AI Is No Longer an Option—The Future of Retail

Disruptors like Shein and TikTok are redefining engagement, raising the bar for seamless omnichannel experiences and hyper-personalization. At the same time, macroeconomic pressures, rising costs, inflation, and supply chain disruptions, are forcing businesses to reconsider traditional revenue streams.

In PwC’s 27th Global CEO Survey, 76% of leaders acknowledge the need for reinvention, yet many remain uncertain about where to start. AI is the key to unlocking new business models, increasing agility, and driving profitable growth. By embedding AI across their organizations, retailers can transform every aspect of their operations, from supply chain resilience to customer experience, marketing, and workforce productivity.

The next era of retail will be shaped by those who move beyond incremental change and embrace AI-powered reinvention. The question is no longer if AI should be adopted—it’s how fast retailers can integrate it to remain competitive in an AI-driven economy. What was once a competitive advantage is now essential for survival.

Reinvention is about fundamentally changing your business model—exploring new revenue streams, profit streams, or even entirely different businesses. Transformation is what enables reinvention.

Kelly Pedersen, US Retail Leader, PwC US

The Urgency to Reinvent

With 76% of retail leaders recognizing the need for reinvention and 42% of CEOs questioning their company’s long-term viability, AI is the catalyst for change. Despite this urgency, only 7% of revenue   over the past five years has come from distinct new business models, revealing a critical gap that AI can help bridge.

97%

of CEOs have taken steps toward reinvention. 

Source: PwC CEO Survey, 2024

How AI is Driving Retail Transformation

Retailers that embed AI across their operations are securing a competitive advantage. With 49% of CEOs expecting generative AI to increase profitability within the next 12 months, AI has moved from an operational enhancement to a core driver of business reinvention. Those that hesitate risk being left behind in an AI-driven economy.

There’s no more room for skeptics. AI is here to stay and you’re at a competitive disadvantage if you don’t adopt AI as part of your enterprise-wide strategy.

Ali Furman, Partner, US Consumer Markets Industry, PwC US

AI-Powered Retail Use Cases: Optimizing Retail Operations Today

AI is reshaping retail by enhancing efficiency, streamlining operations and transforming customer interactions:

Revolutionizing Operations
AI-powered automation reduces operational waste, improves labor efficiency and streamlines inventory management in real time.
Hyper-Personalized Shopping
AI-driven recommendation engines analyze browsing behavior, past purchases and engagement patterns to create real-time, data-driven personalization at scale.
Frictionless Store Experiences
AI-enabled checkout eliminates wait times, prevents fraud and enables  seamless transactions—enhancing both security and customer satisfaction.
Revolutionize Marketing & Content
Automated campaign creation, dynamic content generation and AI-powered audience segmentation improve marketing efficiency and precision.
AI-Powered Virtual Assistants
AI-driven customer and employee assistants provide instant support, automate routine inquiries, and improve both workforce productivity and shopper experience.
Smarter, Responsive Supply Chains
AI-driven logistics enhance route optimization, demand forecasting and real-time inventory tracking, helping retailers reduce costs and prevent supply chain disruptions.

Imagine interacting with your favorite brand and having an individualized experience based entirely on your preferences, product availability, order history and even your family’s needs. AI makes that possible.

Mike Edmonds, Sr. Director, Global Retail & Consumer Goods, Microsoft

AI-Powered Reinvention: Redefining the Future of Retail

Beyond operational efficiencies, AI is redefining what’s possible in retail. Retailers that fully embrace AI are not just improving performance, they are unlocking entirely new business models, creating differentiated customer experiences, and driving long-term growth.

Retail Data Monetization
AI transforms customer insights into new revenue streams through advertising networks and predictive analytics for suppliers.

Hyper-Customization & AI-Powered Personalization
AI enables dynamic pricing, real-time promotions and individualized product recommendations, delivering hyper-personalized shopping experiences at scale.

Social Commerce & AI-Driven Shopping
AI enables real-time personalization in social media and video shopping, boosting conversion rates.

Seamless Omnichannel Journeys
AI integrates online and in-store experiences, enabling higher customer engagement and retention.

AI-Accelerated Product Innovation
Generative AI enhances R&D capabilities, allowing retailers to rapidly develop and test new products, bringing innovations to market faster and more affordably.

AI-Driven Pricing & Merchandising
AI dynamically adjusts prices in real-time based on demand, competition, and supply chain fluctuations.

Sustainability as a Business Driver
AI minimizes waste, optimizes production, and ensures compliance with sustainability goals.

In-House AI Capabilities & Cost Reduction
Retailers are leveraging AI-driven automation to reduce reliance on third-party vendors, enabling in-house software development, lowering costs, and improving control over proprietary data and models.

AI-Enhanced Workforce Productivity
AI decreases manual tasks, reducing labor costs while improving efficiency in scheduling, training and workforce management.

AI-Powered Security & Fraud Prevention
AI-driven computer vision and predictive analytics reduce shrinkage, fraud and operational risks

AI isn’t just about automating tasks—it’s about empowering people to unlock productivity, unleash creativity and ultimately accelerate outcomes.

Matt Joe, Principal, Advisory, Consumer Markets, Climate Transition & Sustainability, PwC

Retail Archetypes: Which One Are You?

