At Cardinal AI Strategies we’ve seen a lot of companies talk about AI transformation. Most are either chasing shiny objects or drowning in analysis paralysis. Five Below, figured it out and their results speak for themselves.
The Reality: AI Without Strategy Is Just Expensive Tech
Here’s what we’ve noticed working with businesses trying to implement AI: everyone wants to jump straight to the cool stuff. Machine learning models, predictive analytics, chatbots, agents – you name it. Five Below took a different approach and started with a simple question: “What’s actually broken in our business that AI might fix?”
This question led them to something less cool than a bot, but critical – inventory management. Not the flashiest use case, but it was costing them real money every single day.
What Five Below Actually Did. The Four Things That Mattered
1. They Got Crystal Clear on Their “Why”
Before they touched any technology, the Five Below leadership team worked to define exactly what success would look like for them. Not “we want to be AI-powered” or “we need to modernize.” Their goal was specific: help customers find what they want when they visit our stores, and make our staff’s lives easier in the process.
This clarity kept them focused when vendor after vendor tried to sell them on the latest AI trends.
2. They Found the Right Partner and Admitted What They Didn’t Know
Five Below found the right partner instead of trying to build everything in-house. This was smart for two reasons:
They got to market faster with proven technology. Their internal team could focus on business results instead of debugging algorithms
Too many companies think they need to become AI experts overnight or jump right in with an AI technology. Five Below recognized that their expertise was retail, not machine learning.
3. They Tackled Their Biggest Pain Point First
Here’s what’s interesting. Five Below identified inventory forecasting as their biggest operational headache. Poor forecasting meant empty shelves ~ lost sales, and overstock ~ higher margins. Instead of trying to AI-enhance everything at once, they focused all their energy on this one problem.
The result? Their planners became 80% more efficient. That’s not a typo – they freed up four out of every five hours their team was spending on manual inventory work.
4. They Measured What Actually Mattered
While other companies were obsessing over algorithm accuracy and processing speeds, Five Below tracked business metrics: sales growth, margins, cash flow. Period.
And these numbers tell the real story:
- Net sales jumped 19.5% to $971 million (1)
- Comparable sales grew 7.1% (impressive in retail) (1)
- They are opening 150+ new stores this year (1)
- New stores are paying back their investment in just one year (1)
Why This Approach Actually Works
The thing about Five Below success is that it wasn’t about the AI itself. It was about having a clear strategy and executing it well. The AI was just the tool.
They proved something important: when you solve a real business problem with the right technology, the results compound. Better inventory means happier customers. Happier customers mean more sales. More sales mean aggressive expansion is possible.
And here’s the kicker – they did all this during one of the toughest retail environments in recent memory. While other retailers were struggling with supply chain issues and inflation, Five Below’s AI-powered inventory system helped them navigate those challenges better than their competition.
What This Means for You
You don’t need to be a retailer to learn from Five Below’s playbook. The principles work across industries:
- Start with strategy, not technology. Define what success looks like before you talk to any AI vendors.
- Be honest about your capabilities. Build where you have expertise, partner where you don’t.
- Pick one big problem and solve it well. Don’t try to boil the ocean.
- Measure business impact, not technical metrics. Revenue, margins, and customer satisfaction matter more than algorithm performance.
The Bottom Line
Five Below’s AI story isn’t about this new revolutionary technology or breakthrough algorithms. It’s about disciplined execution of a clear strategy. They worked with the right people, identified the problem to focus on, found the right solution, implemented it well, and measured the results.
That’s not as sexy as some AI transformation stories you’ll read, but it’s a more honest one. What’s important about that, it would work for you as well.
The lesson? AI transformation isn’t about the AI. It’s about the transformation. Get that right, and the technology becomes a powerful amplifier of your business strategy. Get it wrong, and you’re just burning money on expensive tech toys.
Five Below figured that out. Let’s start a conversation. Cardinal AI Strategies can help you figure it out.
How Cardinal AI Strategies Transforms AI Ambitions into Business Results
Cardinal AI Strategies specializes in helping organizations navigate the complex AI implementation landscape through a strategic, problem-focused approach. We excel at bridging the gap between AI’s potential and practical business applications. Our comprehensive methodology ensures your AI initiatives align with business objectives while addressing the common pitfalls that lead to project failure.
What distinguishes Cardinal AI Strategies is our unwavering focus on business outcomes rather than technology implementation. Our team brings together seasoned business strategists, data scientists, implementation experts, creative strategists and change management specialists who collaborate to address the full spectrum of AI challenges. We understand that successful AI implementation requires alignment across business strategy, data capabilities, technical infrastructure, and organizational culture.
Unlike firms that approach AI as primarily a technical challenge, we recognize that successful implementation requires alignment across business strategy, data capabilities, technical infrastructure, and organizational culture. This holistic perspective ensures your AI initiatives deliver sustainable value while avoiding the pitfalls that plague the majority of implementation efforts.
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(1) Sources:
Five Below Solves AI Strategy With 4 Smart Steps
How Five Below used AI to target tweens and cut costs
How Five Below used AI to target tweens, cut costs | Jefferson City News Tribune
Five Below deploys invent.ai’s platform for forecasting, inventory optimization and replenishment
How Five Below used AI to target tweens and cut costs | business | hanfordsentinel.com
Five Below Partners with Invent.ai to Roll Out AI-Driven Inventory Optimization – The Toy Book
AI Fuels Five Below’s Resurgence – SUCCESS QUARTERLY | Business, Tech & Trends That Matter
Five Below taps Invent.ai platform for inventory optimization | Retail Customer Experience
Five Below Partners With Invent.ai to Improve Forecasting – Supply Chain 24/7