This paper explores the role of innovation and digital transformation in fostering sustainable development in the retail sector. The study investigates how emerging technologies such as artificial intelligence, big data analytics, e-commerce platforms, and omnichannel systems contribute to improving efficiency, reducing costs, and enhancing customer experience. The research also evaluates the environmental and social dimensions of sustainability within retail digitalization. Based on international reports and empirical studies, the findings reveal that digital transformation significantly increases productivity, supports green practices, and enables long-term economic resilience. The paper also highlights key challenges and opportunities for developing economies, including Uzbekistan, and provides strategic recommendations for sustainable retail development.