The Grocery Store of the Future May Be Here Now

  • Industry trends
  • 12/12/2023
Payment for an order at a fast food restaurant in a selfservice terminal

Key insights

  • The grocery industry has experienced significant changes driven by consumer preferences, technological advancements, and environmental consciousness.
  • Artificial intelligence (AI) is becoming increasingly important in the grocery industry, offering benefits such as improved inventory management, enhanced customer experience, and autonomous checkout.
  • When selecting AI software, it’s essential to consider industry specialization, scalability, integration capabilities, data security, and cost-effectiveness.
  • Working with an AI consultant can help you implement AI technologies and enhance benefits.

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The history of technology in grocery

From the widespread adoption of refrigeration and the introduction of self-service in the early 20th century all the way to barcode scanning many decades later, the grocery industry was always considered a stable and predictable business — but not “high-tech.”

History of tech in grocery graphic 

By the 1990s, most grocers had employed basic technology. Point-of-sale (POS) terminals scanned UPC codes, and perpetual inventory systems had workers using handheld scanners to adjust inventories, which were also reduced for sales from the POS system.

As we moved into the post-Y2K era, significant changes started to occur, driven mainly by consumer tastes and spending habits — and, of course, technological advances. More self-checkout lanes were installed to cut down on labor costs and accommodate shoppers who wanted to get in and out as quickly as possible. Online grocery shopping became prevalent, and not only could shoppers pick up their orders while parked in front of the store — they could have orders delivered right to their front door.

More recently, the development of wide-spread environmental consciousness led to a focus on sustainability. Name brands became less of a priority as shoppers gravitated toward lower cost and similar-quality private labels. This also led to greater accessibility to healthier food choices at more reasonable prices.

Grocery today: The potential of artificial intelligence

In recent years, exponential advancements in technology — especially artificial intelligence (AI) — have put significant pressure on grocers to keep up with big box stores and large grocery chains who spend hundreds of millions of dollars annually to implement AI and other related technologies.

As more and more grocers contemplate long-term investments in technologies that use AI, you may wonder: is it worth the hype? Let’s look at how AI is already being used throughout the grocery industry.

Inventory and supply chain management

With unprecedented inflation and issues with “shrink” (a measurement of inventory loss encompassing areas like retail theft, spoilage, breakage, etc.), the ability of a grocer to closely manage inventory has become paramount to improving gross margins and bottom lines.

Better monitoring of inventory levels, improving purchasing through forecasting, and reducing overall shrink are just some of the benefits of using AI. Having real-time, accurate data is vital to understanding current trends and why changes to your existing business operations and models may be necessary to stay competitive.

For more insight, read our article on how AI is helping inventory and supply chain management.

The omnichannel experience

Customer experience is paramount to grocers vying to grab a shopper’s attention and draw them to their store. From the basic use of ChatGPT for customer service interaction via virtual assistants and online support to order tracking and recipe assistance — incorporating AI into mobile apps and the in-store experience will be essential for grocers over the coming years.

Customers may not know it, but when they order groceries with an online shopping app or use a personalized digital coupon, AI may be used to further streamline the overall omnichannel experience. Rather than marketing to masses of people with general circulars, ads, and videos, this seamless technology can provide a more personalized experience as customers search for products and create shopping lists.

Shopping habits can dictate demand for products, and controlling pricing should be part of that conversation. Enhancing sales of products based on customer demand, history, cost, and other data points can drive more dollars to your bottom line. AI can assist by not only interpreting the data for a particular item but also finding substitute goods and complimentary products, as in, “What cheese pairs best with the merlot I purchased for my dinner party?”

As AI continues to develop, it may also assist grocers with store layouts, tracking where the most traffic occurs, and how long customers shop in each area to personalize the overall experience further.

Autonomous checkout

Commonly known as “frictionless,” “seamless,” or “scan and go,” autonomous checkout is not new to the grocery world. When Amazon introduced its version of this technology at smaller-format, brick-and-mortar stores, it seemed like science fiction. A customer could walk into a store, pick out their groceries, drop them into their cart, and walk out of the store without standing in a checkout line.

When a customer takes a product off the shelf, AI would not only be able to put it on the customer’s running tab but also reduce the store’s inventory for that item, limiting the need for extraneous and intrusive physical inventory counts. Further, a continued labor shortage in the grocery industry is creating a need for new and innovative ways to keep and attract customers. This technology could remove the need for checkout lanes and allow current staff to better assist customers on the floor with questions about products or even the technology itself.

In theory, shoppers would save time and the frustration of waiting to check out and pay, and grocers could shift their focus to better customer service and reducing labor costs.

Integrating AI into your organization

Enhancing your workforce

Many think that AI will replace entire workforces, but that is not the case. The real value of AI comes when it is used with your current teams. Using AI to reduce mundane tasks can help increase efficiency and accuracy while allowing employees to focus on more critical tasks. It could enable employers to unlock individuals’ true potential and help them accelerate at what they do best, or assist them in their day-to-day responsibilities.

Selecting the right software

When selecting AI software for your grocery, look for industry specialization. Make sure the software is specifically designed for grocery needs like inventory management and customer behavior analysis.

Scalability and integration capabilities are vital. The software should seamlessly blend with your existing systems and should adapt to the growth of your business, handling more data and additional locations efficiently. It should also be easily customizable and tailored to your specific needs.

Equally important is data security and privacy, considering the sensitivity of customer data in the grocery sector. A user-friendly interface is key for staff with varying technical skills, alongside robust support and training from a reputable and dependable software vendor. The software should be compliant with local and international regulations like the General Data Protection Regulation.

Though AI holds immense potential and transformative power, cost-effectiveness is still a critical factor. Consider not just the initial investment — but also the long-term return on investment.

Working with an AI consultant

An AI consultant should have significant industry experience and a deep understanding of the grocery sector’s specific challenges and opportunities. Technical knowledge in AI technologies relevant to your needs, such as machine learning and natural language processing, is essential.

The consultant should also present a clear, strategic approach to how AI can enhance various aspects of your business — from supply chain management to customer experience. Seek case studies or references from other grocery industry clients to help get a clear idea of their effectiveness.

Choose a consultant who:

  • Collaborates well with your team
  • Is able to communicate complex AI concepts in an understandable way
  • Adheres to ethical AI practices, particularly in terms of data usage and privacy
  • Can provide customized solutions rather than generic ones
  • Offers post-implementation support and adjustment services
  • Has a fee structure that fits your budget
  • Is innovative and forward-thinking — staying abreast of the latest AI trends can provide valuable insights into future technological advancements

The future of AI in grocery

What does the grocery store of the future look like? One thing is certain: AI will grow even more prevalent as the technology becomes more powerful, cost-effective, and attainable to grocers. Just as the POS system revolutionized the grocery industry in the 1970s and evolved to integrate inventory management, reporting, and customer relationship management — AI will likely evolve in ways we never thought possible.

How we can help

Our grocery industry professionals can help you think through your objectives and design both immediate and long-term roadmaps to help you remain profitable.

CLA’s digital team can provide authoritative guidance on how to integrate AI into your organization’s operations. We can help identify areas where AI can be most beneficial and assist with selection and implementation of AI tools and technologies. Reach out now to start developing a plan for implementation and find out what AI can do for you.

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