Why AI Data-Driven Retail is the Future—and How to Get There

Merchandise assortment planning has undergone a major transformation over the past few decades—from manual processes and spreadsheets like Excel to various planning systems. Tech advancements in retail added some structure but many still relied on guesswork, labor-intensive processes and siloed data.

As the retail landscape became more complex (such as with the rise of omnichannel) and consumer expectations rose, the need for sophisticated tech solutions became even more pronounced. That growing complexity paved the way for artificial intelligence to transform how retail brands think about their merchandising strategy.

business meeting over graphs on a computer

Why Retailers Still Struggle: Common Pain Points

Despite advances in technology, many retailers continue to face stubborn pain points leading to off-the-mark inventory decisions. Data is often fragmented and scattered across teams and systems, resulting in information overload without actionable insight. Adding to the challenge: the expansion of omnichannel operations, global supply chain disruptions, tariffs, market saturation, waning brand loyalty and more. The stakes are too high for patchy assortment strategies. 

In 2023, the fashion industry produced between 2.5 and 5 billion units of excess stock. That’s up to $140 billion in lost sales, according to Business of Fashion. Meanwhile, consumers are frustrated—brands are losing out on an average of 20 percent in monthly profit due to out-of-stock sizing, a shopper’s biggest complaint.

The AI Advantage: Balancing Art and Science

Retailers are increasingly turning to data-driven tools to overcome these challenges—and strike the right balance between demand, availability and profitability with AI-powered tools. A recent study found that 75 percent of fashion executives plan to adopt advanced analytics and AI to automate key processes, from forecasting to inventory allocation, in 2025. These proactive strategies are already delivering results for forward-thinking brands; they reported AI has improved stockouts by as much as 25 percent. AI enhances the art of merchandising and strengthens it through powerful data-backed insights. Creativity and brand identity still matter, but now they’re supported by real-time, data-informed decision-making.

Data-Driven Retail Decisions and AI-Powered Merchandising

AI enables a more agile, responsive approach to inventory planning. It processes vast datasets in real time, revealing insights that manual processes would miss or take weeks to uncover. Forecasting becomes more precise by analyzing historical trends at a granular level. Risk is reduced as production decisions are informed by what actually sells, cutting down on waste and markdowns. And with full visibility across channels, teams can better align around performance metrics for DTC, wholesale and ecommerce. A single source of truth empowers smarter collaboration across departments from design and production to planning and finance. 

As manual errors decline and efficiency improves with smarter planning, customer satisfaction rises. Meeting demand with the right products in the right sizes at the right locations ultimately drives profitability and strengthens brand performance.

Steps to Perfecting Merchandise Assortment with AI

Perfecting merchandise assortment with AI begins with smarter planning. Retailers must analyze past sales and behavioral data to uncover not just what sold, but why. AI uncovers deeper insights, including customer affinities and regional preferences, to guide more targeted assortment decisions.

Next, teams must align around common inventory goals, lead times and budget constraints. When all departments operate from the same playbook, planning becomes proactive rather than reactive.

Then, it’s all about placement, which products to put where, when. AI enables retailers to determine the most optimal localized assortment mix, determined by each SKU’s propensity to sell at each location, based on demand drivers like weather patterns. By combining push strategies, using preset rules like store size and sales volume, with pull strategies driven by real-time demand, retailers ensure each store has the essential stock.

Once inventory runs out, it’s time to replenish. AI also enhances replenishment strategies; when items sell, inventory can be shifted from other locations or reordered as needed. This adaptability reduces the risk of overproduction and keeps shelves stocked.

Continuous Optimization: Analyze, Forecast, Repeat

Assortment planning doesn’t end once the product lands in shoppers’ hands. AI thrives on continuous data feedback, improving forecasting models with every cycle. Over time, planning becomes more accurate, responsive and aligned with customer demand.

Perfecting your merchandise assortment with AI isn’t about removing human insight—it’s about unlocking its full potential. By turning complex data into clear direction, AI helps retailers thrive in a world where speed, precision and personalization are no longer optional—they’re essential.

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7thonline is a leading AI-powered retail planning and forecasting software, enabling more effective planning, demand forecasting and inventory optimization for leading retailers. With embedded business intelligence and rich analytics, the solution offers complete demand visibility and planning capabilities at the most granular level. To learn more about our suite of solutions, book a demo or email us at info@7thonline.com.

Retail and Manufacturing Operations: The Possibility of Reshoring with AI & Automation

The conversation around bringing fashion and apparel manufacturing back to the United States has grown louder in recent months as tariff news continues to hit the stands—especially as 97% of goods in the industry are imported. For many, the idea seems aspirational; limited by high labor costs, outdated infrastructure and a lack of technical workforce, the barriers appear to be high. But we’re at a critical inflection point. Automation and artificial intelligence (AI) have matured to the point where reshoring is not only possible—it is practical given the right circumstances.

Our CEO, Max Ma, shared his opinion on reshoring for fashion and apparel with Sourcing Journal: https://sourcingjournal.com/topics/technology/reshoring-immigration-technology-manufacturing-trump-made-in-america-1234749503/

There was a time when regions across the country were thriving apparel production hubs. Factories operated efficiently, often powered by skilled immigrant labor and close ties to local retailers. That ecosystem didn’t vanish because it was inherently flawed, it shifted overseas due to cost advantages. Today, however, the dynamics have changed. Labor costs in countries like China have risen significantly, while regulatory burdens and global instability have introduced new risks into extended supply chains.

