AI in Retail: Trends, Use Cases, and Future Outlook

A lot of people think AI has just shown up recently, but it’s actually been around for quite a while.

Way back in the early 2000s, big companies used AI. Amazon was using it to recommend products you might like. Walmart used AI to keep track of their stock. Macy’s used it to change prices depending on how much stuff people wanted.

But for a long time, it just stayed working behind the scenes. Nothing really changed on the surface and many people weren’t aware of it. 

Then in 2022, everything shifted. ChatGPT made headlines around the world, and suddenly AI wasn’t just some invisible tool, it started showing up everywhere.

Smaller retailers were quick to catch on. They saw the opportunity, knew that the big giants were using this already, and jumped on it. According to a McKinsey report, AI adoption in the retail space has grown by 25% every single year since 2020.

This guide will look at how AI tools are being used in retail operations, from inventory management and supply chain management, to helping with dynamic pricing and customer interactions. 

What is AI in retail?

AI, or artificial intelligence for short, is a broad term for a bunch of smart tech and tools that help businesses work smarter.

In retail, AI can do all sorts of things, like suggest products to customers while they’re shopping online, create more personalized experiences, or even help spot fake goods. Some stores are even starting to use AI for things like facial recognition at checkout.

For customers, this means quicker, easier, and more tailored shopping. For businesses, AI helps reduce errors, save time, and find new ways to grow and increase profits.

AI adoption in the retail industry

Today, AI is everywhere. In fact, more than nine out of ten businesses are already using it in some way and most leaders want to go even further, into more advanced, more sophisticated uses.

Retail is right at the front of this wave with nearly 90% of retailers either using AI right now or testing out AI projects. Plus, it's paying off. 87% of AI has increased their revenue and 94% say it’s helped cut costs. AI tools are helping to optimize retail operations across the board, making shopping more convenient and also creating something brand new, a whole new type of customer. The machine customer.

As well as changing how retailers run their stores, AI is also changing how they interact with customers. Machine customers are AI systems that shop for us. Think about it: A smart fridge that orders milk when you’re running low. A home assistant that restocks your cleaning supplies. A printer that reorders ink before you even notice it’s empty. No checkout lines. No ‘Add to Basket’ button. No human at all.

Key AI trends transforming retail

So now we know what AI in retail is and we’ve seen the numbers to suggest that adoption is huge and not slowing down anytime soon. But what’s really interesting is how it’s being used. Right now, there are a few big trends shaping the future of AI in retail. Here are some of the main AI use cases in retail:

1. Generative AI for marketing & merchandising

Generative AI is tech that can create stuff. Words, images, even website layouts and ads. For retail, this makes a big difference. Before, marketing took forever.

Someone had to write every product description.Design every ad. Build every email campaign by hand. It could take weeks or months to launch something.

Now, AI can do all that in seconds. Want thousands of product descriptions? Done in a flash. Want emails that feel personal, based on what someone bought or looked at? Easy.

This makes marketing faster and more personal. Plus, it helps you jump on trends quick, keeping you ahead of the game.

AI can even make product images. If you want to show a shoe in five colors there’s no longer a need for new photoshoots. AI creates those images for you.

According to a 2025 report by Bain & Company, early adopters of generative AI have already reduced content creation time by 30% to 50%. That means hours saved every day and faster results across the board.

2. AI-driven customer experience

You know what customer service used to be? Long waits on the phone, endless hold music, and hunting through complicated websites just to find one simple answer. It was frustrating for customers and exhausting for staff.

A chatbot powered by AI technologies is a tool that can chat with customers in real time. It can answer questions, solve simple problems, and even help with purchases without needing a human to step in. For example, if someone asks “Where’s my order?”, the chatbot quickly searches the system and gives an accurate answer within seconds.

These bots are also great at handling repetitive tasks like checking stock, explaining return policies, or suggesting products based on what someone’s already bought. They’re always available, day or night, and can talk to hundreds of customers at once.

