Artificial intelligence can unlock up to 320 billion euros for European retail

Artificial intelligence is no longer a future trend, but an active force that is reshaping the European retail value chain. A joint report entitled ‘Rewiring retail in Europe: The AI ​​imperative’ was published last week by European retail association EuroCommerce and global management consultancy McKinsey & Company. It shows that end-to-end AI transformation could unlock economic value of between €240 and €320 billion in European retail over the next five years.

The study shows that implementing these technologies at scale can result in an overall improvement in yields of four to ten percent. This growth will be driven by a combination of revenue growth, margin improvement and increased operational productivity. Despite the significant commercial potential, a March 2026 survey of 36 retail executives found that only 15 percent of current AI investments are in the commercial sector. A disproportionate share continues to go to marketing and support functions.

Softline sector is poised for biggest financial boom

The level of AI-driven value varies significantly between different retail segments. The softline sector, which includes clothing, footwear and cosmetics, is best positioned to achieve the greatest benefits. According to the report, retailers in the softline sector can achieve an improvement in earnings before interest, taxes, depreciation and amortization (EBITDA) of eight to ten percent. This corresponds to a total value of 100 to 130 billion euros. This sector therefore outperforms hardline retail with six to eight percent and food retail with four to six percent.

The significant potential for fashion and cosmetics companies arises from the complexity of the industry. These include structurally higher EBITDA margins; a wide range of products; volatile demand patterns and consumers’ strong desire for personalization. The macro area of ​​commercial merchandising holds the greatest potential. Here, purchasing can achieve an EBITDA improvement of 1 to 2 percent. Merchandising can add another 2 to 4 percent through automated pricing, optimized promotions and predictive assortment planning.

At scale, end-to-end transformation through artificial intelligence can deliver an overall EBITDA improvement of four to ten percent across European retail.

Practical applications show noticeable improvements in margins

Several major European fashion companies have already successfully integrated advanced algorithms into their core operating models. The Spanish fashion group Inditex, parent company of the clothing brand Zara, uses an in-house AI platform. This identifies emerging consumer trends three to four weeks faster than traditional manual forecasting methods. The system optimizes local inventory allocation and replenishment, which directly accelerates full-price sell-through rates and overall merchandise availability.

Similarly, German e-commerce platform Zalando has integrated analytical and generative AI to improve both customer experience on the front end and supply chain processes on the back end.

Capital needs require disciplined technology investments

Realizing the projected financial recovery will require significant capital commitments and a rigorous approach to return on technology investments. The report notes that companies should expect to invest between 1 and 2 percent of total revenue specifically in AI and the underlying data foundations.

These capital and operating expenses are required in addition to existing technology budgets. These budgets typically represent 1.5 to 3.0 percent of revenue for legacy systems and ongoing digital transformation. Due to the complex supply chains in the fashion industry and the high willingness to modernize, retailers in the softline sector make higher targeted investments of 1.5 to 2.0 percent of sales on average. In comparison, the lower-margin food sector spends 0.5 to 1.0 percent of sales on AI infrastructure.