supporting personalised shopping.

Data readiness has emerged as another critical issue. With 54% of brand executives reporting cross-channel and systems challenges, aligning product information and policies, alongside rigorous end-to-end testing, is now considered essential.

At the same time, differentiation remains paramount. AI should enhance relevance and remove friction without diluting brand creativity or authenticity. And with 51% of executives citing limited AI expertise as a constraint, investment in internal capability must be balanced with strategic partnerships to ensure responsible, effective implementation.

Ultimately, the research argues that AI should not be viewed merely as a productivity driver, but as a core engine of innovation. Success will depend not just on adoption, but on thoughtful integration into retail operations – preserving the cultural closeness and personal relationships that have long defined Indonesia’s retail landscape.

As festive spending accelerates, the season may mark more than a cyclical sales peak. For Indonesia’s retailers, it could signal the start of a structurally different era – one where AI quietly shapes every decision before the first item reaches the basket.

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