It’s been said that technology is the great enabler. Used correctly, it can transform a business or an experience more quickly and efficiently than any method before it.
“In today’s climate, it’s all about have the right products in the right place at the right time,” said Doug Baker, VP of industry relations, FMI – The Food Industry Association. “To remain competitive, retailers need to be open to leveraging any and all technology that improves process automation and engagement.”
But to do so, often requires an attitude shift on the part of the retailer. “There is a certain mindset hurdle we need to overcome which is the belief that technology cannot perform a specific function better or produce superior results compared to the people who have been doing these jobs for their entire careers,” Baker said.
The better way for retailers to view technology, Baker said, is as a partnership.
“Today’s technological advancements such as what we are seeing with Artificial Intelligence offers retailers opportunities previously unseen before. It can provide recommendations on how to better serve your customers and employees and help retailers become more effective and efficient,” he said.
Lanor Daniel, CEO and co-founder of ShopperAI, said technology such as AI can level the playing field and help retailers of all sizes compete more effectively.
“Previously, offline grocers competed only against one another. Now, they also compete against the e-commerce ecosystem, which is thriving because it can gather and analyze consumers from the moment they interact with them until they complete a transaction,” he noted.
Daniel said to grow and not just survive, grocers must adapt to the new abilities that technology offers so they can learn more about their customers’ wants and needs.
“Until now, most grocers have made strategic decisions based on static data, which doesn’t represent the realty of their shoppers’ journey and experience,” he said. “And the reality is an unhappy customer will easily find an alternative place to shop.”
Stephen Midgley, VP of marketing for Invafresh, pointed out that the primary drivers behind the transformative impact of AI in grocery retail stem from its capacity to analyze extensive datasets, identify patterns and adapt in real-time. This ability to make predictions based on data, he said, empowers grocers both large and small to make informed decisions, reduce costs and enhance the overall customer experience.
However, some retailers still consider technology more of a line item than a business strategy, perhaps because they are intimidated by its forward-thinking capabilities.
“With AI being the future of the industry, it is important for grocers to make it a consideration, especially with all of the data at their fingertips,” said Shekar Raman, CEO and co-founder of Birdzi. “There is a perception that this cutting-edge technology is expensive and typically out of reach for the independent grocer, but that is no longer the case.”
Shopper experience
The ability to analyze shopper satisfaction and frustration points is critical in today’s retail environment.
“AI can aid retailers in uncovering the areas where their shoppers struggle most, which categories or products have a high abandonment rate (when a customer puts back a product he has touched or even added to his basket), where shoppers ignored products, where they had the quickest decision time and had a good experience, these are also important points to understand,” Daniel said.
To be on par with the major retailers, local grocers need tools like AI that can automatically clean and simplify data into actionable insights. “Linking multiple data points across disparate data sources helps grocers better understand each customer’s behavior, allowing the grocer to simultaneously increase personalization while scaling overall growth,” noted Raman.
Data-driven technologies such as AI play a big role in understanding the customer’s preferences regarding key retail decisions such as product offerings, price ranges and promotions.
“AI allows grocers to understand the mountains of data they sit on, tracking customer behaviors and affinities and adjusting strategies in real time,” Raman said. “AI technologies also enhance a grocer’s ability to provide personalized product recommendations and price accordingly.”
Personalization, Raman added, has a profound impact on driving loyalty and shopper engagement. “Retailers can use data effectively to train AI/ML models, which can provide insights into trends and automatically generate offers that will maximize key performance indicators that retailers track such as basket size, category breadth and visit frequency.”
And while generating personalized strategies used to be tedious and time consuming, with AI that process can take as little as five minutes. According to Birdzi’s research, retailers using its AI-powered tool that generates those personalized strategies are seeing about a 33 percent increase in categories shopped, a 17-20 percent increase in spend and a 15 percent increase in trips.
Demand forecasting
Managing out-of-stocks and inventory, reducing product waste, personalizing promotions and optimizing in-store assortments at a store-by-store level are abilities that already exist within AI, noted Vijay Raghavendra, chief technology officer, SymphonyAI. And while it is easy to get caught up around future uses, Raghavendra suggested retailers stay focused on the true business use cases that AI solves today.
“Predictive and generative AI combined can act as a trusted digital assistant to defined roles within the retailer organization,” he said. “AI technology can prepare and explain data results to category managers, recommend optimal trucking routes at the warehouse and assist store associates with spotting a misplaced product on-shelf.
