Retailers turn to AI for smarter supply chains and shopping
Retailers are doubling down on AI in the second half of 2026, betting that the technology will sharpen their supply chains, streamline operations, and reshape how customers shop. Executives from major chains like Gap, Dollar General, Ulta Beauty, and Kohl’s have laid out their plans in recent earnings calls, framing AI as both a short-term efficiency tool and a long-term competitive edge.
Ulta Beauty’s CEO, Kecia Steelman, discussed the company’s AI rollout during its August 27 earnings call. The retailer is using predictive models and agentic systems to optimize inventory, speed up fulfillment, and improve product discovery—all while leveraging its Ulta Beauty Unleashed strategy, a tech-driven push that includes modernizing core systems. Steelman said the company is leveraging prior investments in technology, automation, and network optimization to improve speed to guests. The company also hired Kelly Garcia, a former Domino’s executive, as its new CTO in July to accelerate these efforts. Steelman noted that the retailer is currently in the early stages of applying AI across key corporate functions, with plans to expand its use incrementally as capabilities mature.
Kohl’s CEO said during the company’s August 26 earnings call for the second quarter of the company’s 2027 fiscal year that he is encouraged by early signs of the store’s AI shopping assistant, which is resulting in stronger conversion and higher revenue per visit. The CEO emphasized that while the company is still in the early stages of its AI journey, the initial results are promising and suggest significant potential for future growth.
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AI adoption driven by inflation and competition
The pressure to adopt AI isn’t just about keeping up with rivals—it’s about responding to a shifting consumer mindset. With gas and grocery prices still raised, shoppers are more deliberate about spending, forcing retailers to find ways to stand out. Bain & Co.’s global retail leader, Aaron Cheris, described the urgency in blunt terms: “Everybody and their sister has to have an answer to the question of what are you doing with AI for their board, for their investors.” Cheris noted that the pace of AI adoption is driven not just by competition but by the need to meet evolving customer expectations in a high-inflation environment.
That doesn’t mean retailers are chasing an “AI-first” identity. Most are taking a measured approach, using the technology to address specific pain points. Some, like Home Depot with its Magic Apron generative AI tool or Walmart with its Sparky commerce agent, are embedding AI directly into the shopping experience, creating more interactive and personalized interactions. Others focus on back-end improvements—supply chain routing, cost-cutting automation, or foundational data work, to make operations smoother. Cheris observed that while some companies prioritize customer-facing AI tools, others are using the technology to improve internal workflows, such as data analysis and decision-making.
Back-end efficiency wins early AI investments
Dollar General is among those betting on AI for internal efficiency. Its CEO said during the company’s August 27 earnings call for the second quarter of its 2027 fiscal year that the company is building agentic operating systems for enterprisewide workflows to improve productivity. Dollar General’s net sales jumped to $11.3 billion during the quarter.
Gap Inc. is also investing heavily, with capital expenditures of $650 million this year allocated to new stores, tech upgrades, and supply chain modernization. The company’s focus mirrors others in the sector: using AI to cut waste, predict demand, and ensure the right products are in the right stores at the right time. These investments are part of a broader strategy to enhance operational efficiency and improve the customer experience through data-driven decision-making.
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For customers, the changes may not feel like a revolution, at least not yet. Cheris noted that AI-powered tools, from chatbots to personalized recommendations, are designed to feel seamless. “You as a customer wouldn’t even know that they were powered by AI necessarily,” Cheris said. “But you’d think ‘wow, they’re really smart.’” Cheris explained that retailers are increasingly using AI to personalize interactions, whether through tailored email campaigns, more relevant website content, or in-store assistance powered by AI tools that provide insights to staff about customer preferences and behaviors.
Augmenting, not replacing, human roles with AI
The shift isn’t just about flashy features. Behind the scenes, retailers are using AI to analyze shopping patterns, adjust inventory in real time, and even train staff with data-driven insights. The goal isn’t to replace human judgment but to augment it, whether that means a sales associate getting instant product recommendations or a warehouse team optimizing routes to reduce delays. Steelman of Ulta noted that AI is being used to improve speed to guests by leveraging prior investments in technology and automation, ensuring that operations run more efficiently.
What’s clear is that AI in retail isn’t a one-size-fits-all play. Some companies are using it to cut costs, others to enhance personalization, and a few to rethink entire business models. But the common thread is speed: the faster retailers can adapt, the better positioned they’ll be to meet customers where they are, and where they’re headed.
