Inverto: How AI Can Unlock Procurement Savings for Retailers

It's well documented that artificial intelligence (AI) has emerged as a critical tool in numerous sectors. 

They include retail, which, according to research from Inverto and parent company Boston Consulting Group (BCG), can reduce procurement costs by up to 15% by harnessing the immense power of AI. 

As retailers contend with tightening margins, increased costs and shifting market pressures, AI offers solutions that target both direct and indirect procurement to streamline operations and enhance competitiveness.

Procurement under pressure amid rising costs

Retailers are facing a complex mix of challenges, including tariff uncertainty and rising labour costs. In the UK, businesses are also grappling with the recent increase to National Insurance contributions.

Against this backdrop, the 2025 Retail in Transition report from Inverto and BCG suggests AI offers a strategic response to rising procurement demands. The report outlines how AI-led tools such as data analytics, should-cost modelling and task automation can help businesses navigate these hurdles.

Direct procurement, covering stock and merchandise that make up 60-75% of total retail sales, stands out as a prime candidate for AI-led efficiencies.

AI platforms can automatically track raw material costs and optimise purchasing decisions, with the potential to cut direct procurement spend by as much as 5%. These efficiencies not only reduce immediate costs but can feed directly into improved profitability.

Indirect procurement also holds vast savings potential. Logistics, IT, marketing and facility management are areas where visibility tends to be lower and inefficiencies often go undetected.

Inverto and BCG's report finds that AI applications in indirect procurement can uncover cost-saving opportunities and help businesses better manage and benchmark supplier costs. By increasing transparency, AI enables smarter decisions across indirect categories, offering potential savings of up to 15%.

Data gaps and negotiation pressure

Buyers across the UK retail sector report a lack of usable data and analytical skills, both of which hinder effective supplier negotiations.

According to the report, 72% say they don't have the data needed to support negotiations, while the same proportion lack the analytical skills to produce it. This gap gives AI a clear role: delivering detailed insights into cost breakdowns, supplier benchmarks and internal procurement volumes that strengthen negotiation positions.

"Our modelling shows that AI can deliver very substantial savings in the retail sector," explains Katharina Erfort, Principal at Inverto. "AI not only makes retail more cost-effective but also enhances agility and resilience – helping retailers secure long-term competitive advantages."

By integrating AI into procurement functions, teams can base negotiations on facts rather than assumptions. This includes accurate should-cost modelling, a method that estimates what a product or service should cost by analysing raw material, labour and production costs. AI automates this process, ensuring up-to-date insights are always available and reducing reliance on manual data entry or legacy systems.

Alongside data shortfalls, the report reveals that 86% of buyers feel overwhelmed by minor tasks during annual negotiations, with everyday administrative work reducing the time available for strategic preparation. This is another area where AI has a clear use case, automating repetitive processes such as data entry, report generation and supplier communication.

With these functions handled by AI, procurement professionals can focus on business-critical activities like supplier management and contract negotiation.

Cost-effective procurement with long-term benefits

Retailers adopting AI in their procurement operations are already seeing tangible improvements in efficiency, cost control and team productivity, outperforming those who delay adoption. 

With procurement forming such a large share of retail costs and AI offering measurable efficiencies, the case for integration is strong.

“Retail as an industry is undergoing a period of rapid transformation,” adds Katharina. “AI can support businesses through optimising procurement processes, while 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.”