Inverto & BCG: How AI Cuts Procurement Costs for Retailers

AI has firmly established itself as an essential instrument in transforming various industries, not least the retail sector.

According to recent research from Inverto and the Boston Consulting Group (BCG), AI can help retailers slash procurement costs by up to 15%.

In a market where retailers face tightening profit margins and fluctuating expenses, AI offers viable solutions to optimise both direct and indirect procurement processes, thereby boosting operational efficiency and competitiveness.

Procurement challenges and AI benefits

Retailers are presently navigating a challenging landscape marked by issues such as tariff uncertainties and escalating labour costs.

In the UK specifically, businesses are contending with elevated National Insurance contributions.

To address these difficulties, AI emerges as a strategic asset. The 2025 Retail in Transition report from Inverto and BCG illustrates how AI solutions, encompassing data analytics, should-cost modelling, and process automation, can help businesses mitigate these obstacles.

A key area ripe for AI optimisation is direct procurement, which involves managing stock and merchandise costs that constitute 60-75% of overall retail sales.

AI technologies can continuously track raw material expenses and streamline purchasing decisions, offering potential direct procurement savings of up to 5%.

By cutting these costs, retailers can see an immediate impact on profitability.

Moreover, AI's applications in indirect procurement, spanning logistics, IT, marketing and facility management, are considerable.

These sectors often suffer from under-the-radar inefficiencies due to poor visibility, which AI can address by revealing cost-saving opportunities and improving supplier cost management and benchmarking. Inverto and BCG's findings suggest that AI-driven improvements in these indirect categories could produce savings of up to 15%.

Data constraints and AI opportunities

Among buyers in the UK's retail sector, a prevailing issue is the shortage of usable data and analytical capabilities, factors that impair effective supplier negotiations.

The report notes that 72% of buyers lack the necessary data to support their negotiations, while an equal proportion do not possess the analytical skills to generate it.

Here, AI plays a pivotal role by offering detailed insights into cost breakdowns, supplier benchmarks and procurement volumes, thus fortifying negotiation strategies.

"Our modelling shows that AI can deliver very substantial savings in the retail sector," explains Katharina Erfort, Principal at Inverto. "AI not only makes retail more cost-effective but also enhances agility and resilience – helping retailers secure long-term competitive advantages."

By incorporating AI into procurement operations, teams can ground their negotiations in factual data rather than assumptions, enhancing decision-making and contract management.

Concurrently, the data highlights that 86% of procurement professionals feel burdened by routine tasks during annual negotiations, hindering their ability to focus on strategic preparation.

AI offers a solution by automating tasks such as data entry, report creation, and supplier communication, thus freeing up professionals to concentrate on more impactful activities like supplier relationship management.

Long-term AI advantages in procurement

Retailers using AI in procurement report significant improvements in efficiency, cost management and workforce productivity, placing them ahead of competitors slow to adopt such technologies. With procurement representing a major portion of retail expenditures, integrating AI is a logical step for achieving pragmatic efficiencies.

“Retail as an industry is undergoing a period of rapid transformation,” adds Katharina. “AI can support businesses through optimising procurement processes, while reducing costs.

"AI can deliver tangible benefits and transform procurement processes. Retailers who are using AI to drive change will outclass the market, where those who don’t risk being left behind.”