‘I can see AI becoming as fundamental to business as electricity’

British retailers face an unprecedented wave of cost pressures following a distinct lack of second- and third-order thinking.

From April, a trio of regulatory changes will hit the sector hard; employers’ national insurance contributions will rise to 15%, while the earnings threshold at which it applies will drop from around £9,000 to £5,000, the national living wage will increase by 6.7% and a new £2bn packaging levy will come into force.

This means that businesses with large part-time workforces will experience a significant rise in payroll costs, adding strain to profit margins. For major retailers such as Tesco, Sainsbury’s and Primark, this means millions – and in some cases hundreds of millions – in additional annual costs.

The consequences extend beyond profitability. With retail employing 3 million people directly and supporting another 2.7 million in the supply chain, these mounting costs are likely to force significant workforce reductions, hurting those hardest that the policy was ironically intending to help, further damaging confidence in the process.

However, retailers aren’t without options. Technology, particularly automation, offers a clear path to protecting margins and maintaining competitiveness if executives are willing to be brave during this period of adversity.

Short-term wins through back-office automation

The most effective starting point is back-office operations – especially in IT, finance and legal departments. These areas often rely on repetitive manual processes that limit efficiency and scalability. Automation provides a valuable way to minimise errors and speed up decision-making.

Over the past decade, according to McKinsey, finance departments have reduced costs by 30% through automation. Legal Dive suggests legal teams, traditionally risk-averse, have increased contract lifecycle management adoption by 14%, with 65% now using AI-powered tools for contract analysis and compliance.

Advancements in AI, particularly generative AI, have further improved the accessibility and effectiveness of automation tools. We found that retailers allocating over 20% of their IT budgets to automation managed to cut costs by 22%.

Platforms like C2FO exemplify this potential. By automating invoice approvals and enabling dynamic supplier payments, C2FO helps businesses optimise cash flow and reduce administrative costs. This typically delivers £1m to £2m in savings per £1bn of cost of goods sold.

For large retailers, the impact can be even more substantial – potentially unlocking hundreds of millions in trapped working capital that would otherwise be tied up in manual processes. Critically, it also provides real-time visibility into cash flow and supplier health, offering broader benefits to the industry by bringing greater liquidity visibility into the system. C2FO recently crossed the threshold of funding $1bn of working capital per day across the world, enabled through their technology.

Discover Dollar takes a different approach to back-office automation, offering a ‘recovery as a service’ model that automatically identifies and recovers overpayments and leakages. It’s a risk-free model, where clients only pay when money is recovered, has already discovered over $504m (£403.9m) in savings for existing clients including several Fortune 500 companies.

In terms of legal and finance functions, Statement streamlines treasury by consolidating financial data and automating manual tasks whilst Luminance’s automates contract lifecycle processes, dramatically reducing manual effort in legal reviews; both of which can save hundreds of hours monthly.

These examples highlight the significant and varied impact that back-office automation can deliver, with implementation of these technologies acting as an immediate buffer against rising costs.

 Medium-term efficiencies through technology

While automation delivers immediate cost savings, strategic technology investments can fundamentally transform operational efficiency.

The landscape of solutions spans various aspects of retail operations across both the supply chain and store estate – from AI-powered demand forecasting to smart workforce management. These technologies deliver compounding benefits – each efficiency gain helps offset rising costs while strengthening competitive advantage.

Several innovative solutions demonstrate the transformative potential. At the store level, Quorso’s store management co-pilot analyses data to provide detailed insights and suggest high-value actions, proven to help existing customers to achieve $180m in additional annual revenue while saving store managers several hours weekly.

In logistics, Paccurate’s intelligent packaging platform delivers up to 23% shipping cost reductions and million-dollar annual savings per distribution centre by optimising material usage, labour and shipping requirements.

Beyond operations, Brainbox AI demonstrates how technology can simultaneously tackle cost and sustainability challenges. Using machine learning to continuously optimise building systems based on weather, occupancy and other external data, it can achieve 25% reductions in carbon emission while simultaneously cutting operational expenditure by 15%. Such solutions can unlock meaningful savings that can help offset macro cost pressures.

Acceleration in technology is only lowering the costs of getting started – now, most technology companies offer trials that do not require payment until they deliver customer traction and a strong return on capital.

A recent interview with Jeff Bezos noted that, following his recent return to Amazon, he is spending 95% of his time on AI, with the company currently building 1,000 AI applications. The valid concern that the most profitable will get stronger only heightens the urgent need to move faster to preserve margins and reinvigorate ROCE for businesses at risk of being left behind.

At True, we are fortunate enough to see more than 4,000 of these technologies a year delivering an accelerated window to that future Bezos outlines.

I can personally see AI becoming as fundamental to business as electricity – a transformative force that will underpin every operation and enable entirely new business models.

In today’s challenging retail environment, embracing this technological evolution isn’t just about efficiency – it’s about survival. While times are tough, continual reinvention through AI provides a transformative foundation upon which to build.