“An entire retail organization can be linked by AI to improve how it performs – this is its true power.”
Within inventory management, Midgley said AI’s real-time capabilities enable continuous monitoring of factors such as sales data and stock levels, mitigating risks of overstocking or understocking. Moreover, he noted that AI-driven demand forecasting draws insights from diverse sources, optimizing inventory levels and minimizing food waste.
“With markdown optimization, AI automates product identification, allocation and pricing adjustments, minimizing waste while improving profit margins,” he said.
Produce is among the many categories poised to benefit from AI.
“This category sees a tremendous amount of shrink (36 percent) and any technology that can better help retailers decide how many feet to devote to a category, how many product facings are necessary and how to optimally manage inventory as it moves through the supply chain, is a win for everybody,” said FMI’s Baker.
Understanding this is a huge leap from mapping out a game plan on an excel spreadsheet, Baker said with the advent of AI grocers of all sizes now have a tool at their disposal that is basing those same decisions around thousands if not more data inputs that one person could never consume equally.
“It will likely mean some people will be asked to take on a different set of responsibilities, but that just means they will be expanding their skill set and be more valuable to the company they work for,” Baker said.
Impediments
For retailers, access to clean data is one of the top concerns. As Baker noted, many retailers are operating legacy systems and those need updating before the advantages of AI can be recognized.
“Data is king and you need to have complete and accurate data for the benefits of AI to be realized,” Baker said.
The key, he said, will be the ability to access unified data, adding that most retail systems currently operate as separate silos. “Retailers need to have an enterprise solution that brings all the data together. When you go through several silos to access data you start losing some of its integrity because one silo may not be complete and accurate.”
The sheer scale of data generated in the grocery sector – encompassing sales transactions, customer behaviors and supply chain movements – poses a challenge in terms of effective management, according to Midgley. Developing robust data-handling infrastructures capable of ingesting, processing and deriving actionable insights from this vast amount of data, he noted, is crucial.
Adding to this, Midgley said the journey from raw data to actionable insights can be convoluted, leading to “analysis paralysis.” Effective dissemination of insights to the right stakeholders in a timely manner, he added, is essential.
“This distribution challenge involves creating streamlined communication channels to ensure that insights reach decision-makers and operational teams promptly,” he said.
To address these challenges, he advises grocers invest in developing comprehensive data-handling infrastructures, refine analytical frameworks and establish efficient communication channels to fully unlock the transformative potential of AI.
Calling data the “lifeforce of AI,” Raghavendra agrees it is critical that retailers come to the technology with clean, anonymized data. But another issue, he noted, can be having insufficient data.
“Machine learning technologies need continual data to keep learning and churning optimal results. If a retailer isn’t pulling from enough sources including internal sales, loyalty program information and external data such as weather and macroeconomic insights it will impede the flow of data to the AI models,” he said.
Retailers that don’t have enough data may be hesitant to implement an AI solution, but there are ways to partner with CPGs and champion both parties’ data.
“Together, a retailer and a supplier can share insights and enable predictive and generative AI to produce unbiased recommendations on product demand trends,” said Raghavendra.
“The technology aids retailers and brand partners in knowing their shoppers better and improving the effectiveness of the supply chain to meet demand. And the AI keeps working, ready to reveal tactics and strategies, by market and shopper segment, that will increase sales for both the brand and the retailer for future months.”
Daniel suggests independent grocers that have data concerns take a close look at all the tools available and make their decision based on which one can bring them the best value. Retailers who aren’t taking advantage of AI, he added, are at serious risk of being left behind.
“The value of AI is quantifiable. And from our experience, retailers using AI tools can increase category sales anywhere from 10 percent to 50 percent,” he said.
Dispelling myths
Investing in technology has often been synonymous with requiring large expenditures, but that isn’t the case anymore. “Costs for these technologies have come down significantly,” Raman said. “The bigger issue is the perception that technologies such as AI require a level of technical expertise that may not be available to the independent grocer.”
The key, he added, is to have a roadmap that gets retailers started down the path. “A crawl, walk, run approach is a start for smaller grocers looking to implement AI,” Raman suggested, noting that retailers like Berkots Foods have implemented his company’s AI platform to get started on this journey.
“By carefully thinking through their roadmap, they are able to fully utilize the capabilities of the platform,” he said.
Adding to this, FMI’s Baker said with cost of entry normalizing in many ways smaller grocers have an advantage over larger chains because of their ability to be nimble and make changes swiftly. “When you can make decisions quickly that offers a huge competitive advantage,” he said.
