After five extraordinarily demanding years, costs are still increasing for retailers, driven by rising wages, further input-cost increases, supply-chain imbalances, and other complications. As costs climb, heightened pressure on consumer spending leaves little room to increase prices to preserve margins.
However, advances in technology are now offering retailers the opportunity to unlock savings that weren’t available in prior cost programmes, even relatively recent ones, according to Bain & Company’s latest retail briefing, Retail Efficiency Rewritten: New AI Tools Demand a Second Look at Your Costs.
This is a major breakthrough for many executive teams feel they have already done what they can with productivity initiatives, leaving no additional savings available in the current cost structure.
Yet to exploit these digital advances fully, retailers must also succeed in the very human task of overhauling the way they work, fixing the underlying inefficiencies, ingrown processes and data-management failings that have been holding them back for years, or even decades.
The Bain & Company brief outlines five principles for tech-enabled cost transformation:
- Plan with a bold ambition.
- Embrace zero-based redesign.
- Get more from data.
- Collaborate across functions.
- Master change management.
AI is starting to unlock big savings. The cross-sector survey of generative-AI adoption, companies reported average productivity gains of 15 per cent across eight key functions, leading to a 9 per cent bottom-line impact from decreased cost or increased revenue.
As AI accelerates tasks further, the prize will only get bigger, especially if retailers convert more of their time savings into either cost savings – through leaner structures – or top-line gains – through redeploying freed-up staff to higher-value activities.
Contact centres and administrative work are among the highest-potential areas for generative AI in retail. One retailer that created an AI copilot to advise on procedural queries found that store associates no longer had to scour user manuals, freeing time for customer interaction and reducing calls to HR and maintenance teams.
Elsewhere, AI has cut the time it takes buyers to value a supplier’s offer from forty-five to fifteen minutes.
With its keen operational focus, retail has a strong record of productivity gains, but most cost programmes have still left money on the table.
Now, retailers have a chance to be more efficient than ever, by embracing new technology and honing their overall approach to cost control. That opportunity couldn’t have come at a better time.
