Retail’s next productivity challenge isn’t automation

Ian Robb, Managing Director, Retail

For much of the past decade, retail’s productivity story has largely been told through automation. As labour availability tightened and customer expectations increased, automation often became the obvious route to greater efficiency, capacity and accuracy.

Retailers continue to face rising operating costs, increasingly complex omnichannel networks and growing pressure to deliver seamless customer experiences. Yet despite continued interest in AI and automation many are taking a more disciplined approach to investment, focusing first on the foundations that will allow those technologies to deliver meaningful value when the time is right.

The shift from transformation to readiness

Artificial intelligence remains high on boardroom agendas but the discussions taking place across the industry suggest a noticeable change in focus. Retailers are asking whether their data, systems and people are ready to support it.

Many organisations still operate with fragmented technology estates, legacy platforms and varying levels of data maturity. While AI promises significant opportunities, retailers recognise that deploying sophisticated tools without the right foundations can create as many challenges as it solves.

As a result, investments in ERP systems, warehouse management platforms, data quality and organisational capability are increasingly being viewed as transformation projects in their own right. Rather than delaying innovation, these investments create the conditions needed for future innovation to succeed.

Why software is becoming the new productivity engine

Another trend becoming increasingly visible is the growing role of software in driving operational performance.

Historically, innovation in logistics and fulfilment was often associated with physical infrastructure. Today, retailers are finding just as much opportunity in better forecasting, greater visibility and improved decision-making.

Whether it is real-time inventory information, enhanced forecasting capabilities or more intuitive operational systems, software is helping businesses make better decisions, respond more quickly to changing demand and create greater flexibility across their networks.

These improvements may offer a faster route to productivity gains than large-scale infrastructure projects. They can also provide benefits that extend well beyond the four walls of the distribution centre, improving customer experience, inventory availability and supply chain responsiveness at the same time.

Rethinking automation

None of this suggests automation is becoming less important. What is changing is how retailers define automation and how they evaluate its value.

For some organisations, automation still means highly automated facilities and large-scale robotics deployments. For others, it increasingly includes technologies that improve visibility, reduce manual intervention and remove inefficiencies from existing processes.

This distinction matters because many retailers have already spent years driving continuous improvement programmes. The productivity gains available through automation are often still attractive but they are now being assessed against a broader range of investment opportunities and competing priorities.

Payback periods that may have been acceptable in the past are now being examined more closely, particularly when businesses are balancing short-term financial pressures against longer-term strategic goals.

At the same time, category economics continue to influence decision-making. What makes sense for a high-volume ecommerce operation may not make sense for a retailer handling bulky products and complex delivery requirements. As a result, automation is increasingly viewed as one component of a broader productivity strategy.

Resilience is moving to the centre of the conversation

The more retailers embrace technology, the more important resilience becomes. Cyber security, business continuity and operational resilience are no longer separate discussions taking place elsewhere in the business; they are becoming central considerations within every major technology and transformation programme.

This is particularly relevant as organisations become increasingly reliant on interconnected systems, AI-enabled processes and sophisticated technology platforms. The benefits are significant but so too is the need to understand how operations will respond when disruption occurs.

The most resilient businesses are not necessarily those with the most advanced technology. Often, they are the organisations that have built resilience into their technology decisions from the outset, ensuring that investments in innovation and investments in continuity evolve together.

Leveraging expertise

The increasing complexity of retail operations also means that productivity is no longer something retailers can solve in isolation.

As the technology landscape evolves, most organisations face a growing number of decisions around systems, automation, AI, inventory visibility and fulfilment. Few businesses have the capacity or specialist expertise to remain at the forefront of every area simultaneously, particularly when leadership teams are balancing immediate operational challenges with longer-term transformation goals.

This is where the role of strategic partners is becoming increasingly important. Retailers are looking for partners that do more than simply deliver a service. They want partners that can bring ideas, challenge assumptions and share lessons learned from across the market. The value often comes not just from technology itself but from understanding where it can have the greatest impact, how it should be implemented and how risks can be mitigated along the way.

At GXO, we see this firsthand. Every day we work with retailers operating in different sectors, at different stages of maturity and facing different commercial pressures. While no two businesses are identical, many of the underlying challenges are consistent. That breadth of perspective can help retailers make more informed decisions, avoid costly mistakes and identify opportunities that may otherwise be overlooked.

In an environment where productivity improvements are increasingly difficult to achieve through any single investment, collaboration is becoming a competitive advantage in its own right.