IHL: Macy’s could reap $7.5 billion in benefits from AI

Macy’s Inc. stands to gain significantly from business improvements caused by artificial intelligence (AI).

According to data from analyst firm IHL Group, the department store retailer could see more than $7.5 billion in business improvements by the end of the decade due to AI technology deployments. 

This total figure includes as much as $3.8 billion in increased sales; $2.1 billion in improved gross margins through lower product costs, more optimized pricing, and supply chain improvements; and then reduce by $1.7 billion sales and generative administrative costs through 2029.

The potential $7.5 billion in business benefits also includes gains that can be made through traditional AI and machine learning (ML) technologies, generative AI, and the potential for artificial general intelligence. These figures do not include any savings from reducing headcount but focus on creating more efficiency and supporting growth and lower expenses through greater efficiencies only.

By line of business, IHL estimates that the Macy’s categories with the biggest potential gains from AI include:

• Commerce solutions: $1.08 billion.
• Infrastructure: $891 million.
• Merchandise/supply chain management: $705.6 million.
• Store systems: $586.3 million.
• Sales and marketing: $498.2 million.

• Business intelligence: $487.9 million.

  “Our research approach was to start by looking at opportunities from an industry-level, then to the segment and specific retailer level leveraging our public and private data,” said Greg Buzek, president of IHL Group. “We then applied a nine-point algorithm to each company that measured items like data maturity, analytics maturity, alignment with key vendors, as well as free cash flow.”

AI will have a $580 billion impact on Amazon and Walmart

Previous analysis from IHL Group indicates the top 212 North American public retailers and restaurants could see over $1.5 trillion in additional financial impact through 2029, with Amazon and Walmart expected to account for more than $580 billion, or 38.5% of the total.

Slightly less than half of this value is expected to be created by generative AI. Overall, IHL forecasts that generative AI will have a $9.2 trillion financial impact on retail through 2029.

While currently representing only 9% of the overall retail industry financial impact in 2023, IHL predicts generative AI will account for 78% of the total financial impact by 2029 and a total of $4.4 trillion during that year.

IHL analysis indicates the benefits of generative AI will stem from three primary areas: increased sales (51%), improved gross margins (20%), and lowered selling and administrative (S&A) costs (29%).

Through 2029, IHL’s forecast predicts that 47% of the benefits of cumulative impact of AI will come from traditional AI/ML technologies in closed systems, 48% from generative AI functions, and 5% from artificial general intelligence tools which will become available later in the decade.