This results in a huge boost in efficiency. In fact, AI can reduce customer service resolution time by up to 50%, with some companies seeing as much as an 87% drop in how long it takes to solve customer issues. That means quicker answers for customers, less pressure on staff, and more time to focus on bigger things.

3. Dynamic pricing & competitor benchmarking

In the past, prices stayed the same for a long time. Today, that’s changed. With AI, prices can change often, even several times a day. This is called dynamic pricing.

Here’s how it works: AI looks at lots of data. It checks how many items are in stock. It sees what customers are buying. It also looks at what other stores are charging. This is called competitor pricing.

Retail companies use this information to optimize pricing strategies. That means setting the best price at the best time.

Here are some examples of ai in retail: If a competitor drops the price on a popular item, AI can quickly suggest a new price to keep the store competitive. Or, if a product is selling fast and stock is low, the AI might raise the price so the company can make more profit.

It’s not just about lowering prices. It’s about smart pricing that helps retail companies earn more and stay ahead of the competition.

And the best part? It all happens automatically. Retail teams don’t have to check prices or competitors all day and then make educated guesses on future customer demand. AI does it for them, quickly and accurately.

This helps stores stay competitive, react fast to changes, and make better decisions about pricing.

4. Supply chain optimization

The supply chain is all the steps a product takes from being made to reaching the customer’s hands. This includes ordering raw materials, making the product, storing it, and shipping it to stores.

Supply chain management is complicated because there are many moving parts. Things like delays, shortages, or mistakes can happen at any step, and that can cause problems.

AI can watch every part of the supply chain at the same time. It collects a lot of data (like shipment times, supplier stock levels, and demand forecasts) and studies it quickly to spot any issues before they become big problems.

For example, if a shipment looks like it might be delayed, AI can alert the retailer to act early. Or, if a supplier is running low on materials, AI can suggest ordering more before the product runs out.

By doing all this, AI solutions help retailers save time and money. In fact, nearly 6 out of 10 retailers say AI makes their supply chains work faster and better and almost half say it helps reduce the costs of running their supply chains.

5. Inventory management

Inventory means all the products a store has ready to sell.

Managing inventory well is important. If a store orders too much of something that doesn’t sell quickly, that’s money wasted. The products take up space, might expire or go out of style, and the store loses money. But if a store orders too little, customers may come looking for something and find it’s sold out. That leads to unhappy customers and lost sales.

AI technologies help solve this by keeping track of inventory levels in real time. That means AI always knows exactly how many products are in stock right now, no matter where they are. AI also studies past sales and customer buying habits to predict future demand—so it can guess when products will run out.

Even better, AI can automate the ordering process with automated inventory management systems like retail POS software. When stock runs low, AI can place new orders automatically without waiting for a human to notice. This means shelves stay stocked with what customers want, and money isn’t wasted on products that won’t sell.

6. AI-powered store layout and operations

A good layout helps customers find what they want easily and encourages them to buy more. Figuring out the best layout depends on things like your customer habits, product popularity, and even the time of year.

AI tools can study lots of valuable customer data, like which products people look at, how they move through the store, and what they buy together. Using this information, it can suggest the best way to arrange products to make shopping easier and more enjoyable.

For example, AI might show that placing certain items near the entrance increases sales, or that grouping related products together helps customers buy more. This means stores can design layouts that fit exactly what their customers want, improving the overall customer experience.

AI can also help with store operations behind the scenes automating repetitive tasks like scheduling staff when the store is busiest, managing energy use to save money, or tracking cleaning and maintenance needs.

This use of AI improves operational efficiency, meaning the store runs more smoothly and costs less to operate. It also frees up retail employees to focus on helping customers, rather than getting bogged down with routine tasks.

7. Hyper-personalization

Have you ever noticed how some stores or websites just seem to get you? 

They recommend stuff you were already thinking about. Show you clothes in your size or style. Send you emails with discounts on things you actually want, not random stuff you don’t care about.

