Demand Volatility: Smart Brands Are Turning to AI for Their Core Retail Strategy

Artificial intelligence is quickly becoming the foundation of efficiency in the world of retail—from demand forecasting and sales analysis to localized allocation and personalization. The technology is arriving on the scene just in time, promoting agile strategies as shopping behaviors shift faster than ever. In response, retailers are building more responsive planning strategies to meet shoppers where they are, with products they are looking for, and AI is becoming central to that effort. Using AI, retailers can more accurately forecast sales trends, quickly respond to shifting consumer behaviors and preserve loyalty—making it a core part of their strategy as they face volatile demand.

Why Chatbots Shouldn’t Be a Top Area of AI Spending for Retailers

Given consumers’ familiarity with generative AI and the cost savings associated with using AI for customer service functions, some retailers are spending heavily on generative AI chatbots in an effort to increase personalization for online shopping experiences. According to Prosper Insights & Analytics, more than 70% of Americans ages 18 and older would prefer to speak to a live person rather than a generative chat program. 

“Of course, this isn’t the only use case for AI in retail, nor is it necessarily the most effective use of budget; consumers are very familiar with AI, but that doesn’t mean they want to deal with it when shopping, and until sentiment around AI for customer service changes, spending may be better focused on optimizing inventory and supply chains or enhancing merchandising strategies. These are use cases that directly impact the bottom line,” commented Max Ma, CEO and Founder of 7thonline. 

Staying Ahead of Shoppers & Driving Loyalty with AI

According to a recent 7thonline survey, one-third of retail executives are already using AI to forecast and analyze demand, while 34% expect it to play a major role in sustaining or growing profits over the next two years. Retailers aim to use AI to stay ahead of shoppers by predicting and capturing emerging trends. The ability to analyze mass amounts of historical and current data in real time down to style, color, size is invaluable to stay ahead of shoppers. 

Retail success has come to depend on AI tools that are able to identify exactly what shoppers are looking for, when they are looking for it—improving the customer experience and fostering loyalty. Brand loyalty is a challenge in the current environment, especially among younger generations who are more likely to switch brands based on price and other qualifications, like value alignment. Forrester estimates that brand loyalty will decline 25% in 2025, adding that saving money is one of the top five reasons consumers in the U.S. will try a new brand. Additionally, a recent Prosper Insights & Analytics survey, found that 39% of Americans age 18+ are buying more store brand or generic products due to price increases. Customers are also shifting away from traditional, transactional programs toward more personalized, value-driven and emotional shopper experiences.

Improve Demand Forecasting—AI at the Core of Retail Strategy

AI’s ability to analyze massive amounts of real-time data in a snap is the crux of its ability to accurately predict sales all the way down to style, color, size, by location. By delving deep into both internal and external data, and current and historical trends, AI models can spot patterns that a human would probably miss when looking at a large number of spreadsheets.

Unlike human analysis, AI technology can easily and quickly incorporate external data like weather conditions, social media sentiment, sales put on by competitors and impact from brand promotions. As a result, retail executives who know the best places to spend their AI dollars will be better prepared to weather the current storm.

Read the full article on Forbes here: https://www.forbes.com/sites/garydrenik/2025/10/07/ai-becomes-a-core-strategy-for-retailers-facing-volatile-demand/ 

To learn more about how AI can help brands and retailers with their merchandising, book a demo or email us at info@7thonline.com.