Invafresh’s Midgley suggested that independent grocers and small chains dealing with budget constraints start incrementally and focus on high-impact areas such as inventory management or customer engagement. He said this approach allows for cost-effective testing and scaling based on initial successes.
In addition, he recommended retailers explore models provided by cloud-based AI services for scalable tools without significant upfront capital investment in infrastructure. He also suggested retailers forge partnerships with tech vendors, startups or local tech communities that offer AI solutions as a service, enabling access to advanced technologies without extensive in-house development.
Employee training is also key. “Invest in training existing staff to work with AI technologies, not only controlling costs but also building internal expertise and fostering innovation within the organization,” Midgley said.
Raghavendra agreed that smaller retailers don’t necessarily need to dive head-first into a complete end-to-end AI optimization solution, but they can dip a toe in.
“If there are particular categories that have experienced sales declines the category manager at that retailer can start by working with an AI partner to look at historical data, current sales data, loyalty information and any other internal sources that the company has and produce forward-looking, highly relevant predictive recommendations on where that category will be going over the next several months,” he said.
AI is already in play
Retailers are using AI as an end-to-end solution to optimize the supply chain and make more customer-centric, effective business decisions. AI is also assisting many retailers today to turn shopper data and loyalty information into relevant assortments by store.
AI technology can quickly optimize assortments that matter most to each individual store and their regional shoppers.
Here are a few recent examples:
- By using Invafresh’s Fresh Retail Platform, many grocery retailers have integrated AI into their operations. The platform employs AI across various solutions, including demand forecasting, inventory management and food waste reduction. Price Chopper, a customer utilizing Invafresh’s AI-enhanced solution, has reported remarkable success in preventing fresh food waste. By leveraging AI, Price Chopper has prevented an impressive 20 tons of fresh food a week from going to waste. Furthermore, this initiative is projected to prevent over 3,000 tons of food waste over the next three years.
- SymphonyAI partnered with Virginia-based grocer K-VA-T, parent company of Food City, to use AI and data management to cultivate a streamlined customer-centric retailing approach with deeper supply chain vendor engagement, shelf planning to personalize stores for their local shoppers and promotion evaluation to enable personalized marketing campaigns. Officials at K-VA-T said AI and analytics tools enabled the organization to be nimble and quickly adjust assortments and product pricing based on current demand trends.
- Strack & Van Til, an Indiana-based grocer, adopted Birdzi’s Customer Intelligence Platform. With a wealth of data collected across in-store and online channels, Birdzi’s AI-powered solutions help the grocer gain insights from the data, run targeted campaigns and grow its shopper value on an individualized basis by creating specific offers, discounts and communications for each customer.
Birdzi also partnered with LOC Software to enhance digital coupon redemption and rewards capabilities for Strack & Van Til and the grocer reported email open rates of 37 percent, as well as positive customer feedback and increased engagement.
Quantifying AI
Return on investment (ROI) expectations for implementing AI can vary depending on the specific use case and the goals of each retailer. The value that AI offers is often quantifiable, but experts say it may take time to realize the full benefits.
“A major benefit of AI is it is wholly measurable,” said Vijay Raghavendra, chief technology officer, SymphonyAI. “The same metrics that retailers already use – sales, revenue, profits, efficiency gains, etc. – plug into AI and make the technology’s impact easily quantifiable.”
Raghavendra pointed to results from a report by research analysts at IDC that found businesses deploying AI gained $3.5 for every $1 spent.
“As the AI-powered recommendations play out, retailers see how accurate the results are and see if they’re growing their business as expected. The value can be derived in near real time and the ROI is very transparent,” he said.
According to officials at Invafresh, the following are factors to consider when evaluating the ROI of AI include:
- Increased Productivity: AI can enhance productivity by automating time-consuming tasks, allowing employees to focus on more complex and strategic activities. This increased productivity can contribute to higher output and revenue.
- Automation of Repetitive Tasks: AI can take over routine and mundane tasks that would otherwise require a significant amount of human labor. This is especially important during labor shortages.
- Improved Decision-Making: AI enables data-driven decision-making by analyzing vast amounts of information quickly and accurately. This can lead to better strategic decisions, optimized resource allocation and improved overall business performance.
- Optimized Inventory Management: AI-enhanced systems in grocery retail can analyze purchasing patterns, expiration dates and real-time demand data, enabling more precise inventory management. This minimizes overstocking, reduces the likelihood of perishable items going unsold and helps curb food waste.
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