Opportunities to optimize retail operations with AI

Today’s retailers are navigating an increasingly complex landscape where consumers have high expectations for a personalized shopping experience but are spending less overall. This unique scenario encourages retailers to innovate with AI, driving agility and efficiency across marketing, finance, and inventory management.  

Industry thought leaders expect that incorporating AI into retail operations will have a significant impact, and Microsoft industry media partner RETHINK Retail recently hosted a miniseries to delve into these expectations. “Our forecast is upwards of $9.2 trillion of potential impact through the end of the decade worldwide,” says Greg Buzek, President of IHL Group. For markets in Latin America alone, IHL Group forecasts potential benefits adding up to $520 billion with AI advancements. 

However, retailers must offer consumers transparency about data use and privacy when incorporating AI into operations. For retail executives, understanding responsible AI practices for their roles and teams can help their organizations realize cost savings and elevate the customer experience.  

Taking advantage of AI-driven optimization

For chief operations officers (COOs) eager to optimize operations, AI-driven data insights can boost efficiency and reduce costs while providing customers with access to the products they want, when they want them. “Supply chain is a huge opportunity for retailers to take advantage of AI, whether it’s better loading of the trucks or route optimizations,” says Buzek. “Not just at the store level, but [it allows] more efficiency at the warehouse level as well.” 

AI-driven data analytics provide insights that enhance forecasting accuracy and relevance. This helps retailers anticipate shifting consumer shopping habits and seasonal trends. For teams responsible for purchasing, stocking shelves, and warehousing, better forecasting accuracy leads to significant cost savings.  

As COOs and chief information officers harness AI to improve inventory management, they can help drive their organizations’ sustainability goals by decreasing waste and energy consumption. “AI can optimize the use of electricity at the various times of day . . . [and you can] be a lot smarter in how you use your electricity at the store level to make a difference [for the environment],” says Buzek. 

Elevating customer experience through generative AI 

Marketing and customer experience leaders are quickly recognizing the potential of generative AI to transform marketing strategies and boost revenue through personalized engagement. Chief marketing officers (CMOs) and customer experience officers can use solutions like Microsoft 365 Copilot to drive innovation and creativity, supercharging employee productivity in generating social content and creative campaign ideas.  

“There are two ways that AI is really going to transform the role of CMO,” says Joyce Gordon, Head of Generative AI at Amperity. “First, it is going to help CMOs to be even more aspirational and visionary. And second, it’s going to force CMOs to double down even more on analytics and optimization because there’s going to be an increase in competition.” 

Retailers that capitalize on AI-powered marketing insights and personalized messaging can enhance the customer experience and propel business growth. “The convergence of data, compute, and AI have accelerated the ability of marketers to quickly analyze vast amounts of data, understand the changes in consumer behavior, and present retail offerings that create value for consumers and also drive revenue for the retailers,” says Sedhu Krishnamurthy, General Manager of AI Transformation, US Retail and Consumer Goods, at Microsoft. 

Safeguarding data at the speed of AI 

Secure, clean data is at the heart of any AI journey and the foundation for AI-driven capabilities. “Data is the fuel for AI and modern retail operations,” says Buzek. “You have to protect that at all costs.” Incorporating responsible AI practices is the first step that chief security officers and chief information security officers can take to safeguard sensitive data from potential vulnerabilities. AI-driven security solutions empower organizations to identify and respond to threats faster.  

Retailer networks touch a multitude of vendors and businesses that sustain their supply chain, and AI security solutions are an important line of defense. “If you have a vendor that gets compromised and they come to your store and tap into your network, you are now compromised if you don’t have the right security in place to block those attempts,” says Buzek. “Overall, AI can be a huge benefit in terms of operational efficiency for security operations.”  

Transforming retail operations with AI 

Now is the time to learn how AI can streamline processes, personalize customer engagement, and enhance security. Read the latest Microsoft report on retail trends, access the “AI in Retail” ROTH miniseries, and explore more insights at the National Retail Federation 2025 (booth 4503).