One-size-fits-all strategies rarely succeed in retail. PwC US’s Retail Archetypes provide a roadmap for aligning transformation efforts with unique market strengths:

Large-scale retailers like Amazon and Walmart leverage AI-powered logistics to streamline fulfillment, reduce costs and enhance supply chain efficiency.

Brands like Chewy and Foot Locker use AI-driven subscription models and hyper-personalization to deepen customer relationships and drive recurring revenue.

Luxury retailers like Chanel and Sephora integrate AI-powered virtual shopping and in-store analytics to create immersive, high-touch customer experiences.

Brands like Uniqlo, On Running and Wayfair deploy AI-driven trend forecasting to optimize inventory, accelerate production cycles and stay ahead of shifting consumer demands. AI-powered sustainability tracking further enhances material sourcing and minimizes waste, improving both efficiency and environmental impact.

Retailers like Dollar General and Five Below harness AI-driven supply chain automation to enhance operational efficiency and reduce costs. AI-powered merchandising dynamically adjusts pricing and product assortments to maximize profitability and maintain a competitive edge.

These archetypes provide a roadmap for retailers to identify strategies that align with their unique needs and strengths. To explore more, read PwC US’s Reinventing Retail Business Models for in-depth insights into how these strategies align with business goals.

We’re seeing organizations think horizontally across functions and workflows. It’s not just about isolated use cases anymore; it’s about creating end-to-end value.

Mike Edmonds, Sr. Director, Global Retail & Consumer Goods, Microsoft

Five Critical Missions for AI-Enabled Retail Reinvention

Retailers that succeed with AI don’t just automate tasks; they rethink their entire business models. To stay competitive, companies must focus on five critical areas, from AI governance to ethical deployment.

These five missions provide a roadmap for retailers to structure their AI transformation effectively. By focusing on governance, platform strategy, data access, ethics, and AI literacy, leading brands are securing their competitive advantage in an AI-driven economy.

1. Organize for AI Delivery
To scale AI impact, retailers need a structured operational model.

2. Balance Platform Strategy & Innovative Tooling
AI adoption requires robust platform integration and tooling to maximize scalability.

3. Enhance AI Maturity & Access to Strategic Data Assets
Unlocking AI’s full value requires high-quality data and seamless integration.

4. Proactively Address AI Ethics & Regulation
Trust and governance are critical for responsible AI deployment.

5. Democratize AI & Foster Data Culture
AI success depends on organization-wide literacy and adoption.

Actionable Steps for Retail Leaders

Retailers that move quickly to integrate AI will gain a competitive edge, while those that hesitate risk being left behind in an AI-powered economy.

Understand your organization’s strengths and market positioning. Align AI strategies with your business archetype to drive targeted, transformative outcomes.

“As a leader, your job is to elevate the conversation cross-functionally, prioritize, and make choices that align with your company’s strengths.”
_{— Alison Furman, Partner, US Consumer Markets Industry, PwC}

Build trust by using frameworks like PwC’s Responsible AI framework. Designed to work alongside Microsoft’s secure technology, this approach enables responsible AI deployment while unlocking its transformative potential. Treat responsible AI governance as an integral part of your business strategy to enable transparency and responsible practices.

“This is the time to be bold. But boldness must be paired with a responsible AI policy that’s treated like a product. A responsible AI policy should be living and breathing with every interaction that your company, employees, and customers have with it.”
_{— Mike Edmonds, Sr. Director, Global Retail & Consumer Goods, Microsoft}

Effective AI relies on high-quality data. Develop an AI-ready data ecosystem. AI-driven data analytics can transform customer insights into revenue-generating opportunities.

AI enables frictionless retail and supply chain optimization:

AI-powered checkout systems eliminate transaction bottlenecks.

AI-enhanced RFID tracking in fitting rooms informs product development.

AI-driven dynamic pricing and in-store promotions optimize revenue.

AI works best in a human-led, tech-powered environment. Provide clear communication about its benefits and invest in upskilling employees to build confidence and capabilities. Establish explicit usage policies and create a culture of experimentation, ensuring teams are equipped to increase AI’s potential.

AI adoption achieves greater ROI when scaled systematically across the value chain. Establishing an AI “factory” or center of excellence enables repeatable processes like model training and deployment, enabling scalability and efficiency in implementation.

Partnering with technology leaders like Microsoft and advisors like PwC accelerates progress and simplifies complex transformations. These collaborations help align AI solutions with business goals, integrate them effectively and support long-term scalability.

The retail landscape is constantly evolving, and AI strategies must follow suit. Continuously monitor outcomes and adapt AI initiatives based on performance insights. This iterative approach helps refine strategies, address emerging challenges and stay ahead in a competitive market. AI-driven retail operations have a projected 4x multiple of margin uplift for first movers.

“Good looks like true business results. You may not see revenue increases immediately, but metrics like NPS are early indicators of success.”
_{— Kelly Pedersen, US Retail Leader, PwC}

Ready to Transform?

Retail is undergoing a seismic shift. AI is no longer an optional investment—it’s the foundation of future growth. Forward-thinking retailers who embrace AI today will be the industry leaders of tomorrow.

The next step is clear: assess your AI maturity, develop an enterprise-wide AI strategy, and embrace the transformation before your competitors do.

PwC and Microsoft are ready to help you develop an AI-driven strategy that enhances customer experiences, optimizes supply chains, and unlocks new revenue streams. Connect with one of our Retail Industry Leaders today to begin your AI transformation journey.