Navigating Retail Profitability Headwinds with Data and AI

EPAM Systems’ Martin Ryan, Alex Van Gestel and Pierre Kremer explore how retailers can achieve profitable revenue growth and explain why this requires data to be used in a novel way and the new results that can be achieved by doing so.

Every retail organization is facing significant headwinds at present with inflation, interest rates, exchange rate volatility, energy prices and supply chain constraints all well-documented and placing pressure on margins and profitability.

While eCommerce may have been good for growth in the past several years, it has more often than not been at a lower margin than physical store sales.

While everyone is discussing Generative AI, it is margin pressure and ensuring profitable growth that are this year’s big themes for retailers. For example, many grocery retailers operate at around a 2% margin[1], which is incredibly challenging when new factors erode profitability further.

If we leave aside new business models, we are exploring with our retailer clients (e.g., Retail Media, subscriptions, marketplace, rentals), generating business value comes down to the following three elements:

• Revenue growth, particularly in relation to consumer acquisition, retention and price efficiency
• Cost reduction and the need to be competitive across production, procurement, supply chain and personnel
• Agility and efficiency, especially working capital efficiency and CapEx

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