Why the Future of Retail is AI Everywhere

Forward-thinking retailers are already harnessing artificial intelligence to help them sustain and grow their margins in the face of economic uncertainty, environmental pressures and geopolitical instability. Nevertheless, they will only realize AI’s full potential once they apply it holistically across their entire business. Retailers must develop a more strategic and integrated approach to their AI capabilities, focusing on two key levers of business value generation: revenue growth and cost reduction. However, the key is to build data foundations first.

Retailers should create data models that connect the entire business value chain, whether sourcing and buying goods or moving and selling them. In turn, that means drawing together all the company’s data with information from partners and suppliers to create a united data set that covers the whole company’s operations.

This first step is far from simple. While some companies decided many years ago to become data-driven, others have not been using it deliberately or intentionally, even though they’ve been collecting data for years. A 2023 survey of US Chief Data Officers and Chief Data and Analytics Officers found that just 23.9% of companies characterize themselves as data-driven, and only 20.6% say that they have developed a data culture within their organizations.

To become data-driven, retailers must audit the quality of their data and address any shortfalls, as well as set rules, practices and structures for data governance. They also need to streamline processes and foster a data-first culture that promotes data accessibility, data-driven decision-making, and training and education programs. Of course, such change will require commitment from the C-suite. Ultimately, retailers should strive to create a customer-driven intelligent enterprise.

An archetypal example of such an enterprise today is fashion giant HUGO BOSS. Years ago, it recognized the inseparable nature of AI and customer data. As it invested heavily in AI capabilities, it simultaneously built strong data and analytics platforms powered by SAP and Microsoft Azure. Today, it claims to have many AI-powered engines in sales, pricing, marketing, product and forecasting, with new ones coming out at a monthly pace.

Using AI to Grow Revenue

Beyond the need for secure data foundations, there are two other key areas of experimentation for retailers looking to take advantage of AI: revenue growth and cost reduction. Concerning the former, innovative retailers are already using AI to support dynamic pricing, personalization and retail media optimization to grow revenues.

UK grocery chains Morrisons and ASDA are currently trialing dynamic pricing to respond more dynamically to changing market conditions. Morrisons experimented with dynamic pricing by introducing electronic shelf labels (ESLs) in a small number of stores during 2023. ASDA also completed an ESL trial on 25,000 products. In addition to empowering these supermarkets to adapt quickly to fluctuating market conditions, dynamic pricing would be instrumental in reducing food waste. For example, by providing attractive discounts on fresh produce approaching its sell-by date, dynamic pricing could help both the environment and the retailer’s bottom line.

Additional ways AI can aid in revenue growth include mitigating the complexities of adopting or scaling a retail media operation. It can also help build predicted audience profiles, manage and optimize campaigns in real-time, and create alternate versions of creative based on feedback. According to research from a leading digital transformation services and product engineering company, AI-driven platforms can generate 40% operational efficiencies and double the performance uplift of a retail media business.

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Learn more about how EPAM is strategically leveraging AI and data to make retail businesses more resilient while facilitating growth and efficiency: https://www.epam.com/insights/white-papers/how-data-and-ai-are-driving-retail-growth-and-profitability