Can AI help margin pressures?

Walmart released their quarterly results last week and it’s made me reflect on the chanhing shape of retail - and current economic pressure.

I will always be passionate about the retail and consumer brand industries. I’ve cut my teeth in roles at the likes of Asda (the UK supermarket chain then partly-owned by Walmart), Sainbury’s and Unilever. As these industries fight relentless margin pressures, I’m keen to increase AI adoption where it counts - optimising investment and profitability.

Walmart recently released their Q2 FY2027 results and the numbers highlight a diversified business, one that’s growth is largely thanks to technology and data as opposed to their supermarkets.

Their ecommerce growth was a staggering +23% and now stands at a solid 24% contribution to total sales. Then there is the growth of the highly profitable retail media business with global advertising at +38%.

Total revenues were $187.9 billion and of course the lionshare came from Walmart’s core business made up of 4,600 physical stores. But growth is minimum due to rising costs, around 1 - 2%. This is common for retailers in this current market in the US, UK and Australia. It’s brutal out there.

I would often use Walmart as an example of best-in-class omnichannel execution when working on brands such as Magnum at Unilever or Smirnoff at Diageo.

It’s Walmart’s adaptability though I’d most like to focus on. Over the last 10 years they’ve made smart strategic decisions that have also taken significant budget - investing in their data foundations for example and the infrastructure required for their ecommerce network.

The UK Market Changed too

In the UK, Tesco, Sainsbury’s and Boots have all made similar smart moves, grasping the fantastic advantage their first-party represents from loyalty cards Clubcard, Nectar and Advantage respectively. All retailers have had to embrace online out of necessity during the pandemic, from grocery orders to click and collect, marketplace to quick commerce from the likes of UberEats and JustEats.

However, from my experience, the core business functions have not moved at the same pace. Buying and marketing teams were set up to serve stores. The buyers have hundreds of product lines and optimise for performance across their categories through an in-depth understanding of their weekly, monthly and seasonal performance, for example. But online often behaves differently - your best seller instore might be different to your best seller online.

Equally, for marketers, the rise of online has created new shopper journeys and a plethora of marketing opportunities. How customers use online to plan their shop or browse for inspiration opens up new places to engage them - and of course, who the online customer is, the visuals and messaging they might engage with - is a new playing field.

Online has been around for ages you might be thinking, but the pandemic brought in new customers and the growing contribution it made to a retailers success required new investment and ways of working. For instance, I was in a strategy role working on Ice Cream at Unilever when the pandemic began - yes, there were plentiful freebies - and saw how the move to online saw a big uptake in big low priced tubs of vanilla ice cream. The mix of brands was completely different to instore - people seemed to have more willpower than instore and more premium brands such as Ben & Jerry’s initially suffered.

These new marketing channels have been a God-send to retailers, broadening what advertising space could be sold (e.g. online banners, in-app placements). But again, it’s a new business model. Digital marketing teams on both supplier and retailer side have needed to learn as they go. To a retailer, this offers new income as well as the opportunity to design the best shopper journey - think winter campaigns with relevant branded slots featuring soups and warming recipes.

To a supplier, retail media offers a fantastic opportunity to communicate to the shopper at the point of conversion. Shall I buy Heinz or Private Label? Shall I buy Neutrogena or Olay? In my previous roles, we developed some fantastic activations on brands including Bailey’s and Don Julio when I worked at the alcohol supplier Diageo.

However, the reporting needs to catch up to the offer to help suppliers see return on their investments. Retailers are learning the most effective assets and shopper journeys at the same time they are selling them.

How AI can help business functions adapt in the retail and FMCG industries

Here are some of my top line recommendations to help with these immediate examples of disruption and margin pressure.

1. AI + Commercial acumen to understand Online Performance

Buyers have a million other things to do and ecommerce teams don’t always have a commercial background.

• Utilise AI to build Omnichannel reports and circulate to all parties each week

• Understand over- and under-indexing online vs. in-store. Act on the insight (e.g. bring strong brands or promotions to a larger online audience)

2. AI to optimise Retail Media ROI

There should be rich and timely data available showing what’s working and what isn’t.

• Retailers - Pull data and use AI to create a template to send reports to your suppliers/clients. A report doesn’t need to be war and peace.

• Suppliers - build a prompt system for marketers to analyse retail media results. Negotiate accordingly.

3. Reduce time in meetings

It’s time to radically transform meetings and outdated processes.

• With permission, feed buyer meeting transcripts and minutes into a knowledge bank. Use this to prepare for every meeting.

• Reimagine processes with AI. Work with an AI or transformation professional to map out the process and identify where clunky parts can be augmented.

The Transformation Opportunity across sectors

I’ve been working with a variety of sectors since moving into a full time career driving AI education and increasing AI adoption for business impact. Leaders from the Drinks, Sports, Property industries as well as Retail and business teams including in the Pharmaceutical industry. Every sector has been facing some form of disruption.

Transformation means evolving business models and the skills needed to adapt. It’s hard work but with case studies like Walmart to look to, the evidence to look to the future and adapt accordingly is undeniable.

Find Walmart Q2 Results: here