AI investment rises as retailers face growing cybersecurity threats

Artificial intelligence (AI) is reshaping the retail sector, with 80 per cent of retail leaders planning to increase investment in the technology, although cybersecurity threats and regulatory constraints could limit its benefits, according to professional services firm EY. The firm’s CEO Outlook Survey found that 80 per cent of retail leaders were also optimistic about their ability to expand the responsible use of AI and customer data across their businesses, despite pressure on costs and prices, geopolitical disruption and economic uncertainty. However, EY warned that greater reliance on AI could expose weaknesses in retailers’ strategies, governance and operating models, particularly as digital adoption increases the risks surrounding customer privacy and cybercrime. The survey found that 24 per cent of retail leaders identified cybersecurity and data privacy threats as a leading business risk for the following year. EY said retailers should prepare for different possible futures rather than assume current investment trends would continue uninterrupted. Its analysis uses a four-scenario framework developed by Jim Dator of the University of Hawaii. The scenarios range from a constrained future, in which economic pressures, regulation, cyberattacks, outdated systems and poor data restrict AI adoption, to continued growth through sustained investment. A third scenario envisages a fundamental transformation of society and the economy around new technologies, while a fourth considers systemic breakdown, in which a small number of powerful technology platforms dominate access to AI models and charge premium prices, potentially restricting access to larger retailers. In a more constrained future, retailers could focus AI investment on lower-risk back-office functions such as finance, procurement, inventory management and logistics, while customer-facing applications struggle to expand amid regulatory uncertainty and declining public trust. EY highlighted the European Union’s AI Act, China’s state-led AI governance and interventions by individual US states as examples of regulatory measures shaping the sector. At the same time, cyber threats are increasing as malicious uses of AI develop. The World Economic Forum’s Global Cybersecurity Outlook 2026 found that 87 per cent of organisations had experienced rising cyber risks linked to AI vulnerabilities, while 94 per cent expected malicious AI to have a significant effect on cybersecurity in 2026. EY said retailers were particularly exposed because customer data, payment systems, older technology infrastructure and complex supply chains create numerous potential points of attack. The firm said retailers’ future success would depend on combining technological investment with clear strategies that account for different possible outcomes.