Retail transformation and consumer adaptation
November 2026 | BRIEFING ROOM | SECTOR ANALYSIS
Financier Worldwide Magazine
November 2026 Issue
FW discusses retail transformation and consumer adaptation with Chloe Forster at DLA Piper, Matthew Gregory at Norton Rose Fulbright LLP, and David Niemeyer at Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates.
FW: Over the last few years, how have the most significant challenges and opportunities within the retail and consumer sector evolved? What is driving these changes?
Forster: In today’s retail and consumer sector, success is increasingly determined by an organisation’s ability to respond to evolving consumer expectations, technological disruption and economic uncertainty. Supply chains have evolved from a focus on pandemic recovery to building resilience against geopolitical developments and cost pressures. Inflationary challenges have impacted consumer spending. Consumers remain willing to spend but are increasingly value-conscious, not just cost-conscious, leading to changes such as increased demand for circular economy models and resale platforms. Artificial intelligence (AI) has moved from experimentation to enterprise-wide adoption, transforming everything from customer engagement and merchandising to pricing and supply chain management. Retailers that successfully combine technology, trust and operational agility will be best positioned to succeed.
Niemeyer: The last few years in the retail and consumer sector have been defined by a shift from growth at all costs to disciplined portfolio rationalisation. In particular, from a strategic transaction and M&A perspective, companies have pursued scale-driven M&A to improve resilience and unlock efficiencies amid cost pressures and increasingly value-conscious consumers, while simultaneously exiting brands that lack strategic fit and doubling down on strong, scalable platforms. Tariff uncertainty and inflation-driven margin compression have been persistent headwinds, and the transition to omnichannel retail has required major capital investment, making cash flows less predictable and a key diligence area for buyers.
Gregory: The challenges and opportunities facing retail financial services (FS) providers have shifted markedly. Cost of living pressures have dampened consumer confidence, while higher wages and operational costs have squeezed margins. Digital channels and AI are creating significant opportunities for firms investing in technology and skills. Buy now pay later (BNPL) has opened new credit markets but triggered regulatory reform. From a regulatory perspective, the most significant change in the UK has been the introduction of the Consumer Duty. In force since 31 July 2023, it has proved a major shift in how firms do business, putting good customer outcomes at the centre of decision making – whether launching new products, delivering existing services or engaging with other firms in the ecosystem.
“Retailers are walking a tightrope between price sensitivity and service expectations, and that tension is showing up squarely in deal structuring.”
FW: How are changing consumer expectations influencing business strategy, operating models and growth priorities across the sector?
Niemeyer: Changing consumer expectations are ever-present in all aspects of the sector. Persistent affordability pressure from grocery inflation and shrinking federal food assistance is shifting where consumer dollars are spent, with consumers redefining what ‘value’ means through active trade-offs. At the same time, the rise in GLP-1 medication adoption is changing how millions of consumers make choices about food, beverages and other consumer goods. We are seeing these shifts drive real operating-model changes, with companies restructuring research and development pipelines, renegotiating supplier contracts and reallocating capital toward ‘better for you’ categories. All of these changes then further surface as key diligence items in purchase agreements.
Gregory: Changing consumer expectations are reshaping strategy, operating models and growth priorities across retail FS. Consumers increasingly require seamless digital experiences across web, mobile and in-person distribution channels. Personalisation has become a baseline expectation, with data driving tailored products and service. The wealth sector illustrates AI’s transformative potential to address these evolving consumer needs. The advice gap – rooted in both regulatory and structural causes – may narrow as new technologies, coupled with regulatory initiatives such as Financial Conduct Authority (FCA) targeted support rules, effective from April 2026, enable broader access to financial guidance. However, the FCA’s Mills Review in July 2026 highlights emerging perimeter questions, including whether AI models and providers are themselves carrying on regulated activities and how the FCA should address this.