Meanwhile, pockets of domestic production still exist. Lower-cost regions such as South Carolina maintain infrastructure and history in apparel manufacturing, and niche factories continue to operate in urban centers like Brooklyn, New York. The conditions for regrowth are in place. What is needed is an alignment in policy, technology and the industry’s commitment.

The Role of AI in a Reshoring Revolution

Automation and AI are the great equalizers in the reshoring conversation. Dark factories have been seen in other industries—so it’s not unfounded that they could be possible for fashion as well but it’s unlikely apparel manufacturing will be entirely human-free; significant portions of the production process from fabric cutting, dyeing, material transport and even quality control, can be automated today. These advancements dramatically reduce dependency on manual labor while increasing output consistency.

Beyond the factory floor, AI-driven platforms like 7thonline are already transforming how retailers plan and manage inventory. By automatically generating merchandise plans based on historical data and predictive analytics, retailers can reduce overproduction, avoid lost sales and respond more quickly to changing demand. These benefits are particularly compelling when paired with shorter, domestic supply chains.

When production happens thousands of miles away, a single purchase decision can take months to reach the sales floor. The risk of misalignment is high. Reshoring, supported by intelligent planning systems, drastically reduces that lag and associated costs.

Policy Must Match Industry Momentum

For this reshoring vision to become a reality at scale, government support is essential. Other countries that have successfully built automated manufacturing sectors, such as Japan, South Korea and China, have done so with significant public investment. These governments have subsidized robotics, funded workforce training and created tax incentives to attract industrial development.

The United States should review success stories and take inspiration while following suit. Subsidies for automation equipment, tax incentives for reshoring investments and grants for workforce development would create a more level playing field. These policies should be considered industrial aid because they are strategic investments that can lead to job creation, higher tax revenue and greater national resilience.

Looking Ahead: A Smarter Supply Chain

The time to act is sooner rather than later. The fashion and retail industries are under immense pressure to improve speed to market, reduce waste and operate more sustainably. Especially as tariff uncertainty continues to hit the newsstands. A smarter, more localized supply chain that’s enabled by automation and powered by AI is the solution.

As we look to the future, the question is no longer whether reshoring is possible. The question is: are we ready to do the work collectively, across sectors and with government support to make it happen? With the right combination of policy, technology and willpower, we can build a new era of American manufacturing. One that is more intelligent, responsive and resilient than ever before.

7thonline is a global leader in AI-native demand planning and inventory management solutions, offering retailers and wholesalers innovative functionality that optimizes their supply chains and drives profitability across all key channels. To learn more about our merchandise software solution, contact the team at info@7thonline.com or book a demo.

Escape from Excel

Boost sales, improve margins and maximize profits. Learn how retailers can utilize AI and demand planning software to escape from Excel hell.

Maximize Your Market Share with Micro Merchandising

Micro merchandising ensures stores have the assortment mix the local market wants—in the right color, the right size, at the right price. Through precise planning, demand forecasting, and inventory optimization, products can sell at the highest possible margin.

Maximize Inventory Productivity with Multi-Channel Demand Planning

At 7thonline, we understand the challenges brands face in maximizing inventory productivity across wholesale and direct-to-consumer (DTC) channels. 7thonline’s DTC Demand Planning is ‘Store-Based’ (Yin), while its Wholesale Demand Planning is ‘Account-Based’ (Yang), for a comprehensive and complete view of Corporate Demand. The two approaches are equally vital to your business yet when they are integrated as part of a whole, the combined benefits are significant.

digital sales forecast

Through decades of collaboration with clients like Patagonia, Canada Goose, PVH, Under Armour, Oakley and VF Corp, we have learned, refined and developed an end-to-end multi-channel demand planning technology that is purpose-built for inventory management, planners and account executives/salespeople.

Unfortunately, many people think they can manage wholesale with Excel or treat it the same as retail by using a ‘store-based’ solution, which leads to overstock and lost sales. Recently, several leading, innovative brands have approached 7thonline seeking a technology that can help them overcome the unique challenges of wholesale channel demand planning.

  • Traditional demand planning tools were originally developed as ‘store-based’ solutions for CPG and food and beverage. After all, these are the largest consumer consumption categories so it makes sense.
  • However, while ‘store-based’ approaches are great for DTC brick and mortar, they cannot be retrofitted to work for wholesale demand planning—period.
  • Our wholesale demand planning is purpose-built as an ‘account-based’ system which is the only way to effectively manage wholesale.
  • It enables Account Executives (AEs) to take early demand signals from customers and provides demand visibility across all accounts.
  • It also enables quick order aggregation from brick-and-mortar and other channels, as well as effective planning for future demand with the aid of ML&AI forecasting.

Available to Sell (ATS) Reports can be created instantaneously versus aggregating bookings from hundreds of Excel worksheets. As mentioned earlier and in stark contrast, our approach to DTC demand planning is ‘store-based’. Utilizing both strategies for multi-channel demand planning is crucial for success.

7thonline’s unique approach of combining Yin and Yang has enabled brands to have a holistic view of demand planning across all channels, helping them drive revenue growth for nearly 25 years.

To learn more about 7thonline’s multi-channel capabilities, book a demo or email us at info@7thonline.com.