Retail Under Pressure: Artificial Intelligence as the Key to Cost Excellence

• Rising costs and increased competition are putting retailers under increasing pressure
• Analysis by BCG and Inverto: AI applications can generate savings of up to 5% in direct spend and 15% in indirect spend
• Core processes and functional areas can be rethought in the context of AI. AI can therefore make retail not only more cost-efficient, but also more agile and resilient.

Düsseldorf/Cologne, March 19, 2025 – The economic uncertainty of recent years has fundamentally changed market conditions in retail. High inflation has led to cost increases along the entire supply chain, forcing consumers to save their money, and to increasing competition. In view of this challenging situation, many retailers are currently focusing on cost reduction and securing margins. To reduce procurement and process costs and strengthen competitiveness, many retailers are increasingly relying on the use of artificial intelligence. This can reduce costs in direct spend by up to five percent, as the Boston Consulting Group (BCG) and Inverto have analyzed in their new report “Retail in Transition”. With regard to indirect spend and process efficiency, the consultants have identified even greater optimization potential.

AI-supported data analysis improves negotiation strategies

“The most important lever for reducing costs in retail is optimizing direct procurement,” explains Marcus Kroth, retail expert and partner at BCG. “The cost of goods accounts for 60 to 75 percent of retail sales. Even small savings in this area therefore have a significant impact on profits.” However, many buyers lack the necessary data. Almost three quarters of the buyers surveyed (72%) would like to underly their arguments in negotiations with more facts and figures. At the same time, however, just as many say that they do not have the necessary analytical skills to gather detailed insights and fact-based arguments. One possible solution: “Cross-functional collaboration and digital, AI-based tools, such as automated tracking of raw material prices, can support buyers by providing the necessary data and comparative values ​​for a better negotiation result,” says Kroth.

Up to 15 percent less indirect costs through targeted use of AI

In addition to direct spend, indirect costs also offer a considerable potential for savings. Many companies have only limited transparency about their Goods not for resale (GNFR) related expenses, such as for logistics, IT or facility management. The result: “The savings potential for these goods is often underestimated,” says Simone Hilbring, procurement expert and managing director at Inverto. “Indirect spend offers many levers for reducing often unnecessary expenses. Consistent right-sizing is crucial to succeed here.” AI-supported analyses enable more precise control of indirect costs by uncovering hidden savings potential and suggesting alternative procurement strategies. “Through strategic tenders, digital procurement platforms, systematic supplier evaluation and the use of targeted levers, costs in this area can be reduced by up to 15 percent,” says Hilbring.

A cost-efficient, agile and resilient retail sector

Even the efficiency of entire work processes can be increased with the help of artificial intelligence – and the greatest improvements through AI come when companies transform entire business areas. Leading retailers are therefore already driving AI-based end-to-end transformations of their key functions such as procurement, supply chain, customer service and marketing to secure long-term competitive advantages. For example, through targeted use of AI, complete marketing campaigns can be created within a few hours – something that previously took weeks. This reduces production costs by up to 50 percent. At the same time, companies can shorten their campaign cycles and react more flexibly to market changes, which enables further increases in efficiency.

Only through appropriate, ongoing cost management can capacities be released that companies can use to generate additional value. The hype about AI in retail is therefore justified – provided it is used strategically and with a clear focus: “We see that AI not only makes retail more cost-efficient, but also more agile and resilient,” says Marcus Kroth. “Retailers are creating a stable foundation for sustainable success by reducing their costs with the help of AI applications and combining them with future-oriented investments – for example, increasing their own value for money, stronger personalization or scaling retail media offerings.”