Forster: Consumer expectations are becoming increasingly sophisticated and contradictory. Customers want value while still expecting premium experiences, convenience alongside sustainability and greater personalisation without compromising trust. They expect frictionless purchasing journeys and instant access to information. In response, retailers are rethinking their strategies and accelerating investment in AI, from customer engagement and merchandising to pricing, inventory management and supply chain optimisation. The emergence of generative AI (genAI) and agentic AI is fundamentally reshaping how consumers discover and purchase products, with AI assistants increasingly influencing purchasing decisions. In a world where agents are talking to agents, retailers should revisit their digital storefronts and checkout flows. Increasingly, data and digital capabilities are becoming critical sources of competitive advantage.
FW: How are retailers redefining their value proposition as consumers become more price-conscious while still expecting convenience, service and quality?
Forster: The challenge is no longer simply offering the lowest price, but demonstrating why a product, service or brand is worth choosing in an increasingly crowded and price-sensitive market. Retailers are responding by redefining their value proposition using technology to deliver more value. AI-driven personalisation, smarter pricing, supply chain optimisation and improved inventory management enable retailers to offer consumers better prices, greater convenience and more relevant experiences. Meanwhile, digital tools are helping businesses improve efficiency and service levels. The result is a value proposition that extends beyond price and focuses on delivering the right product, through the right channel, at the right time.
Gregory: Retail FS providers are redefining their value proposition by combining competitive pricing with convenience, service quality and digital innovation. AI-powered chatbots are playing a growing role in delivering that proposition at scale. However, where chatbots provide information about credit, insurance or investment products, outputs could constitute a financial promotion or even guidance, triggering regulatory obligations. The FCA expects firms to ensure that AI-driven communications are fair, clear and not misleading, and that suitability requirements are met where personalised recommendations are made. Under the Consumer Duty, firms must also avoid foreseeable harm, support informed decision making and deliver good outcomes. Firms therefore need robust controls over chatbot scripts, data inputs, escalation routes and output testing.
Niemeyer: Retailers are walking a tightrope between price sensitivity and service expectations, and that tension is showing up squarely in deal structuring. Private equity firms spent the first half of 2026 taking retailers private at prices the public market would not pay, betting that companies willing to do multi-year operational work outside quarterly earnings pressure will be worth considerably more later. Public markets are discounting retailers that cannot yet prove they have solved the value-versus-experience equation, while sponsors see turnaround potential. The next period will be shaped by a widening split between retail formats that work and ones that do not. From a transactional standpoint, this means earnouts, contingent consideration and management retention provisions are increasingly used to bridge valuation gaps tied to unproven repositioning strategies.
“Growing AI maturity, continued regulatory evolution and the ability to build new revenue streams seem likely to reshape competitive positioning in retail FS.”
FW: What impact is AI and data-driven decision making having on customer engagement, operational efficiency and competitive differentiation across the sector?
Gregory: AI and data-driven decision making are having a significant impact on customer engagement, operational efficiency and competitive differentiation across retail FS. Machine learning is enabling hyper-personalised product recommendations and predictive marketing, while AI-powered processes are improving underwriting, claims handling and credit decisioning. GenAI is also enhancing customer communications and service at scale. However, these gains bring regulatory risk. Models may embed bias or produce outcomes that cannot be explained to customers or regulators. Under the UK General Data Protection Regulation, personal data must be processed lawfully and transparently, with impact assessments as required. The FCA does not plan standalone AI regulation but expects firms to govern AI safely through existing frameworks, including the Consumer Duty, the Senior Managers and Certification Regime and its expectations on governance and controls.
Niemeyer: AI has moved from a diligence footnote to a central valuation driver. Retailers report that AI has enhanced efficiency through cost reduction and supply chain improvements, with the biggest functional impacts in IT, marketing and customer service. For deal counsel, this raises new diligence categories: data provenance and licensing rights, model intellectual property ownership, algorithmic bias exposure and integration risk when combining disparate AI stacks post-close. Buyers are also pressure-testing whether claimed AI-driven efficiencies are sustainable and proprietary or merely vendor-dependent, which could potentially materially affect purchase price and post-closing indemnification negotiations.
