The retail sector in Europe is making very slow progress in adopting Artificial Intelligence (AI). Macroeconomic figures point to massive potential, which the recent report *Rewiring Retail in Europe: The AI Imperative* by EuroCommerce and McKinsey & Company estimates at €320bn. However, it also reveals a significant maturity gap: ‘While 40% of organizations report having an AI strategy in development, less than 30% have reached established or integrated levels, and more than 80% remain in the emerging or developing stages of AI literacy and adoption.’ Most organizations are far from effectively scaling AI, largely due to a strategic imbalance in capital allocation. Operators in the fashion, footwear, and cosmetics industries (considered ‘softline’) face the greatest opportunity for profitability improvement across the entire retail sector, with a potential increase of ‘between eight and ten percentage points in their ebitda.’ However, the study shows that resources are not being directed toward the most lucrative areas. The report notes that ‘our survey found that only 15% of AI investment among European retailers is directed toward the commercial domain, ‘even though this area - which encompasses purchasing and merchandising -represents the greatest opportunity for return on investment.

On the contrary, the bulk of capital resources is being diverted toward peripheral functions or those with less direct impact on gross margin. Data compiled by EuroCommerce and McKinsey shows that ‘a disproportionate share is flowing into marketing and support functions, suggesting a certain degree of risk aversion.’ Marketing and support services account for 67% of AI investment in European retail, compared to 15% allocated to sales and purchasing. Specifically, marketing accounts for 44% of AI budgets, and support functions account for 23%.  The EuroCommerce report warns that ‘75% of retail roles may change as a result of AI.’ Humans will oversee, and machines will execute. This paradigm shift toward autonomous or agent-based systems will directly impact the retail labor market in Europe, altering the required skill sets and reshaping day-to-day decision-making within fashion companies. The conclusions drawn from the joint report warn that ‘up to 75% of retail roles may change as a result of AI, with humans shifting toward supervising and orchestrating AI systems rather than performing tasks.’ This shift in skills will require a massive effort to train company teams, the study notes. Surveys of European retail executives reveal that ‘despite heavy investment, eight out of ten executives said it is too early to determine the impact of AI on EBITDA, reflecting a significant gap between ambition and execution.’ Experts from EuroCommerce and McKinsey conclude that ‘AI is no longer just a lever for optimization; rather, it is reshaping how demand is created, how decisions are made, and who captures value within the retail ecosystem.’