Future-Proofing Grocery : Deep Dive into AI Strategy Adopted by Grocers

AI has continued to dominate the industry, sustaining its disruptive influence even a year after its initial launch. Throughout 2023, Generative AI has remained the focal point, and the grocery sector has embraced it. In the face of significant challenges such as labor shortages, shrink, theft, data piracy, supply chain optimization, persistent inflation, and the quest for loyal omnichannel shoppers, the adoption of AI is rapidly gaining momentum among retailers.

According to a survey of grocery executives conducted in February 2023, 13% of grocers expressed their willingness to allocate non-budgeted funds to explore AI solutions. The top use cases identified by these executives were inventory optimization (86%), supply chain operations (81%), and pricing and promotions (72%). There is a notable positive sentiment among executives, with 82% believing that AI adoption will soon become a necessity.

As we transition into 2024, the holiday season brings a heightened focus on omnichannel shopping, with 78% of shoppers expressing a desire to engage with a mix of digital channels and physical stores as per the October 2023 digital grocery performance report. The acceleration of AI becomes crucial for retailers looking to enhance the digital experience and maintain shopper loyalty during this period.

AI has effectively addressed several pain points for grocers, including AI based personalization, shelf stocking, warehouse automation, and robotics. In 2023, the primary areas of investment for grocers, as per research findings, include optimizing digital channels (86%) for the omnichannel shopper, increasing digital promotions and discounts (77%), expanding delivery and pickup slots (74%), improving inventory visibility (69%), and prioritizing personalization (47%). Meeting omnichannel shoppers on their preferred platforms is identified as a critical strategy for securing customer loyalty.

How can AI help revolutionize the retailer challenges

Grocers are leveraging AI across various functions from improving the digital experience by pricing initiatives and mobile shopping by personalizing its recommendations to each customer, helping maintain a better in-store experience, and improving payments, customer service, logistics and inventory optimization and theft prevention. 

In today's omnichannel landscape, where 78% of holiday shoppers engage with both digital channels and physical stores, and 69% of grocery sales are digitally influenced, AI emerges as a powerful solution. By introducing AI tools for employees, such as chatbots and inventory management, and enhancing customer engagement through personalized recommendations and promotions, grocers can address challenges and foster loyalty. Grocers can address challenges and foster loyalty by introducing AI tools for employees, such as chatbots and inventory management, and enhancing customer engagement through personalized recommendations and promotions. Grocers can address challenges and foster loyalty by introducing AI tools for employees, such as chatbots and inventory management, and enhancing customer engagement through personalized recommendations and promotions. , from improving the digital experience by pricing initiatives and mobile shopping by personalizing its recommendations to each customer, helping maintain a better in-store experience, and improving payments, customer service, logistics and inventory optimizationGrocers can address challenges and foster loyalty by introducing AI tools for employees, such as chatbots and inventory management, and enhancing customer engagement through personalized recommendations and promotions.

In the competitive digital space, major players like Walmart, Kroger, and Amazon are strategically adopting AI in 2023. Their initiatives include self-checkout options, personalized in-store recommendations, and loyalty programs tailored through efficient AI algorithms for faster customer segmentation. AI extends its impact into language models, customer surveys for data categorization, and improving the overall customer experience. Moreover, AI facilitates the implementation of self-checkout solutions, particularly relevant as retail wages are on the rise. For shoppers, this translates into a more seamless and personalized retail experience amidst the dynamic digital shopping landscape.

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How can AI help transform the shopper experience?

In our July 2023 survey focusing on customer sentiment, the report underscores a significant concern among shoppers, 77% express dissatisfaction with the checkout experience in physical stores. The incorporation of AI-infused self-checkout technologies, as seen with companies in the area, emerges as a potential remedy. These technologies offer shoppers the flexibility to tailor their preferences based on the number of items or pricing, promising a more streamlined and personalized shopping experience.

Smart carts equipped with shelf-scanning cameras provide an additional layer of convenience. Shoppers can check pricing and promotional information for items while navigating the aisles. However, the adoption of such technologies raises apprehensions related to security and privacy. Despite these concerns, 43% of shoppers express willingness to share their biometrics for an in-store checkout, and a significant 71% are open to sharing their data for a more convenient and faster in-store checkout experience.

While the majority of shoppers (94%) harbor concerns about the security of their biometric data, there is a noteworthy trend indicating a 13% increase in grocery spending on digital and privacy measures anticipated for 2024. This shift underscores the evolving landscape where shoppers, while cautious about data security, are increasingly open to embracing new technologies that enhance the efficiency and personalization of their in-store shopping experiences.

What have the top grocers been doing about it ?

Let's review the year-end of 2023 to see the investments of the top American grocers in a world where AI has catapulted its rise and its proliferation in a razor-thin market is a necessity.

