AI Revolution in Retail: Dream Profits or Data Nightmare?

Künstliche Intelligenz (KI) is currently on everyone’s lips, and many companies feel the pressure to jump on the rapidly moving bandwagon. This also applies to the retail sector, where AI has the potential to significantly improve margin optimization—for example through intelligent markdown strategies.

However, despite all the enthusiasm surrounding new technological possibilities, reality often looks different: without clearly defined use cases and the necessary prerequisites, AI quickly becomes a waste of money.

1. The real value of AI: AI can deliver significant benefits by analyzing large volumes of data to enable more precise markdown and pricing strategies or to manage inventory more effectively. However, AI is not a cure-all. A specific AI use case—such as in one of our client projects on “markdown optimization”—demonstrates that AI only creates value when it is applied in a targeted way to maximize revenue potential and reduce excess inventory. This value must be carefully weighed against the required investment and operating costs.
2. The prerequisites for using AI: Successfully implementing AI requires robust data and a solid technological infrastructure. Many retailers still lack the systematic data collection or the infrastructure needed to use AI effectively. Without these foundations, the use of AI can not only be ineffective but may also lead to misleading results.
3. Untapped potential in existing data: Before investing in AI, retailers should make better use of the data they already have. In many cases, there is significant untapped potential that can be leveraged without costly AI investments. Even simple analytical techniques can lead to substantial improvements in markdown strategies and support sales-driving decisions. Figure 1 shows an example from a past project.

Call to Action: It is crucial for retailers to develop a clear use case for AI before investing in this technology. This includes a thorough assessment of existing data, infrastructure, and specific business needs. Take advantage of Horn & Company’s consulting expertise to identify your potential. The funding program “Intensivberatung Zukunft Handel 2030” also offers a valuable opportunity to evaluate suitable approaches.

In summary, AI is a powerful tool, but it requires thorough preparation and a clear strategic direction to future-proof your business, with or without AI.