Target India head says retailer weighing AI tool costs amid shift to usage-based pricing

BENGALURU: Target India head said on Monday that a shift to usage-based AI pricing is pushing the U.S. retailer to look more closely at making costly tools available for its employees.

AI firms such as Anthropic and OpenAI are increasingly shifting to token-based pricing that charges customers based on usage, instead of a subscription-based service, reflecting a broader reset in AI economics and raising costs for enterprises.

“It is forcing us to re-evaluate our strategy,” Target’s India President Andrea Zimmerman told Reuters, adding that the retailer’s size and scale mean it has to look at trade-offs between employee needs and demands.

However, Zimmerman said there are “significant investments” being made in ensuring that teams have the right tools to do their jobs.

“(AI pricing) sits at a technical debate at the highest level in both our architecture forums as well as in our senior leadership forums within technology,” she said.

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Target’s global center in India has verticals such as merchandising, digital, stores and supply chain, employing about 5,600 people. About 40% of Minneapolis-based Target’s tech workforce is based in Bengaluru.

In India, the company is looking at ramping up investment in its analytics teams in a bid to turn growing volumes of data into actionable insights at a faster clip.

“We work to adapt really quickly when we see that consumer demand or sentiment start to shift,” Zimmerman said.

The $57-billion retailer has struggled with three straight years of declining revenue as cost-conscious shoppers traded down to cheaper alternatives.

Under new CEO Michael Fiddelke, the company plans to spend an additional $2 billion this year on new stores, remodels, and AI initiatives.

“AI is fun, exciting and interesting to think about,” Zimmerman said. “Change isn’t going to be immediate, and it is certainly not free.”