Retail companies’ legal departments are seeing increased demand for their services but little growth in resources, leading to a sharp jump in the use of artificial intelligence and other technology to manage the resulting pressure on costs.
That was one of the key messages as NRF and consulting firm Harbor presented the results of NRF’s second annual Legal Department Benchmarking Study during a webinar last month.
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“I think you’ll see … a lot of change, a lot of it driven by legal tech and AI,” NRF Chief Administrative Officer and General Counsel Stephanie Martz said in unveiling the study’s findings. “You’ll see that a lot of your colleagues are very busy, both utilizing those tools and in responding to the challenges that the new technology presents.”
Martz was joined by Lauren Chung, Harbor’s optimization officer and practice lead for strategy and transformation, and Matt Harmon, senior manager of client engagement.
The study was based on responses from 28 retail companies with median annual revenue of $6 billion in 2024, $22 million in median legal spending and a median legal staff of 14.
Participants cited alignment with their companies’ business strategy and organization as their top priority, cited by 93% of respondents; cost-savings opportunities came in second, cited by 71%, up from 50% a year ago. Better managing expensive outside counsel came in third, and investing in cost-saving technology was fourth. In-house team growth and talent engagement/retention were tied for fifth.
A full three-quarters of companies (75%) said they are seeing increased demand but only 15% expect to see an increase in lawyer headcount, down from 31% last year. Only 32% expect an increase in spending on legal department budgets, down from 62% last year, and 16% expect a decrease.
“We see continuing pressure that legal departments are facing in the retail industry related to cost,” Chung said. “There are cost pressures (and) there are new ways that law departments are now having to work and operate that allow you to be able to do more within the constraints of cost pressures.”
The top move legal departments are making to manage increased demand is equipping other departments at their companies with “self-help” tools that reduce the number of requests that come to the legal department in the first place, cited by 56% of companies, up 20 percentage points from last year. Doing so can include steps such as providing fill-in-the-blank contract templates for simple issues, posting online answers to frequently asked questions and raising the dollar threshold of contracts that require legal review, she said.
Increasing the use of outside counsel was cited by 43% of companies, but amid higher costs that number was down by 12 percentage points. Chung said many companies are managing outside counsel spending by consolidating the number of firms used, regularly reviewing rates charged, negotiating lower rates and seeking flat rates for some work. One-third of retail legal teams (35%) are also redistributing work to other departments — not all matters that come to legal departments actually need to be dealt with by an attorney — along with 29% automating routine tasks.
Regardless of the approach to balancing demand with resources, technology is playing a greater role, Chung said.
Some 70% of legal departments are now using contract lifecycle management software, up 22 percentage points, and over half (58%) use electronic billing. Electronic discovery is being widely used, along with technology for management of documents, patents and trademarks, and for issuing requests for proposals.
Only about one-third (32%) have adopted artificial intelligence, but that number has shot up from zero a year ago. And AI was cited by 50% of legal departments that don’t already use it as a technology they are considering or planning to implement.
“AI is here to stay,” Chung said. “It is going to be a huge element to be able to support law departments as they continue to manage flat budgets.”
Harmon said technology to improve productivity is “table stakes nowadays for most law departments” and “adoption of AI kind of goes hand-in-hand.”
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“You really can’t do a Google search nowadays without having some AI element to it,” he said. “We’re using AI whether we’re intending on it or not.”
Harmon said AI can help in-house lawyers with simple searches but also makes it possible to “easily navigate across what could be a large swath of data” in databases and documents to find important words, facts and figures or even identify common themes.
It can also “quickly and succinctly” summarize depositions or be used to prepare initial drafts of complaints, contracts and other documents. And it can power Q&A chatbots to help with self-service initiatives to provide answers to other retail company departments.
“Whether that’s contracts or responses to RFPs, there’s a lot of benefit that can be taken from AI to help make that an efficient process,” he said.
“There are so many use cases” for AI, Chung said, that it is “really changing the way we think about service delivery in a number of different dimensions.”
