Retail’s Trillion-Dollar Technology Opportunity

Retailers and consumer-packaged goods (CPG) companies are developing truly exciting initiatives powered by digital innovation. A couple of the most noteworthy developments that I’ve been monitoring include:  

1. Artificial intelligence (AI) applications that boost customer engagement and retention
2. Tax technologies that leverage edge computing to deliver a seamless, consistent customer experience and drive operational efficiencies 

The retail and CPG industries could generate $660 billion in additional economic value by leveraging Generative AI, according to McKinsey’s analysis. Add traditional AI and analytics to the innovation mix and the value of these opportunities could soar into the trillions. These breakthroughs include:  

• New distribution models: AI-driven shopping bots and agents could soon influence shoppers’ choices more than traditional marketing
• Digital try-ons: These interactive tools – powered by a combination of augmented reality (AR) and AI-driven personalization – enable users to virtually “wear” (think clothes or eyewear) or "apply" (think cosmetics) products by using their device’s camera or a digital avatar. Aso known as virtual try-ons, these applications let customers engage with products online.
• Agentic AI: Agentic AI differs from generative AI based on its ability to operate with greater autonomy, as Vertex Vice President of Technology Strategy Chris Zangrilli explains here. In the retail space, Agentic AI solutions can provide customers with digital concierge services that automatically fulfill household essentials, manage subscriptions and plan vacations among other tasks. 

The customer experience is core to these new offerings, the McKinsey article emphasizes: “If it doesn’t improve customer satisfaction by X basis points, then it’s gone.” 

This is where companies’ tax technology stacks play a crucial role. As DMA Senior Tax Technology Manager Tim Allen points out in this Vertex post, innovations in retail tax automation solutions – particularly edge computing solutions – can help businesses eliminate contradictory tax calculations and errors across different sales channels. These systems can quickly support new channels, payment mechanisms and product categories. They can also reduce transaction latency, for example during daily or seasonal sales spikes. All of those improvements and benefits help improve customer satisfaction and enhance the customer experience. 

Tax engines provide additional operational benefits, including:  

• Offline resiliency for fast in-store checkouts without sacrificing accuracy
• Centralized control for all local tax engines and update management from a single location
• Enhanced security with controlled connectivity at every endpoint. 

For more on how tax automation can help tax teams support omnichannel capabilities, enhance the customer experience, improve organizational resilience and more, take a look at this Vertex white paper, How Retailers and their Tax Groups are Gaining an Edge. It contains practical insights on the pivotal role of tax in supporting strategic retail objectives – including those related to high-value technology innovations.

PLEASE REMEMBER THAT THE VERTEX BLOG PROVIDES INFORMATION FOR EDUCATIONAL PURPOSES, NOT SPECIFIC TAX OR LEGAL ADVICE. ALWAYS CONSULT A QUALIFIED TAX OR LEGAL ADVISOR BEFORE TAKING ANY ACTION BASED ON THIS INFORMATION. THE VIEWS AND OPINIONS EXPRESSED IN THE VERTEX BLOG ARE THOSE OF THE AUTHORS AND DO NOT NECESSARILY REFLECT THE OFFICIAL POLICY, POSITION, OR OPINION OF VERTEX INC. ⁠