AI Merchandising in Retail: How-Tos, Best Practices and Examples

Retail merchandising is both an art and a science. Your merchandising decisions—including which products to showcase and how to position them on the shelf—must be rooted in data and customer insights. Of course, you also need to be creative to ensure that your merchandising initiatives have a certain flair and oomph in order to stand out from competitors. 

AI is changing the game by offering smarter, faster ways to make merchandising decisions. When implemented well, AI merchandising helps retailers make data-backed choices that elevate the shopping experience and maximize revenue.

That way, you can focus on the creative side of merchandising while AI handles the heavy lifting of data analysis and optimization.

What is AI merchandising?

AI merchandising is the use of artificial intelligence to analyze data, predict trends, and automate merchandising tasks. It helps retailers optimize product placement, pricing, and promotions by leveraging machine learning and data analytics. 

The goal of AI retail merchandising is to improve efficiency and ultimately drive customer engagement and sales. 

1. Use cases of AI in retail merchandising

Demand forecasting and inventory management

AI analyzes purchasing patterns and market trends to predict demand and ensure your shelves are stocked with the right merchandise. This means you'll have the right products at the right time—maximizing sales while keeping inventory lean and efficient. 

In Coresight's Research's AI for Merchandising guide, analyst Vijay Doijad points out that AI helps retailers anticipate demand shifts faster and more accurately. He writes:

“AI has become crucial for optimizing key operational areas, including demand forecasting, assortment and allocation planning, and inventory management and replenishment, allowing retailers to achieve more accurate demand predictions, customize product assortments to local preferences and streamline their inventory replenishment processes.”

Vijay continues, "Assortment planning focuses on selecting the right mix of products for each store and region, tailoring offerings to local market preferences and consumer demand. By analyzing trends and sales data, retailers can ensure that they stock the products that will resonate most with their customers, improving sell-through rates and enhancing customer satisfaction."

In short: Smarter forecasting equals happier customers (and merchandisers!).

Assortment planning

AI digs into customer preferences and sales data to help you build assortments that convert. It identifies best-sellers and emerging trends, so your shelves reflect what shoppers actually want.

Remember, even the most creative displays won't generate results if they're showcasing products that customers aren't interested in. AI alleviates that by identifying shifts in demand early, adjusting stock levels in real time, and highlighting underperforming products before they become dead inventory.

Visual merchandising and store layout optimization

AI-driven insights reveal how shoppers move through your store, guiding you to design layouts that drive foot traffic to key displays. From window placements to endcaps, AI can assist with creating in-store experiences that catch eyes and keep customers browsing longer.

Content and marketing personalization

AI can tailor product recommendations, emails, and promotions based on browsing and purchase behavior. 

It's like having a personal shopper for every customer—showing them what they love before they know they want it. Personalization boosts engagement, loyalty, and conversion rates, so every interaction feels relevant and drives customers closer to checkout.

Customer feedback analysis

Some AI solutions can sift through reviews, surveys, and social media to uncover what your customers love—and what's missing the mark. It identifies patterns and trends faster than manual analysis, giving you clear insights to refine your merchandising programs.

"Reviews and comments are data-rich resources that can help guide merchandising strategies. But reading, categorizing, and analyzing them to glean insights takes time. Lots of time," writes Francesca Liu, product marketer at Salesforce.

"Generative customer feedback analysis automates the task and gives merchandisers quick, actionable insights. Now, merchandisers can automatically and intelligently identify your most loyal and at-risk customers to help decrease abandoned carts, drive successful product bundling and promotions, and optimize pricing strategies."

2. How to implement AI retail merchandising

1. Assess your needs

Before diving into AI merchandising, take a step back and analyze where your current merchandising strategy falls short. Are you struggling with overstock? Grappling with inaccurate demand forecasts? AI thrives on solving specific pain points, so clearly define your goals—whether it's boosting conversion rates or optimizing inventory. 

Map out how AI can complement your existing processes to create a more data-driven merchandising program. This allows you to start with a clear assessment and set the stage for measurable success.

2. Choose the right AI vendors and solution providers

Selecting the right AI partner can make or break your retail merchandising efforts. Look for vendors with proven retail experience and scalable solutions that align with your business size and needs. 

Prioritize platforms that connect with your existing tech stack and provide robust customer support. 

And don't just chase buzzwords—ask for tangible proof of performance such as:

• - Case studies and customer references
• - Trial periods
• - ROI metrics
• - Product roadmaps

That way, you can make informed decisions based on real-world results and long-term potential.

3. Integrate AI into your existing systems

AI shouldn't disrupt your workflows—it should enhance them. Choose merchandising tools that can plug into your current POS, CRM, and inventory management platforms. The integration should be intuitive, allowing your data to flow smoothly across channels. 

The goal is to automate smarter, not harder, so you can focus on strategy while AI handles the heavy lifting behind the scenes.

