Rising costs, particularly the increase in National Insurance costs coming into effect in April, are putting significant pressure on retailers’ margins. In response, many brands are passing on these higher costs to consumers. A recent survey by The British Retail Consortium indicates that as much as two-thirds of British retailers plan to raise prices in response to increased NI costs. However, inflating prices has a negative impact on consumer confidence and spending.
Despite reports of a bumper Christmas trading season, consumer spending has been faltering ever since and retailers are very concerned about increased pressure on costs. As a result, organizations are grappling with how they can do their best not to increase prices.
At this crucial time, retailers must reassess and look at ways to generate efficiency by making improvements in key areas such as forecast accuracy in the supply chain and stock control, driven by AI’s transformational potential. This means they can absorb cost increases and avoid passing these on to consumers whose spending is already squeezed.
At the recent National Retail Federation (NRF) 2025, top of the agenda was how AI can change the retail game. The technology has the potential to lead the charge in these unprecedented times and empower retailers to enhance supply chain responsiveness to disruption, and drive supply chain efficiency for the benefit of the customer. To continuously deliver the exceptional shopping experiences their customers expect.
VP for Sales and Retail Industry Strategy at Blue Yonder.
The cost vs. customer experience challenge
Cost optimization has become a top priority for retailers who have had to navigate a significant jump in costs on a variety of fronts. With margins squeezed, increasing prices or adding new charges may seem like an obvious way to protect margins. However, the long-term pursuit of a consumer cost pass-through strategy can prove a risky choice, as there comes a point when consumer loyalties and trust begin to erode.
One thing is for sure: Today’s consumers, and their wallets, are weary following a prolonged period of inflationary turbulence and economic volatility. Indicators show that consumers are now hyper alert and sensitive to price rises and will be making their purchasing decisions accordingly. Similarly, they are less likely to look favorably on retailers who they perceive are rising prices in an attempt to increase profits – rather than offset costs.
Post-Christmas and with the build up to increased budget pressures this April, retailers that want to deliver a consistent consumer experience and maintain customer spend should opt to work smarter so they can mitigate the need to pass costs onto consumers. To achieve this goal, they should address the supply chain weaknesses that increase operational cost – and consider the host of AI-driven technological innovations designed to change the way retail does business. For example, AI-enabled pricing, provides retailers with real-time insights into the factors influencing customer demand to make optimal pricing decisions across the product lifecycle, at a granular level and at speed.
Inefficient data management
When data from suppliers, customers and other sources is scattered across the supply chain it becomes difficult to capture the actionable insights that enable better demand forecasting and inventory management.
Today’s cloud-powered platforms enable retailers to break down the operational silos that generate inefficiencies, making it possible for internal teams to work much more proactively and cohesively. Even better, by sharing data with the entire supply chain, including trading partners, via a single platform, smarter processes and approaches can be initiated so that everyone can work more effectively.
This kind of real-time flexibility minimizes inefficiencies such as excess inventory. An entire end-to-end AI-driven supply chain can plan for both demand and returns more intelligently. By doing so, retailers can reduce the need for reactive and costly safety-buffer stock orders.
Smarter inventory and returns management
As supply chains become more connected, retailers gain the visibility they need to engage in smarter inventory and returns management.
For example, retailers will be able to see if high demand products are already in transit and extend delivery windows on their website accordingly, rather than ordering additional stock. They can also instantly identify if an item is currently available at a store location for immediate pickup.
By engaging in this real-time dynamic inventory management, retailers can significantly reduce the inventory wastage that equates to lost revenue and additional costs. Equipped with real-time visibility of stock returns, inventory levels across the network can be optimized. This ensures items are instantly re-routed to where they are needed the most – direct to a store or a distribution center.
Using AI to enhance supply chain resilience
A digitally connected and cooperative supply chain will be better equipped to handle disruptions caused by external factors such as weather, or internal issues like supply chain bottlenecks. What’s more, real-time and bi-directional data sharing makes it possible to create interoperable workflows that transform retail planning and merchandising. It also opens the door to deploying AI technologies that will further improve supply chain efficiencies and reduce interruptions.
For example, using AI powered tools, retailers can monitor their entire supply chain in real-time and proactively identify and respond to potential disruptions on the horizon. They can also deploy AI and ML solutions to improve and elevate how they undertake several supply chain activities, such as last-mile delivery planning and warehouse management.
Finally, retailers that invest in AI-enabled tools will be able to automate routine tasks and support human operators with real-time insights that help them to focus on making strategic decisions that will drive efficiency.
Streamlining the supply chain to boost efficiency – and save costs
Today’s cloud-powered, interoperable, and data-driven supply chains make it possible to unite multiple teams – retail planning, merchandising, warehousing and transportation – so they can collaborate instantly and seamlessly. When combined with the transformative potential of AI, retailers can plan and proactively manage their supply chains ‘in the moment’ to improve resource utilization, boost operational efficiency and minimize waste. By doing so, they’ll be able to avoid passing on price increases that disappoint loyal customers and suppress demand.
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