What: AI-driven innovation and investment are redefining retail competitiveness, operational efficiency, and customer experience while intensifying the need for robust cybersecurity.

Why it is important: The convergence of AI-driven transformation and cybersecurity challenges is reshaping retail strategy, making technology integration and risk management critical for future success.

The Bain Technology Report 2025 underscores how AI-driven innovation is fundamentally altering the retail landscape, with leading retailers rapidly extending their competitive advantage through strategic technology investments. Over the past year, 87% of retailers adopting AI have achieved revenue increases of at least 6%, while also realizing significant improvements in customer service efficiency and supply chain optimization. This transformation is marked by a decisive shift from manual, Excel-based planning to AI-powered systems that enable dynamic inventory management and real-time decision-making. GenAI and agentic AI are now revolutionizing supplier negotiations and risk management, delivering measurable productivity gains and reducing operational bottlenecks. However, this accelerated digitalisation exposes retailers to heightened cybersecurity risks, as only 18% of companies have mature digital core security, and high-profile breaches continue to disrupt major players. As consumer expectations for personalised experiences intensify, retailers must balance innovation with robust investment in privacy and security to sustain growth and maintain customer trust in an increasingly complex digital environment.

IADS Notes: As reported in Forbes (March 2025), 87% of retailers implementing AI achieved revenue increases of 6% or more, with significant gains in customer service efficiency and operational productivity. BCG’s analysis (July 2025) confirms that only 10% of retailers have successfully scaled AI applications, yet those that have are outperforming peers by 7 percentage points in five-year TSR. Inside Retail (March 2025) highlights the critical role of AI-driven personalization in meeting the expectations of 71% of consumers seeking tailored experiences. Meanwhile, The Retail Bulletin (August 2025) and Retail Week (August 2025) document the surge in sophisticated cyberattacks, with only 18% of retailers possessing mature digital core security and high-profile breaches at M&S, Harrods, and Co-op exposing the sector’s vulnerabilities. These sources collectively illustrate that while AI and digital transformation are driving growth and operational gains, robust cybersecurity and risk management are now essential components of retail strategy.

Bain & Company: Technology Report 2025