4. Train your team

No matter which AI merchandising tool you adopt, it will likely shift how your team operates. So, identify the people who will be using the solution. This can include:

• - Merchandise Planners
• - E-commerce Managers
• - Store Managers
• - Marketing Teams
• - Inventory Analysts
• - Data Scientists/Analysts
• - Product Buyers

Invest in training that empowers employees to leverage AI insights for smarter merchandising decisions. Create hands-on workshops and offer resources that break down AI concepts into actionable steps. You should also encourage curiosity and show how AI can reduce tedious tasks, freeing up time for creative, high-impact work. 

At the end of the day, a well-trained team becomes your greatest asset in maximizing AI's potential, driving adoption and long-term success.

5. Gather data and iterate

AI is all about automation, but it's not a set-it-and-forget-it solution. You need to regularly collect feedback, monitor performance metrics, and refine your models to stay ahead of trends. 

The more quality data your AI processes, the sharper its insights become. With that in mind, test small adjustments, measure outcomes, and iterate frequently to fine-tune your AI merchandising approach. 

Retail is dynamic, and so is artificial intelligence. As such, continuous optimization ensures your merchandising strategy evolves with customer demands and market shifts.

3. Best practices for AI merchandising success

1. Start small

When you find a great AI retail merchandising tool, it's tempting to jump in with both feet and do a wide rollout. However, starting too big can overwhelm your team and disrupt operations.

Recognize that AI implementation doesn't have to happen all at once. Start with a pilot project in one product category or a single store. From there, track the results, gather feedback, and refine the process accordingly. This minimizes risk and allows your team to learn and adapt.

2. Involve key stakeholders

AI merchandising impacts multiple departments, from marketing to supply chain. Get buy-in early by involving key stakeholders in the selection and implementation process. Their insights ensure the solution addresses real needs and aligns with broader business goals. When everyone is on the same page, adoption increases, and the transition becomes smoother.  

3. Focus on the customer experience

Don't lose sight of the end goal: to enhance the customer experience and drive sales. With that in mind, use AI to create personalized experiences, recommend relevant products, and optimize inventory to meet demand. Always ask, "How does this benefit the customer?"

Happy, engaged shoppers boost loyalty and sales. When AI aligns with customer needs, it transforms merchandising from a sales tool into a relationship builder.

4. Don't completely eliminate the human element

AI excels at crunching data, but human intuition still plays a vital role. Let AI handle things like data analysis and trend forecasting while your team focuses on creativity and strategic decisions. The best results come from blending AI insights with the expertise of your merchandising team. This balance ensures AI supports—NOT replaces—the personal touch that makes your brand unique.

5. Continuously optimize your efforts

We've said it before, and we'll say it again: AI isn't a set-it-and-forget-it solution. Regularly review performance data and tweak your models based on emerging trends and customer feedback. Test new approaches, analyze results, and adjust your strategy to stay ahead.

4. Examples of AI retail merchandising

1. Coach taps into AI to create digital twins

Coach's parent company, Tapestry, uses the AI solution Adobe Firefly to create a "digital twin" of Coach products seen on store shelves. These digital replicas allow teams to experiment with new concepts, gather direct consumer feedback, and scale content for everything from social media campaigns to in-store merchandising.

2. Walmart uses AI in-store and online

According to Oracle, Walmart keeps product shelves stocked with fresh products by using cameras, sensors, and interactive displays to monitor inventory levels in real time. These technologies track when perishable goods and other items are running low and automatically trigger notifications through internal applications. This system alerts associates to restock shelves, ensuring products remain available and missed sales opportunities.

In addition, Walmart plans optimize its website’s online merchandising through generative AI. According to the company press release: 

“With this technology, Walmart will create a unique homepage for each shopper making the online shopping experience as personalized as stepping into a store designed exclusively for each customer.”

The initiative, which is set to launch in late 2025, will enable the company to create hyper-personalized experiences at scale. 

“A standard search bar is no longer the fastest path to purchase, rather we must use technology to adapt to customers’ individual preferences and needs,” said Suresh Kumar, global chief technology officer and chief development officer, Walmart Inc.

3. Grocery retailers use AI to ensure optimal in-store assortments

Solutions like Simbe's Tally 3.0 robot (used by companies like Carrefour, Giant Eagle, and Schnucks) enable retailers to automate shelf scanning, identify out-of-stock or misplaced products, and ensure planogram compliance. The robot roams aisles to detect inventory gaps and track assortments that deviate from store layouts. Simbe and similar systems can also generate heat maps so you can see high-performing shelf areas and get the insights you need to optimize product placement.

Final words

AI can be a game-changer in retail merchandising as it offers smarter, faster ways to anticipate customer needs and optimize product placement. That said, success in AI merchandising requires the right tools, clear goals, and cross-team collaboration. The key is starting small, iterating often, and keeping the customer at the heart of your AI initiatives. 

Ready to transform your merchandising strategy with technology? IWD gives you the tools to craft planograms, execute in-store directives, and gain the insights you need to make intelligent merchandising decisions.

 Get in touch to learn more. 

Cover Picture : Valentino Spring 2026