Walmart  

• Walmart launched My Assistant, a new generation AI-powered tool in August.
• Aimed at improving productivity for 50,000 US-based corporate employees
• Walmart introduces a new shopping assistant for customers in the coming weeks.
• Enables a more interactive and conversational experience for customers.
• Capable of answering questions, providing personalized product suggestions, and sharing detailed product information.
• Walmart Voice Order allows customers to reorder items via smart speakers and mobile devices.
• Customers can use natural language commands like, "Hey Google, add Great Value orange juice, a loaf of Great Value bread, and a dozen eggs to my cart.
• NLP is utilized to understand customer requests in natural language.
• Product name entity recognition identifies specific products.
• Prior purchase information is used to determine brand preferences.
• Chatbots assist customers with simple queries about order status, returns, etc.
• Resulted in a significant reduction in customer contacts, allowing human agents to focus on more complex issues.
• Acknowledges that customers prefer quick and easy issue resolution.
• AI-driven chatbots assist with simple queries, enabling human agents to handle more complex issues effectively.

Kroger 

• Within the 84.51 customer research team, large language models are being piloted to summarize customer database sets
• AI applied to customer surveys and service logs, enabling rapid analysis and categorization in minutes.
• Advanced algorithms are employed to optimize store operations.
• Streamlining essential tasks like store orders, reducing out-of-stock items, and improving inventory management.
• Resulting in operational efficiency and reduced operating expenses.
• Kroger plans to use AI as a monitor in self-checkout lanes.
• Cameras will observe customer scanning behavior, enhancing checkout processes
• Kroger utilizes AI to enhance overall performance and increase profit margins.
• Focus on boosting store brand sales through AI applications.
• Application of data and AI-based personalization to understand customer preferences.
• Targeted and effective experiences delivered based on customer behavior.
• Increased digital engagement provides more efficient channels for relevant product recommendations and timely promotions.

Target 

• Target has invested over $4 billion to $5 billion.
• Focus areas include enhancing the assortment of owned and national brands.
• Investments made in store assets and teams for a reliable and differentiated shopping experience.
• Expansion into new markets and continuous improvement of existing stores.
• Enhancement of the digital experience, starting with the website.
• Introduction of a unique retail hub model that has transformed guest service.
• Notable features include Drive-Up service, contributing to well over $7 billion in annual sales.
• Utilizing AI to recommend products based on user searches.
• Enhancing the customer experience through personalized product recommendations.
• AI employed for demand forecasting to optimize the ordering process in the supply chain.
• Improving operational efficiency and inventory management.
• AI used for optimizing product assortment planning.
• Ensuring a well-curated and appealing range of products for customers.
• AI involved in evaluating and ensuring the quality of imagery on the company's website.
• Enhancing the visual representation of products and the overall online shopping experience.

Ahold Delhaize

• Introduction of an MLOps framework designed to reduce time to market for machine learning products.
• Emphasis on pragmatism in building the framework, recommending a small, value-focused start.
• Arne highlighted the improved deployment of a cross-selling model using MLOps.
• Suggestions for products at the checkout page for multiple Ahold Delhaize brands (Mega Image, Maxi, Alfa Beta, Delhaize).
• Current MLOps framework enables deployment to another brand within a month, compared to the previous 9-month timeframe.
• Kickstart AI brought together AI talent from leading Dutch companies to tackle global challenges.
• Improved Delhaize Belgium’s demand forecasting model to reduce food waste across all Ahold Delhaize’s brands potentially.
• Learning from Kickstart AI: Bringing diverse backgrounds and experiences together can solve complex problems.
• The collaboration benefits the communities served by all of Ahold Delhaize’s brands.
• Prism was introduced as a customizable software streamlining inventory, customer, and store operations management across channels.
• Aligned to enhance the overall shopping experience through technology.

Costco

• The wholesaler recently redesigned its digital membership card available in its app.
• Updates to the website, including a redesigned site header with a more extensive search bar.
• The retailer opened a digital optical store where consumers can virtually try on glasses and then order them for pickup.

Ongoing improvements in the app are below - 

• In-warehouse shopping tools for customers.
• Digital membership card features.
• Barcode scanning capability in the app.
• Shopping list management tool.
• Warehouse savings tool.
• Ability to view fuel prices for nearby gas stations.

Amazon

• Collaborated with Anthropic to advance generative AI.
• Anthropic selected AWS as its primary cloud provider.
• Occidental chose AWS as its preferred cloud provider for operational efficiencies and carbon removal projects.
• Introduced a new generative AI-powered feature in Amazon’s U.S. store.
• Allows shoppers to quickly understand customer sentiment before reading detailed reviews.
• Introduced generative AI capabilities to help sellers create product listings.
• Unveiled Supply Chain by Amazon, an end-to-end, fully automated set of supply chain services.
• Launched a generative AI-based digital assistant in India to assist small businesses.
• Previewed a smarter Alexa powered by generative AI and a custom-built LLM for voice interactions.
• New capabilities include making multiple requests simultaneously, handling ambiguous smart home requests, and setting up routines entirely by voice.
• Announced new LLM tools to facilitate the creation of more conversational and intuitive Alexa experiences.

In the rapidly evolving landscape of AI, poised for high growth as we progress into 2024, grocers are strategically directing their investments. Key areas of focus include optimizing digital channels tailored for omnichannel shoppers, catering to those who prefer a blend of in-store and online experiences. 

Prioritizing a mix of pickup and delivery options, alongside expanding and optimizing delivery slots, emerges as a focal point. Additionally, there is a heightened emphasis on refining personalized recommendations to fortify customer loyalty. As grocers scale their operations, these strategic investments underscore their commitment to staying ahead in the dynamic retail landscape.