Artificial Intelligence (AI) could help UK retailers slash procurement costs by as much as 15% at a time of mounting financial pressure, according to new research from Inverto and parent company Boston Consulting Group.
Inverto’s and BCG’s 2025 Retail in Transition report finds that AI offers solutions to help businesses lower procurement costs, enhance operational efficiency and increase competitiveness, e.g. by data analytics, should-costing modelling, or automatisation of daily tasks. This comes at a crucial time for UK businesses navigating multiple challenges, including tariff uncertainty, rising recruitment costs and the recent National Insurance hike in April.
Direct procurement*, which accounts for 60–75% of retail sales, is a perfect area in which to apply AI. It can streamline the procurement process, for example, by automatically tracking raw material costs — unlocking savings of up to 5%. These savings can significantly boost profitability.
Indirect spend** – including costs for logistics, IT, Marketing and facility management – also offers significant savings potential. Many companies struggle with a lack of transparency in these areas. AI helps uncover hidden potentials and optimise procurement strategies, delivering cost reductions of up to 15% on indirect spend.
72% of buyers report needing more data to support negotiations with their suppliers while 72% stating they lack the analytical skills to deliver that data. Inverto says an obvious use case for AI is providing detailed insights into cost breakdowns, benchmark prices and the own procurement volumes that strengthen the buyer’s cases in procurement negotiations.
The research also shows that 86% of buyers feel “overwhelmed” by many smaller tasks during the annual negotiations. The time needed to complete these minor tasks gets lost for preparing for negotiations. Here AI could be used to automate simple tasks, which would alleviate pressure and help teams focus on negotiations and other business-critical tasks.
Katharina Erfort, Principal at Inverto, says: “Our modelling shows that AI can deliver very substantial savings in the retail sector. AI not only makes retail more cost-effective but also enhances agility and resilience – helping retailers secure long-term competitive advantages.”
“Retail as an industry is undergoing a period of rapid transformation. AI can support businesses through optimizing procurement processes, whilst 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.”
*Direct procurement refers to the purchase of materials directly sold to consumers.
**Indirect spend refers to the purchase of goods and services that support a business’s operations– in retail referred to as ‘Good Not for Resale’.
