Plenty of opportunities; but still at an early stage of development
This document explores the key AI opportunities and their impact on the decision-making processes in the retail industry on two main fronts. The first focuses on the retailer’s relationship with the customer, in particular the shopping experience, personalised targeting and the medium- and long-term engagement with them. The second is the retailer’s opportunity to streamline and optimise operations, focusing on inventory management, supply chain efficiency, and dynamic pricing.
- Despite being at an early stage of development in Mexico, we are convinced that all companies will need to implement AI technology in order to create real value and any potential strategic advantage in their industry.
- In the grocery segment, we believe Walmex is the best positioned retailer to take advantage of AI investment. However, digital players have more considerable means at their disposal while smaller players will need to make careful strategic picks.
- We expect a significant impact from AI deployment in our retail coverage universe. According to our initial calculations, a 1.5pp increase in operating margins would represent USD1.2-1.5bn in potential savings per year and USD8.8-9.5bn in terms of economic value in the companies under coverage.
- Despite AI deployment, we think labour will continue to be the most important operating expense in the retailers’ P&L structure in the short and medium term, but this could change in the long term.