Artificial intelligence will likely become a functional part across retail operations, with implications ranging from demand generation to cost structures, UBS Securities said in a note emailed Friday.
The US hardline and food retail sector has mostly used AI in areas such as marketing, customer service chatbots and basic inventory optimization, the brokerage said.
However, the technology is now being adopted more broadly across different functions, UBS analysts, including Michael Lasser, said.
"As consumers increasingly rely on large language models and agentic systems to discover, evaluate, and purchase goods, traditional traffic channels -- stores and websites -- may become less central," Lasser said. "This raises important questions around traffic monetization, particularly for high-margin businesses such as retail media."
UBS expects higher-income consumers to influence demand dynamics, as the top 10% of households dictate about half of all spending.
AI may exacerbate income inequality, benefiting premium categories and adding pressure on value-oriented segments, according to the UBS note. This means retailers may have to alter strategies to reflect "a more bifurcated consumer landscape."
Retailers that use AI-driven marketing are likely to see improved customer acquisition efficiency, Lasser said.
On the cost management front, he said working capital needs could drop due to the automation of repetitive processes and improved inventory management systems.
While AI helps improve accuracy in stores and distribution centers, it introduces new costs, including cloud computing, data governance and cybersecurity, Lasser said.
Retailers with integrated ecosystems are likely best positioned to benefit from mounting AI adoption, according to UBS. They include Walmart (WMT), Costco Wholesale (COST), Target (TGT), Home Depot (HD), Lowe's (LOW) and Kroger (KR).
Also on that list are AutoZone (AZO), O'Reilly Automotive (ORLY), Wayfair (W) and Williams-Sonoma (WSM).
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