Forster: AI is no longer a standalone technology initiative; it is becoming an operating layer across the retail business. AI and data are transforming retail on three levels. First, they are enabling more personalised and engaging customer experiences through tailored recommendations, content and services. Second, they are improving operational efficiency by optimising inventory, forecasting demand and streamlining supply chains. Third, they are creating new sources of competitive differentiation as AI increasingly influences how consumers discover and purchase products. We are seeing a growing number of strategic partnerships between retailers and technology providers, as platforms for retailers to successfully integrate AI into both customer-facing and operational processes are creating meaningful advantages over competitors.
FW: How are businesses approaching pricing, promotions and loyalty strategies in order to protect margins without undermining customer retention?
Niemeyer: Margin protection has become a board-level and deal-level concern. Companies are increasingly relying on predictive analytics and real-time, AI-enabled decision making to improve pricing, inventory and forecasting while keeping customer experience and trust intact, rather than blunt promotional discounting that erodes brand equity. From a transactional lens, first party customer data and loyalty programme economics are now valued assets. We are seeing dedicated representations and warranties, carve-out provisions and standalone valuations for loyalty platforms and data assets in recent consumer deals, reflecting their strategic importance to margin defence.
Forster: While AI and customer data enable more targeted pricing and promotional strategies, the most successful retailers also focus on building trust and delivering perceived value. Businesses are becoming more conscious of the distinction between what technology enables and what consumers expect, particularly as regulation around data and AI continues to evolve. The most effective loyalty strategies combine personalisation with transparency and the enablement of customer choice. Ultimately, retailers that can use data responsibly to create meaningful customer experiences will be better positioned to protect both margins and long-term loyalty. As AI-driven personalisation becomes more sophisticated, competitive advantage will increasingly depend on balancing commercial opportunity with responsible data stewardship and consumer trust.
Gregory: Retail FS providers are approaching pricing, promotions and loyalty with far greater sophistication. Dynamic pricing, targeted promotions and evolved loyalty programmes allow firms to respond to market conditions in real time and reward customer loyalty. However, retention-focused strategies must navigate the FCA’s scrutiny of practices that penalise loyal customers. The insurance ‘price walking’ reforms under PS21/5, which prohibit charging renewing customers more than new customers for equivalent cover, illustrate the regulatory direction of travel. Fair value assessments under the Consumer Duty now extend across the product lifecycle, requiring firms to evidence that pricing, renewal terms and loyalty incentives deliver good outcomes rather than exploit inertia. BNPL and other embedded credit products featuring within loyalty ecosystems also attract regulatory attention, particularly as BNPL is brought within the FCA’s perimeter. A coherent, transparent strategy can protect margin without eroding customer trust or triggering regulatory intervention.
“The challenge is no longer simply offering the lowest price, but demonstrating why a product, service or brand is worth choosing in an increasingly crowded and price-sensitive market.”
FW: What are the most significant changes taking place in supply chain, sourcing and inventory management? How are these affecting resilience, investment decisions and profitability?
Gregory: From an FS regulatory perspective, the most significant changes in supply chain, sourcing and operational infrastructure centre on diversified sourcing and stronger resilience. Declining globalisation and geopolitical fragmentation appear to be contributing to this shift. As regulatory regimes diverge, notably between the UK and the European Union following UK withdrawal, retail FS firms face rising compliance costs from managing compliance with multiple frameworks across jurisdictions. ‘Nearshoring’, improved contingency planning and predictive analytics are improving continuity, though they demand greater capital and tighter controls. Investment in technology, including AI-driven demand sensing and automated processing, is enabling agility while reducing cost. The FCA’s operational resilience framework under PS21/3 is directly relevant. Firms must identify important business services, set impact tolerances and plan for disruption.
Forster: Geopolitical developments have led many consumer goods and retail businesses to move away from efficiency-led supply chain models to resilience-led models, where flexibility, vendor diversification, traceability and inventory reduction are prioritised. Businesses are investing in technologies that support this, such as data-driven AI forecasting and inventory management, which can help retailers balance availability with efficiency and reduce both out of stock items and markdowns, improving customer experience. The next generation of supply chains will be defined not by how cheaply they can operate, but by how intelligently they can adapt, using AI, data and diversified sourcing strategies to balance resilience, responsiveness and profitability.
