E-commerce

How optimization shapes the online shopping experience

In the midst of increasing scale and economic flux, successful retailers will be those who leverage the tools at their disposal to optimize the shopping experience and make it as seamless as possible for customers.

Photo: Adobe Stock

September 26, 2025 by Jennifer Locke — Manager of Technical Account Management - Americas, Gurobi Optimization

Online shopping is by no means a new phenomenon for retailers. The scale at which it operates, on the other hand, has increased dramatically since its earliest days. Many large retailers' initial forays online in the 1990s promised shoppers diverse digital marketplaces, sometimes offering upwards of 250,000 total inventory items. While that's not bad for early corporate adopters, it's not nearly as impressive in today's online retail industry — often, these websites' men's and women's clothing sections boast hundreds of thousands of unique items each.

Managing this level of inventory across both physical and digital storefronts is a monumental task. How should retailers get the right products in front of the ideal customers at the best time? When should items go on sale, and how much should they be discounted? Where do these items need to be put on shelves or warehoused in order to support quick and easy shipping? And, most importantly, how can this be handled in a manner that reacts to contemporary challenges while maintaining a seamless customer experience?

The answer, it turns out, is simple: use math.

Contemporary retail pressure points

Before we can solve this problem, it's important to understand the factors at play. Scale is not the only challenge today's retailers need to take into account. For one, the online retail ecosystem is becoming increasingly crowded and incredibly competitive. Ever-growing virtual marketplaces like Amazon and their discounted prices have made it difficult to bring in customers, set competitive prices, and secure consistent brand loyalty.

Global supply chains also remain in flux as industries recover from the lasting impacts of the pandemic. At the same time, retailers must navigate the uncertainty that comes with increased tariffs and inflation.

These shifting economic and geopolitical tides have a significant effect on material supply, business operations, and customer spending, all of which influence online shopping behavior.

To account for these obstacles, today's teams need to make smarter and faster decisions about their inventory, pricing, and logistics — all while staying agile enough to react to change on a dime. Viewed as separate entities, these challenges can seem daunting. When considered as variables in a larger equation, however, they become more approachable and easily solvable. That's why a growing number of retailers are approaching their inventory management as an optimization problem.

Optimizing retail inventory

Mathematical optimization is an approach to problem solving that takes a complex challenge, breaks each of its key factors and components down into mathematical variables, and leverages advanced algorithms to generate a detailed, actionable solution. This is different from machine learning algorithms, which predict outcomes based on existing historical data rather than prescribe a solution based on the analysis of trillions of possible outcomes.

The core benefit of mathematical optimization is its ability to make the best decisions while accounting for the complexity of numerous business constraints. This makes it ideally suited for retailers' current conundrum—with so many factors in play, addressing one obstacle could easily exacerbate two others. By leveraging a mathematical optimization solver, retailers can translate their various decision variables and business constraints into information that is fed into a series of algorithms, producing a prescriptive solution. If any factors change, their decision variables and business constraints can be updated, and the solver can be run again.

Retail optimization in action

Consider a brick-and-mortar department store that also maintains a large presence as an online clothing marketplace. In the early summer months, it'll need to account for an influx of new warm-weather inventory from numerous brands, distributors, and affiliates, as well as a rise in customer demand for these items.

Within this inventory, there might be a specific style of swimsuit that's especially popular with customers. This item will need to be added to the proper section of the company website, priced according to competitor listings and desired profits, and distributed to the stores and warehouses closest to prospective customers. As holidays like Memorial Day, the Fourth of July, and Labor Day come and go, the suit price will need to be dynamically adjusted to account for sale prices, as well as available supply, fluctuating customer demand, and buyer reviews.

With each new factor introduced, the sale of this bathing suit becomes slightly more complex. When this same process is repeated across every item in the company's summer product inventory—from t-shirts to flip flops, to each pair of sunglasses — retailers are faced with a complicated and constantly-changing network of necessary sales decisions.

Keeping up with pricing and inventory manually for all products, while possible, would take an immense amount of time and effort. Optimization can take this lengthy, high-intensity process and significantly streamline it. It can also be combined with machine learning for an even greater impact. Information such as total inventory, competitor pricing, and customer interest gathered from machine learning models can be used to find the ideal discounts, ensuring that customers see the most competitive and compelling price possible and helping to sustain their business without excessive effort. Ultimately, mathematical optimization makes it easy to dynamically change pricing and manage inventory as factors change.

The future of optimized e-commerce

This kind of e-commerce optimization might sound somewhat fantastical, but the odds are you've already experienced the other side of it without even knowing it. Many of today's retailers have adopted some form of optimization into their inventory management, pricing, and shipping. And with the continued expansion of larger and more diverse online ecosystems, this practice is likely to grow.

In the midst of increasing scale and economic flux, the most successful retailers will be those who leverage the tools at their disposal to optimize their shopping experience and make it as seamless as possible for their customers.

About Jennifer Locke

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