That’s AI working behind the scenes. It’s watching what you click on, what you buy, even what you leave sitting in your cart. Then it uses all that info to make your shopping feel personal just for you.

This is called hyper-personalization. It’s very quickly becoming one of the most powerful tools for retail companies everywhere. AI helps companies tailor everything:

• Product recommendations
• Marketing emails
• Homepages and app layouts
• Timing of promotions or reminders
• Even the words and images used in ads

Say you love skincare. AI might show you new skincare products before anything else. Or if you’ve been checking out hiking gear, your next email might feature boots, backpacks, and a special offer right when you’re ready to buy.

Customers really respond to this. In fact, 81% of shoppers say they’re more likely to buy from businesses that offer personalized experiences.

For retail companies, personalization powered by AI means stronger customer relationships, better conversion rates, and smarter marketing with less waste.

8. Sentiment analysis

How do your customers really feel about your brand? What are they saying about you online, on reviews, social media, or forums? 

Sentiment analysis can help you work this out. It’s a method that uses AI to scour through customer feedback and help you understand how they’re feeling (aka their sentiment) towards your business. 

So, if people are overwhelmed whenever they visit one of your stores. Or, if they’re chuffed with how your team call them by their name, you’ll know it. 

Now, with AI, sentiment analysis doesn’t just count how many good or bad reviews you’ve received. It scours through thousands of messages, looks at the language people use (words, phrases, even emojis) and works out how they’re feeling.

For example, if lots of customers are saying your service is slow or frustrating, AI will flag that as negative sentiment. If they’re using words like love, amazing, or easy, that’s a clear positive.

This kind of insight is really useful for retailers. It shows you what your customers like, what they don’t, and where there might be room to improve. Instead of guessing how your brand is being received, you get a clear picture backed by real data.

Benefits of AI in retail operations

AI is helping retail companies work smarter, faster, and more efficiently. Here are four big ways AI is changing day-to-day retail operations:

• Boosts efficiency: Like inventory tracking, updating prices, and answering the usual customer questions. So your team can focus on the fun or important bits.

• Smarter decisions: It looks through tons of customer data which shows  what customers like, what sells, and then it helps you pick the right products and prices that actually work. No more guessing!
• Better customer experience: Shoppers get cool recommendations, handy reminders, and chat help whenever they want, even at 3 AM. 
• Drives revenue: AI figures out the best prices, spots what’ll sell soon, and cuts down on wasted stuff. More money, less hassle.

Challenges of AI in retail

AI can do a lot for retail, but it’s not always smooth sailing. There are some bumps to watch for:

• Bias in the system: If the data it learns from is biased, AI can mess up too, like giving unfair prices or weird suggestions.
• Bad data = bad results: If your data’s messy or missing, AI will make bad calls. So keeping data clean is a must.
• High setup costs: Getting AI going takes money, tech know-how, and training. Plus, sometimes it feels like a black box nobody really understands.

Future of AI in retail

AI is changing retail in a huge way. It’s becoming just as important as smartphones once were. If businesses want to keep up, they need to use AI.

Smart shops are already doing cool things with AI like:

• Making shopping feel personal for each customer
• Automating boring daily tasks so workers can focus on better things
• Knowing how much stock to keep and what prices to set
• Seeing trends before they get big

Epos Now is right at the center of this shift. Its AI tools are built to close the knowledge gap many small business owners face, offering smart, data-driven suggestions that help avoid common mistakes and improve profits. 

From automated financial tools integrated into retail payment processing to AI-driven recommendations, Epos Now gives entrepreneurs real-time customer insights that support growth and efficiency.

With over 75,000 merchants in multiple countries, Epos Now’s scalable platform uses AI to flag wasteful spending (like overpaying for supplies) and fine-tune stock purchasing.

Plus, with its embedded finance engine, businesses can instantly access bank accounts, credit cards, or even credit facilities easily.