The State of Retail in 2025:
Embracing Agents for a New Era of AI
As we step into 2025, the retail industry is poised for a transformative shift driven by technological advancements and evolving consumer expectations. And the industry is ready – after all, generative AI is positioned to create between $240 billion to $390 billion in economic value for retailers. In my conversations with retailers around the world, I’m hearing that companies are all in on AI – they recognize the technology’s potential, they’ve made the investments and have realized initial success deploying it across various business segments, but what’s next? How do you identify ways to scale innovation and increase revenue? According to a Deloitte report, nearly 70% of organizations have moved 30% or fewer of their Generative AI experiments into production. Microsoft is helping unlock innovation by equipping customers with our Copilots, customizable agents, data solutions, and rich partner ecosystem. In other words, enabling what we’re calling “Retail Ready.”
The convergence of Copilots and agents
The combination of Copilots and agents in particular is poised to help retailers go further with AI. Agents are the apps of the AI era. Microsoft predicts that every business process is going to get reimagined as an agent and Copilot is the UI to interact with and manage these agents. Agentic is no longer just an IT term, but a business term. AI agents are active participants across every retail priority, from empowering the workforce and transforming the shopper journey to creating agile, sustainable supply chains and unlocking the full power of retailer data.
For customers who want the ability to build powerful agents to address both internal and external use-cases, Copilot Studio provides both options. It enables users to customize and enhance agents for Microsoft 365 Copilot, and to build standalone agents that can be deployed to websites, social media, line of business applications, chat platforms, and more. For professional developers looking to build, deploy and scale high-quality AI agents – for retail or other industries – our recently unveiled Azure AI Agent Service within Azure AI Foundry enables organizations to define which model the AI agent uses, instructions for how it should complete tasks and tools it can use to access and interact with other services. Retailers are using Microsoft AI to create autonomous agents that increase revenue, reduce costs, and scale impact.
Pets at Home, the U.K.’s leading pet care business, created an agent for its profit protection team to more efficiently compile cases for skilled human review, which could have the potential to drive a seven-figure annual savings.
Agentic AI is also transforming store operations by empowering employees with intelligent tools. Store Operations Agent, for example, puts generative AI in the hands of store associates, allowing them to spend less time on routine tasks and more time assisting customers. This shift not only improves efficiency but also enhances the overall shopping experience.
In 2025, retailers will focus on creating a rich agentic world where AI agents operate seamlessly across retail functions, driving growth and profitability.
Get the most out of your data
The retail industry generates a vast amount of siloed data, and most retailers only leverage a fraction of it, providing them and their customers with incomplete insights. Retail data solutions in Microsoft Fabric give retailers the power to unify and enrich a wide range of retail data sources, enabling real-time, actionable insights.
One of the key benefits of retail data solutions is the Retail industry data model – a standardized, customizable framework for organizing data using data definition, format, and storage enhancements tailored for retail data needs. Retailers can leverage this blueprint to plan, architect, and design data solutions for data governance, reporting, business intelligence, and advance analytics.
Microsoft’s commitment to data governance and responsible AI is foundational to what we build. This is crucial for the 36% of consumers who would leave a brand if they were concerned about how their personal data was being used. Trends change, but our adherence to our core principles – fairness, reliability and safety, privacy and security, inclusiveness, transparency, and accountability – is steadfast.
Looking ahead, the adoption of agentic AI will continue to accelerate. Retailers will invest in AI technologies that offer a competitive edge, from advanced analytics to autonomous decision-making systems. The focus will be on creating a rich agentic world where AI agents operate seamlessly across retail functions, driving growth and profitability. Deloitte predicts that 25% of enterprises using GenAI will deploy AI agents in 2025, growing to 50% by 2027.
The state of retail in 2025 is marked by the transformative power of agentic AI. As we move forward, the integration of agentic AI will be crucial for retailers looking to stay ahead in an ever-evolving landscape. In partnership with our partners and customers, I’m looking forward to making the most of the opportunities ahead. We’re Retail Ready. Are you?
The State of the Retail Industry 2025
JAN 2025
Keith Mercier is the Vice President of Worldwide Retail and Consumer Goods at Microsoft, where he leads the global strategy and execution of empowering the retail and consumer goods industries with cloud and AI solutions. Previously, he has held significant roles at IBM and Gap Inc., where he led various initiatives in AI, eCommerce, and business development. With over 30 years of experience in retail operations and technology consulting, Keith has a deep understanding of the challenges and opportunities facing retailers in the digital era. His mission is to help retailer and consumer goods companies create customer-centric businesses that leverage data, insights, and innovation to deliver exceptional experiences and outcomes. Keith is a driver of change, with a proven track record of generating new revenue streams, scaling best practices, and building strong partnerships across the industry. As a mentor and advisory board member for New Black and Fashable, Keith is also passionate about developing the next generation of technology leaders and innovators.
Keith holds an MBA from Pepperdine Graziadio Business School and a BA from Clemson University and currently lives in San Francisco with his wife, Kate.