June 26, 2026
The Biggest AI Shift in Retail Isn't What Customers See — It's What Happens Behind the Scenes
Most business owners think AI transformation means adding a chatbot to their website or rolling out a virtual try-on feature. But according to Macy's senior director of engineering Murali Murugan, the
The Biggest AI Shift in Retail Isn't What Customers See — It's What Happens Behind the Scenes
Most business owners think AI transformation means adding a chatbot to their website or rolling out a virtual try-on feature. But according to Macy's senior director of engineering Murali Murugan, the real competitive edge is happening somewhere customers never look: inside the decision-making infrastructure of the business itself.
Published by MIT Technology Review in partnership with Infosys, the article "Repositioning Retail for the AI Era" makes a striking argument. The biggest transformation reshaping retail right now is not the flashy, consumer-facing features most brands lead with. It is how products surface in search results, how inventory moves through supply chains, how engineers ship code faster, and how retailers respond to customer behavior in real time. Macy's is not layering AI on top of existing workflows. The company is embedding intelligence directly into its systems for personalization, search, operational planning, and software development itself.
Murugan describes this as an "AI-first" approach, and his definition is precise and worth noting: "AI first isn't about adding intelligence on top. It's about redesigning how decisions happen so the business moves faster and every experience feels more relevant by default." Macy's early AI efforts focused on narrow, high-impact use cases like search recommendations and customer engagement, where measurable gains in conversion and reduced friction quickly built internal momentum. As Murugan explains it, once those quick wins were established, "scaling was a business decision, not a technology debate anymore." That momentum is now extending into conversational commerce through Ask Macy's, an AI-powered shopping assistant that functions more like a personal stylist than a search bar. Shoppers can describe what they need in natural language, whether for a prom, a vacation, or a last-minute event, and receive curated recommendations informed by past purchases, preferences, and context. Critically, Macy's still views AI as an invisible layer that augments the judgment of its team rather than replacing it. The long-term vision is retail that feels seamlessly adaptive and personalized, powered by systems customers may never even notice.
So what does all of this mean if you run a small or mid-size business and are not Macy's with its engineering resources? Quite a lot, actually. The same principle Murugan describes, compressing "the gap between the signal and the action," applies at any scale. Every time a potential customer visits your website, browses a product, abandons a cart, or searches a keyword, that is a signal. Most small businesses collect those signals and do nothing with them in real time. AI tools now make it possible to act on customer behavior automatically and personally, without a dedicated engineering team.
The article also highlights something critical for business owners who are still in a "pilot" mindset with AI: isolated experiments do not compound. Macy's moved from pilots to integrated systems, and that integration is what created compounding improvement. If your business is running AI as a one-off test here and a disconnected tool there, you are getting a fraction of the value. The goal is to connect your AI tools so they inform one another, the way Macy's connected search, personalization, and operational planning into a single operating philosophy.
The practical takeaway here is also about timing and confidence. Murugan notes that continuous improvement, learning from mistakes, and quickly adapting to newer technology standards compound into a meaningfully better customer experience over time. For small business owners, waiting for the "perfect" AI setup before scaling is the wrong approach. Start with one high-impact area, measure it, build confidence, then expand. That is exactly the path Macy's took, and it is accessible at any budget level.
This week, identify the single highest-friction moment in your customer's journey, the point where people drop off, search without finding, or fail to convert. Then research one AI tool specifically designed to reduce friction at that exact point, whether that is a conversational product recommendation tool, an AI-powered search upgrade for your site, or a personalization layer on your email sequences. Do not bolt it on as an experiment. Treat it as the first building block of an integrated system, because that is what it needs to become.
The brands that will own their markets in the next three years are not the ones with the most AI tools. They are the ones building AI into the fabric of how decisions get made.
Originally inspired by: Repositioning retail for the AI era (https://www.technologyreview.com/2026/06/25/1137848/repositioning-retail-for-the-ai-era/) See how Leads to Conversion can help you build an AI-first marketing strategy that drives real growth. Get your free AI audit