Niemeyer: The supply chain is where deal risk allocation has changed most dramatically. With section 301 tariffs still in effect and trade policy uncertainty ongoing, the just in time, concentrated-sourcing model is evolving toward regional diversification. For M&A practitioners, this translates into heightened focus on supplier concentration risk, tariff exposure representations and contingency planning disclosures during diligence. This is particularly important as many companies still lack detailed contingency plans for tariff shocks or supplier failures, which can materially affect valuation and require specific indemnities or price adjustment mechanisms.
FW: Looking ahead to 2027, which developments are most likely to reshape competitive positioning and determine the sector’s winners and losers?
Forster: Looking ahead to 2027 and beyond, the winners and losers are likely to be determined by how effectively organisations adapt to structural change. AI is moving from pilot programmes into core retail operations and will reshape how consumers discover, evaluate and purchase products. Trust and responsible data use will become increasingly important as regulation evolves. Resilient, technology-enabled supply chains will be essential in a more volatile world. The most successful retailers may be those that are able to invest in innovation while balancing that with customer trust and operational agility to create sustainable competitive advantage. Those that treat these trends as standalone initiatives rather than business-wide transformation programmes risk falling behind.
Niemeyer: Continued consolidation in fragmented, cost-pressured categories like grocery, beauty, pet and vet services, and logistics will keep deal activity elevated, alongside a rise in ‘founder buyback’ transactions, as entrepreneurs reacquire brands aligned with authentic consumer preferences. Scale will continue to remain decisive and I would expect continued megadeal activity accounting for a growing share of consumer markets deal value, alongside supply chain-driven vertical integration and AI-capability acquisitions. Companies unable to demonstrate durable value propositions, resilient sourcing or proprietary data and AI advantages will face take-private pressure, divestiture or acquisition.
Gregory: Growing AI maturity, continued regulatory evolution and the ability to build new revenue streams seem likely to reshape competitive positioning in retail FS. Firms that effectively integrate AI capability beyond pilots into pricing, personalisation, underwriting and customer service may be viewed as obtaining a competitive advantage. But those firms will similarly face significant regulatory obligations and expectations to integrate this technology safely, mitigating risks with appropriately robust governance controls in place. In the consumer finance sector, BNPL regulation is likely to reshape the consumer credit landscape, with new challenges for firms to meet new regulatory rules on affordability, disclosure and fair value. Declining globalisation and diverging national regimes will increase compliance costs, favouring firms with scalable regulatory infrastructure. Embedded finance and data monetisation will create important profit pools but attract closer regulatory scrutiny.
Chloe Forster is a partner in DLA Piper’s Band 1-ranked technology transactions and strategic sourcing team and the firm’s UK sector co-lead for consumer goods, food and retail. She advises multinational clients on strategic technology transactions and digital transformation programmes, including outsourcing, cloud, artificial intelligence, automation and other emerging technologies. She has extensive experience leading complex global sourcing projects across multivendor environments, working with major financial services, consumer goods, retail, pharmaceutical, hospitality and aviation clients. She can be contacted on +44 (0)7738 295 324 or by email: chloe.forster@dlapiper.com.
Matthew Gregory is a partner in the financial services team at Norton Rose Fulbright. He advises a broad range of domestic and international clients, including banks, payment institutions, non-bank lenders, and asset and wealth managers, with a particular focus on retail and consumer financial services. He has extensive experience in financial services regulation, retail conduct and governance, helping clients navigate complex regulatory requirements and deliver regulatory change programmes. He can be contacted on +44 (0)20 7444 2467 or by email: matthew.gregory@nortonrosefulbright.com.
David Niemeyer is a highly accomplished partner in Skadden’s Band 1-ranked corporate/M&A team who has built an elite practice focused on M&A, private equity and other strategic transactions. His unparalleled work ethic, poise, technical acumen and commercial judgment have distinguished him as trusted adviser to an enviable list of clients across a wide range of industries, including apparel, beauty, consumer products, energy, entertainment, fintech, food, gaming, media, retail and sports, among others. He can be contacted on +1 (213) 687 5922 or by email: david.niemeyer@skadden.com.
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