Many retailers have a planning cadence that puts them at a disadvantage in a dynamic market. They use highly structured, manual processes that happen on a strict schedule and limit their opportunities to negotiate costs, service levels, and category strategy with their suppliers. Meanwhile, suppliers launch new products and push for cost increases far more frequently, often coming to negotiations armed with better information.
Retailers know they’re at a disadvantage but also feel stuck, because making the kinds of changes required to negotiate more effectively can feel like it requires an army of people doing highly manual work to make sense of messy data. They simply cannot operationalize more frequent changes.
The So What
GenAI helps retailers regain an information edge with their suppliers. It enables companies to rapidly synthesize vast amounts of data and generate actionable insights. When paired with modern AI-based tools, retailers can also automate planograms, pricing, and other levers. These tools are leveling the playing field, transforming retail negotiations from annual cycles to continuous, data-driven engagements, and leading to better outcomes for customers and retailers.
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GenAI helps chief merchants at retailers gather and make sense of a broader array of information and engage more effectively with suppliers. Specific benefits include:
Faster Insights. Automated analytics deliver proactive insights on the business and flag areas that need attention (such as unknown stockouts leading to shifts in the product mix and eroding profit margins).
Richer Insights. GenAI-based “recipes”—the real-time detailing of what’s in a specific product—allow retailers to determine what products should cost. Retailers can incorporate both commodity costs and tariff considerations when analyzing pricing changes. They can demonstrate to retailers the impact on sales and track this information in detail over time. GenAI-generated attributes enable robust product comparisons and assortment analytics for a wider range of goods.
Streamlined Communication. GenAI solutions can create letters and other communication formats using automatically generated data insights, speeding interactions with vendors and reducing the administrative burdens on teams.
Automated Execution. AI-driven planogram design enables more frequent assortment changes with fewer resources.
The Idea in Action
Forward-thinking organizations are already seeing results from GenAI:
A retailer used GenAI to break down products into their constituent ingredients and better understand the upstream costs that its suppliers faced. Prior to that, the retailer had little information about those underlying prices, leaving it vulnerable to cost hikes that suppliers demanded. Armed with new insights from GenAI, the retailer was able to accurately calculate real-time costs and push back against millions of dollars in cost-increase requests during a tariff spike. Moreover, GenAI helped the retailer engage rapidly, generating a 20-fold ROI in its first year. The next step is to embed that in a new process for cost increases, which can be automated and scaled up across the company.
Similarly, a midsized grocer used AI to determine which portions of its assortment were most popular with consumers, and it used that information to add some new products and drop others. In the past, those decisions were made based primarily on intuition. The retailer was able to generate insights that impacted its bottom line just five weeks after implementation.
Now What
BCG has found that only 10% of the benefits from AI (including GenAI) come from algorithms, and 20% come from tech and data. The remaining 70% come from changes to processes and employee behaviors. To get the value, retailers need to build a balanced plan that tackles all aspects of driving change.
Identify a few focus areas. Start by determining which decisions and processes can be enhanced the most, and the fastest, through GenAI. Prioritize a manageable number and set specific target outcomes to track results.
Use GenAI to address data challenges. Cleaning messy data is a quick win that shows teams the value of GenAI intuitively. Pick a pain point like attribution or vendor/brand mapping and use GenAI to make that data more manageable. From that baseline, companies can move on to more advanced use cases like chatbots.
Redesign work processes. Tools alone don’t deliver value—teams must change how they work, with new roles, workflows, and resourcing. Processes need to be redesigned to make merchants more proactive and equipped to respond to real-time market shifts. Retailers also need to redesign how they manage inventory flows, allocate store labor hours, and plan marketing efforts.
Integrate end-to-end. Rather than limiting GenAI insights to reducing costs for a specific product category or vendor, retailers need to embed them across all merchandising decisions in the strategy lifecycle, from pricing to promotions to assortment and merchandising.
Lead by example. It’s not enough for leaders to endorse the initiative and marshal resources. Success requires that they model new behaviors by rolling up their sleeves and using GenAI-enabled solutions themselves, fostering a mindset of learning and experimentation.
Be realistic about timelines. Overly ambitious transformations often stall when early wins don’t materialize. Companies can generate quick early results, but organization-wide change requires a sustained effort over time.
Clarify goals and reassure employees. Leaders must clearly connect GenAI transformation to both company outcomes and individual team benefits—directly addressing workers’ fear of being displaced. Retailers can build trust by clarifying the positive changes from GenAI freeing teams to spend more time innovating, building relationships, and generating customer insights—while also being transparent about potential shifts in resourcing.
