UBS has seen the AI revolution and concluded that the “visible” impact for consumer companies is at least three years away

“This is becoming a key strategic focus and competitive differentiator across the value chain, rather than a tool for efficiency,” the author writes. They look at a wide range of use cases, from demand forecasting to supply chain automation to product recommendations, and believe that in addition to improving operations, they should provide a “more comfortable customer experience.” The use of AI will be an important factor in separating winners and losers in the consumer space, they add. It’s very early.

Despite the prominent case studies and surges in executive attention, UBS has said that the direct quantifiable financial impact of AI remains limited, simply a statement of profit and loss, or P&L. Meanwhile, despite many headlines on AI-related layoffs, UBS has found little evidence of staff cuts. However, such power reductions are likely to come, UBS added.

Using in-depth interviews with analysts and company disclosures across more than 20 global sectors, the report details how AI is reshaping everything from supply chains and marketing to customer experiences, highlighting the most important changes and competitive divides. “Most consumer companies expect the impact of generated AI to be more prominent in three to five years,” adds the memo.

AI moves from the back office to the meeting room

Core Theme: AI has moved beyond being a back office efficiency tool to the core of your business strategy. Particularly large retail and consumer-oriented companies Walmarthas appointed executives dedicated to transforming AI, highlighting the growing importance of this. The number of AI for conference calls in the consumer sector has doubled since 2022, with key investments not only streamlining operations, but also power growth through personalized recommendations, smarter inventory management and target marketing.

Large companies are finding a wide range of AI applications, UBS Evidence Lab discovered.

• Walmart Use AI-driven recommendations and assistants to personalize your shopping experience and optimize fulfillment. Supply chain automation is rated as reducing unit costs at fulfillment centers by up to 30%.
• L’Oreal It is leaning towards AI for marketing optimization and product innovation, and reports a profit of 10%-15% on advertising tasks thanks to BETIQ Tools’ bespoke tools, which are expected to cover 60% of marketing spending by 2024.
• P&G It uses AI for logistics and quantifies potential savings of $200 million to $300 million from smarter truck scheduling.

Globally, consumer companies deploy AI, ranging from product design (such as Robam’s proprietary LLM, known in China as “AI gourmet”), dynamic pricing, and smarter labor scheduling. In Australia, travel agencies and retailers are citing improved margins for cost reductions and AI-enabled automation.

Size is important

Repeated take-out is that large, capitalized incumbents are set to make the most profitable in the near future of the medium term. These players, such as Walmart Home Depot, coca colaL’Oréal, and China and Haier in China can better pay the higher rate of customer data needed to maximize AI profits. In contrast, companies that are not technologically advanced may struggle to compete and may encourage industry integration or put their followers at a disadvantage.

The patterns of AI adoption are very similar across the world, but the impact varies by region and sector. US retailers and restaurant chains focus on operational efficiency and customer engagement. The European luxury sector, which relies on craftsmanship and brands, should have less short-term impacts from AI. In the Asian market, market leaders are leveraging AI to promote product differentiation and cost benefits, but there is still little evidence of the impact of widespread profits.

Typically, only a few companies, an industry giant with deep pockets and rich datasets, report clear improvements in margins or revenues directly due to AI adoption. Most companies, especially small businesses, have yet to see the strengthening of material P&L. In many cases, the increased efficiency of AI is reinvested to drive growth rather than dropping into revenue.

Outlook: Can be realized for more than 3-5 years

Most analysts expect true financial returns (high margins, revenue growth, labour productivity) to become “visible” within three to five years as AI applications mature and become more deeply integrated into core business processes. In the meantime, the wave of experimentation, especially in marketing, logistics and customer experience, has laid the foundation for a potentially transformative decade for the consumer industry.

For now, UBS concludes that, for all the excitement, the impact of the AI revolution on the interests and labor structure of the consumer sector is just beginning to feel.

For this story, luck Generated AI was used to assist with initial drafts. The editors checked the accuracy of the information prior to publication.