The gap is widening and the retail marketplace is becoming increasingly challenging for grocery retailers. As the big players in the grocery industry—especially giants such as Amazon, Walmart, and Kroger—invest in artificial intelligence (AI), the big are getting smarter, stronger and more efficient, while the smaller retailers perhaps flounder.
All is not lost. Midsized and small retailers can take advantage of being able to move quickly, but they need to partner soon with AI-enabled technology leaders, says Jon Hauptman, senior director of retail analytics for Inmar Willard Bishop Analytics in Chicago.
AI describes computer programs that learn as they go along. It is being used in the grocery industry for everything from creating promotions to replenishing shelves, delivering orders and unloading trucks.
Here’s how the three biggest grocery companies are using AI.
Amazon: Stores and Online
Amazon “is using AI everywhere,” says Gary Hawkins, CEO of Center for Advancing Retail & Technology, Los Angeles. And Hauptman says Amazon has “forced all other food retailers to look at similar ways to enhance the shopping experience.”
In terms of customer-facing technology, Amazon is using AI in three ways: to power virtual assistant Alexa; in its 10 cashier-free Amazon Go stores; and the recommendations its website offers to customers.
Amazon is also making good use of robots, which trundle around its warehouses transporting shelves packed with products. For delivery, Amazon has long been talking about drones and the company has just begun testing a delivery robot, Amazon Scout, in Seattle. This cooler-sized device rolls at a walking pace and makes deliveries during daylight hours
Walmart: Robot Alert
In the front of the house, Walmart has Bossa Nova robots in 50 stores, verifying prices, looking for out-of-stocks and making sure everything is in the right place; and soon it will have floor-scrubbing robots, too. In 47 stores, Walmart is using automated shelf scanners to identify low stocks, incorrect prices and missing labels.
The retailer also reportedly is launching an Intelligent Retail Lab inside a Levittown, N.Y., store, which will identify low stocks and report spills and incorrectly shelved items.
Walmart’s warehouse division, Sam’s Club, will soon test a cashierless system via an app at a Dallas store. The app will also help customers navigate the store and will populate their electronic shopping list with their frequent purchases. Next up: drones to guide customers through stores.
In the back of the house, robots are automating parts of the pickup process in warehouses, and a Walmart in Salem, N.H., features automated carts—Alphabots—to help fill online grocery orders. Also speeding things up is the FAST Unloader, which scans and sorts items directly off trucks. Walmart is also stretching its wings outside it stores with autonomous vehicles to delivery groceries via a pilot program in Surprise, Ariz., using Udelv.
Kroger: MultiPronged Approach
Through its own company, 84.51 degrees, Kroger is improving demand forecasting, product assortment and other shopper-driven insights and analytics. Hauptman sees Kroger’s greatest inroads in AI in driverless delivery cars. The retailer is testing this with Nuro in Scottsdale, Ariz., in Fry’s Food Stores.
And it’s developing a retail-as-a-service platform for the retail industry in conjunction with Microsoft, designed to bring the ease of online shopping to the store of the future.
Also in stores, Kroger is implementing EDGE shelf technology, which digitally displays pricing, promotions, ads and nutritional information, and can also guide shoppers to products.
Kroger last year announced the expansion to 400 stores of its Scan, Bag, Go technology, which lets customers scan items and ring themselves up.
And toward the end of last year, Kroger announced the creation of its first robotic warehouse in Monroe, Ohio, designed by online grocery retailer Ocado, which will likely open in two years, followed by 20 more locations.
Retailers not embracing artificial intelligence yet should be knocking each other down in the race to embrace it before they’re obsolete, given the enthusiasm among the top three.
Small Grocers Fight Back With AI
It’s not just the big chains using artificial intelligence. Employees at Earth Fare stores in 10 states in the Southeast, Mid-Atlantic and Midwest are being more creative, generating more ideas and improving their skills.
What’s behind all this is the introduction of artificial intelligence. In 2016, Fletcher, N.C.-based Earth Fare began working with Daisy Intelligence, based in Concord, Ontario.
Earth Fare president and CEO Frank Scorpiniti wanted to use his people where he could maximize their potential: in helping grow and reinvent his stores. He’s also been able to spend a lot more time on training, because AI is helping him claw back time for his workforce.
Another goal of the collaboration was to promote the right products in Earth Fare’s flyer. “Daisy has allowed us to be more impactful with what we have in the flyer. We can do as many sales or more and can draw more feet into the store because the products in the flyer hit and punch more than they used to,” Scorpiniti says. “That allows us to adjust everyday pricing, sometimes lower, because we don’t have the margin drain that having another, say, 20 items in the flyer would create.”
Since Earth Fare has been working with Daisy, comparable store sales have jumped by 5% each year and the chain has had the ability to expand; it opened its 52nd store in March. “It applies science to the frequency of what items to put on sale,” Scorpiniti says. “Also it helps understand cannibalization—so it’s not all net incremental. We now also look at accompanying sales to the products we put on the flyer.”
Building a Better Bottom Line
Save-On-Foods, based in Langley Township, British Columbia, started working with Daisy more than two years ago.
“We needed to take the next step in trying to get more bang for our buck, especially with advertising and what we promote, and we needed to go to AI to start down that path,” says Terry Piwek, general manager of drug stores for Save-On-Foods.
Daisy ranks the items at Save-On-Foods that drive the most sales and decides which items should go into stores’ flyers. It chooses which promotions to offer and changes them up. “It’s still early stages but indications are that it’s delivering a better bottom line,” Piwek says, “because it’s recommending the right things to promote at the right time.”
Where Daisy has made a big difference is with associated sales, he says, such as increases in sales of buns when hamburgers are on sale. “Every item has an associated sale that comes with it and it offsets the investment we make on the promotions,” he says.
Daisy has also had a big effect on prices, showing that small changes don’t affect units sold or sales. Gary Saarenvirta, Daisy’s founder and CEO, says he’s helping smaller retailers fight back against the grocery giants as they drive prices down.
“Retailers perceive they have a price problem and have an issue selecting the right products to promote,” Saarenvirta says. “They’re not seeing the margins they used to. This is a way to level the playing field. We help them be as efficient as they can with pricing and promotions.”