The Oxford Languages Dictionary defines the term “all in” as being “completely committed to or very much in favor of something.” When it comes to artificial intelligence (AI), it appears most grocers are all in. The staff at Wave Grocery observes that AI is a perfect partner in the grocery sector. They write, “Artificial intelligence has rapidly permeated into industries around the globe, with the supermarket and commerce fields being no different. AI in supermarkets is one of the latest trends we’re seeing in this space, allowing supermarkets to easily manage inventory, analyze customer data, and orchestrate quality control checks. Supermarkets are the perfect sector to engage with AI developments for two main reasons: 1) Enormous number of products; [and] 2) Large customer base. Across the tens of thousands of products available and the potentially millions of shoppers, supermarkets have access to a wide and diverse pool of data. By feeding this huge volume of data into AI tools, supermarkets can obtain deeply precise analytics that will guide their industry forward.”[1]
AI in the Supermarket
Executives from the Morningstar DBRS group predict that grocers failing to go all in on AI are risking their future market positions. They explain, “Grocers are increasingly turning to AI powered solutions to better manage operations and improve their value proposition for the customers. We expect them to increase investment in AI in a bid to accrue long-term benefits. However those Grocers who underinvest in AI are potentially jeopardizing their market positions and could reflect some credit weakening over the long term.”[2] So, what are the long-term benefits to which they refer? Aaron Ricadela, Senior Communications Director at Oracle, discusses half-a-dozen ways AI is currently being used to improve the grocery sector.[3] They are:
1. Customer Experience (CX). AI can personalize shopping recommendations and promotions based on a customer’s shopping habits and loyalty program data. Gary Drenik, co-founder of Prosper Business Development, reports, “Consumer data from Genpact, a global professional services and solutions firm, reveals 51% of respondents think more retailers should emulate Amazon’s use of AI to improve CX. This should be heard as a warning sign to other players in the food retail space to prioritize digital transformation.”[4]
2. Quality Control. According to Ricadela, “Grocery retailers use AI software for food quality inspection. For instance, aisle-roaming robotic scanners see how quickly meat or vegetables sell to gauge their freshness. AI algorithms factor in the weather, local events, and other external data points to guide grocer purchasing. AI systems can also inspect incoming pallets of goods for damage.”
3. Inventory Management. Ricadela writes, “AI systems can help retailers look across their stores’ product assortments, analyze historical sales, and find signals to prevent stockouts.”
4. Trade Promotion Optimization. Ricadela reports, “Personalized promotions are considered one of the most promising grocery use cases for advanced data analysis techniques, which yield fresh views on the effect of promotions and the sales effect that certain promotions have on other products. According to consultancy McKinsey, when fielded with precision, promotions can lift sales by 4% to 8% and boost operating profit by 2% to 3%.” AI solutions, like the Enterra Revenue Growth Intelligence System™ (ERGIS™), can systemically perform holistic revenue growth optimization (including optimizing strategic and tactical pricing, trade promotion, trade architecture, price pack architecture, media mix, customer segmentation, and assortment).
5. Pricing. As noted above, strategic and tactical pricing can be optimized using AI. Ricadela adds, “AI algorithms can detect changes in shopper buying patterns and suggest prices for goods that maximize sales. Such analyses factor in price history, inventory levels, competitor prices, supplier costs, and other data points. Retailers can also use AI to perform an ‘affinity analysis’ that suggests the best prices for complementary items, such as coffee and creamer or chips and salsa. In addition, AI analyses can reveal the ‘demand transference’ of substitute goods.”
6. Theft or “Shrinkage” Prevention. Anyone who closely follows the retail sector knows that inventory shrinkage has become a major problem. Ricadela reports, “AI-based computer vision applications can reduce theft by identifying shoppers who pocket items from shelves and cashiers who don’t scan each item at checkout. Stores can position cameras over self-checkout lanes to determine whether customers intentionally pass products over a scanner bed without registering their barcodes.”
Here are a few other ways that AI can improve supermarket operations.
● Front of store operations. Journalist Maria Monteros reports, “Grocers have been using AI technology online or behind the scenes for the past couple of years, said Melissa Minkow, director of retail strategy at digital consultancy firm CI&T. But lately, grocers have started to incorporate them into their stores where they could interact with shoppers. By adding AI technology in physical stores, grocers could increase labor efficiencies, speed up lines and make the shopping experience smoother.”[5]
● Infrastructure efficiency. The Wave Grocery staff reports, “Supermarkets are leveraging AI to optimize energy consumption and enhance sustainability. AI-driven systems manage heating, ventilation, air conditioning (HVAC), lighting, and refrigeration units to reduce energy use and minimize environmental impact, leading to significant cost savings. These systems can adjust energy consumption based on store traffic and external weather conditions, ensuring optimal energy use.”
● Supply chain optimization. The Wave Grocery staff also reports that AI can make supply chains more efficient. They explain, “AI optimizes the entire supermarket supply chain by improving demand forecasting, logistics, and supplier management. These advancements ensure timely deliveries, reduce stockouts and enhance overall supply chain efficiency. By predicting demand more accurately, supermarkets can reduce excess inventory and avoid stockouts, leading to better customer satisfaction and lower costs.”
Concluding Thoughts
Drenik predicts, “To stay relevant in the food retail market today and in the future, grocers need to demonstrate an ability to build, nurture, and grow an omnichannel experience for customers. While many grocers have made investments that support their digital agenda, such as engaging with last-mile delivery providers and upgrading their online interaction points with customers, many have paid less attention to digitalizing back-office functions. The few retailers that have successfully begun their AI journeys have focused on how the technology can optimize supply chain processes from planning and logistics, finance and accounting, and regulatory compliance, all the way to customer interactions.” Richard Kestenbaum, a Partner at Triangle Capital LLC, predicts that grocers who go “all in” on AI will be tomorrow’s sector leaders. He explains, “We are only at the starting line of what AI can do. Over time, the transformational power of AI will be more apparent. … The grocery industry is notoriously competitive and the vast majority of it still takes place in physical stores. The scale is massive, the profit margins are thin and the large players in the industry, like Walmart, Amazon, and Kroger, have financial resources greater than many national governments. It’s an industry where small improvements can be the difference between success and failure and AI can make the difference. Grocers have gotten the message.”[6]
Footnotes
[1] Staff, “AI In Supermarkets: Changing The Global Industry For The Better,” Wave Grocery Blog, 13 October 2023.
[2] Vineet Khattar, Moritz Steinbauer, and Tim O’Brien, “Artificial Intelligence: Empowering Firms like Never Before—Global Grocery Sector (Part 3 of 5),” Morningstar, 5 October 2023.
[3] Aaron Ricadela, “Transforming Supermarkets and Grocery Stores with AI,” Oracle, 5 September 2023.
[4] Gary Drenik, “AI Is Coming For Supermarket Shelves – Are They Ready For It?” Forbes, 5 September 2024.
[5] Maria Monteros, “Grocers are beginning to blend AI technology into their store operations,” Modern Retail, 31 January 2024.
[6] Richard Kestenbaum, “Artificial Intelligence Is Already Taking Over Grocery Stores,” Forbes, 27 September 2023.
