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Tori Hamilton

Lori Schafer in RetailToday: AI Innovation for Grocery Retailing is Just Getting Started


A shot of Lori Schafer's article in the Retail Today publication, includes an image of a happy family in the product section of a grocery store

Find the original article published by RetailToday here.


Grocery retailing has outperformed other retail segments in recent years, and “essential retail” particularly proved its value during the COVID-19 pandemic and its aftermath. However, grocers today are facing a fresh set of challenges, as detailed in a recent report from the Food Marketing Institute.


According to a new FMI study, “The Food Retailing Industry Speaks, 2024,” 85% of supermarkets named asset protection and theft as the biggest problem affecting their business. Persistent inflation has also negatively impacted profit margins, and grocers are dealing with societal challenges including an increasing lack of civility.


Despite these uncertainties, grocery retailers are stepping up their investments in technology in order to improve efficiency, profitability, and the customer experience. Not surprisingly, investments in artificial intelligence are a big part of that, and investments in AI nearly doubled year over year, according to the FMI.


AI’s Impact on Grocery Retailing Is Increasing Exponentially

AI’s impact on retailing the past few years has been nothing short of transformational. Today, however, AI innovation is entering an inflection point, as AI begins to emerge from the “first wave” of adoption – embedding Gen AI or other AI on top of existing applications. A “second wave” of AI innovation is underway, in which AI applications are anchored in an AI platform that’s purpose-built for AI, with a single platform and data model underpinning all applications.


Here's why it matters. Having the right product information has always been crucial for helping retailers make informed decisions that drive growth and customer satisfaction. But to unlock the full potential of next-generation AI technology, systems need much higher-quality data and real-time updates about the products they sell. This simply isn’t possible with fragmented, disconnected systems due to issues with data latency, quality and access.


However, when all product information – including attributes, descriptions, images, videos, ratings, reviews, and more – resides in a single, unified AI platform, it’s a game-changer. This next-generation platform then becomes the single source of truth for all systems and applications that rely on product data. That’s where grocers’ investments in AI begin to multiply, with applications ranging from Shopping by Diet to Assortment Planning, and Lifecycle Pricing/Promotions, and more. Let’s take a closer look.


Unified Product Data & Attributes Power Shop by Diet initiatives

Consumers increasingly expect supermarkets to help them make informed purchase decisions that align with their dietary and health requirements, and grocery retailers are responding with Shopping by Diet programs that meet consumer needs.


However, identifying the right products for a consumer’s preferences can be a time-intensive, error-prone process. Even with a team of content specialists, large supermarket retailers find it virtually impossible to manually enter information from the product package and select the appropriate categories for a constantly changing assortment of products. It's a process that simply can’t scale, and it inevitably leads to inaccurate, incomplete data.


Advanced AI can extract product information from multiple sources and automatically attribute the product to the correct category. It then enriches the information to create the right search and navigation requirements to help consumers find the best products for their health and wellness needs. As a result, shoppers can easily find what they’re looking for, since the underlying AI will have automatically identified, categorized, and search-optimized the product data. The result is increased customer satisfaction and loyalty, as well as the potential for higher profits for the retailer.


AI Helps Grocers Sharpen Their Pricing Strategies

Pricing is another key area where AI is making an impact. Even though inflation is easing overall, grocery shoppers continue to be concerned about high prices. As USA Today recently reported, even though wage growth has far outpaced inflation year-over year, consumers still experience sticker shock at the supermarket.


That’s why grocery retailers are taking a fresh look at their pricing strategies and looking to AI to help give them an edge. The biggest gains occur with unified product data and analytics at the core. The same product attributes and data that power Shopping by Diet initiatives can also provide product intelligence, forecasts and recommendations for AI-powered pricing solutions. This includes not only lifecycle pricing but also promotions and markdown optimization, with the ability to measure effectiveness, understand cannibalization, halo, and cross-category effects, and recommend omnichannel promotions that meet business goals for category, basket size, revenue and margin.


AI’s Impact is Just Beginning

The benefits of second-generation AI platforms continue to multiply when more solutions begin to rely on rely on unified data and analytics at the core. As another example, a retailer’s category management solution can recommend actual product demand based on the AI data, then factor it into the assortment plan. It can also take advantage of enriched, current data for copywriting in brand voice, auto-attribution, advertising, and other marketing tactics for true 1:1 promotion and better shopper engagement.


The pace of AI innovation continues to accelerate, and in the months ahead grocers and other retailers will increasingly look to AI to provide a competitive edge. The AI revolution in food retailing is just getting started, and retailers, brands, and shoppers alike will be the winners.

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