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Artificial intelligence (AI) is transforming digital marketing by enabling advanced analytics, automation, and personalised customer engagement. Despite growing adoption, qualitative insights into how small retail enterprises in emerging economies adopt AI remain limited. This study examines AI adoption in digital marketing among small retailers in Cape Town using an interpretivist qualitative case study design. Grounded in an integrated Technology–Organisation–Environment (TOE) and Unified Theory of Acceptance and Use of Technology (UTAUT) framework, data were collected through semi-structured interviews with 18 participants identified via snowball sampling. Thematic analysis shows that AI adoption is driven by competitive pressure, customer expectations, and perceived performance benefits, but is constrained by skills gaps, cost concerns, and data-related challenges. The study extends TOE–UTAUT theory by demonstrating how platform-based AI tools reduce technological barriers while amplifying organisational and capability-related constraints in emerging market contexts. The findings provide actionable insights for policymakers and practitioners aiming to support sustainable digital transformation in small business ecosystems.