AI Integration in Category Management: Substance or Merely a Marketing Slogan?
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In the ever-evolving world of retail, Artificial Intelligence (AI) is making a significant impact, particularly in category management and merchandising. This transformation was highlighted in a survey conducted by BCG in 2025, which revealed the challenges and opportunities that AI presents for the retail sector.
Last June, Black Swan Data, a company specialising in predicting emerging trends using AI, was acquired by Mintel. Meanwhile, Impact Analytics, a firm focused on helping Consumer Packaged Goods (CPGs) analyse shopper and sales data, raised an impressive $40 million in 2024. These developments underscore the growing importance of AI in retail.
One Brazil-based startup, Aravita, helps supermarkets optimise order quantities for perishables by utilising data from weather, demand patterns, inventory, and shelf life. This is just one example of how AI is being used to avoid empty shelves and spot demand swings before they appear in Nielsen data.
However, the survey also identified several key challenges in implementing AI for category management in retail. Data quality issues, underutilisation of technology, complex tech integrations, overworked teams, and outdated planning processes were highlighted as significant barriers. Approximately one-third of data points used by merchants were found to be incorrect, making AI less reliable without clean data. Furthermore, around 40% of available technology goes unused, reflecting a gap between AI capabilities and actual application.
Despite these challenges, AI delivers value primarily when clear business rules are defined, data is clean and trustworthy, and success metrics are explicitly set. In particular, AI proves effective in localised assortment optimization, determining product mixes and placements based on demand signals, margins, and shopper profiles.
To address these challenges, solutions discussed include pairing AI use cases with human expertise and existing habits, investing in workforce training, focusing on use cases with clear rules and measurable outcomes, improving data quality and integration, and moving from pilot projects to full-scale practice with leadership support and change management.
The potential of AI in retail is immense, with applications ranging from smarter pricing and promotion planning to digital visual merchandising and store execution. For instance, retailers such as Lowe's are using AI, computer vision, and digital twins to test layouts, adjust placements based on season or weather, and react faster to viral trends.
To delve deeper into this topic, a live discussion on AI's role in category management and merchandising will be held on July 30. The discussion will be hosted by Louisa Burwood Taylor, the head of news and research at our socials, and will feature leaders from BCG, Deloitte, Daisy Intelligence, and Lumi AI. This event is a fantastic opportunity to learn more about the current state of AI in retail and its future potential.
For those interested in attending, registration can be found on the website. The future of retail is exciting, and AI is at the forefront of this transformation.
[1] AgFunderNews summary of the BCG survey and related commentary on category management and AI in retail [3] BCG AI in work insights reinforcing the importance of frontline employee engagement and training [5] Additional BCG AI in work insights emphasising the need for clear business rules, clean data, and success metrics.
- The rising significance of Artificial Intelligence (AI) in the retail industry is extending to other sectors as well, with finance firms like Deloitte utilizing AI for smarter pricing and promotion planning.
- In the realm of technology, AI is also making strides in the business of Consumer Packaged Goods (CPGs), as demonstrated by Daisy Intelligence's work in localised assortment optimization.
- As the use of AI expands across various industries, including finance, retail, and technology, it's evident that artificial-intelligence-driven solutions will play a crucial role in shaping the future of businesses.
