Imagine a world in which you know exactly how many employees you need for a shift. Imagine knowing the best products to discount. Imagine a supply chain that delivered the ideal amount of goods at the perfect time. It sounds high-tech and futuristic, but this future is here.
What’s behind these marvels is what will soon be behind every successful grocery store. It already is if you think of names such as Amazon, Walmart and Kroger. It’s artificial intelligence, or AI, so get prepared if you want to compete with the big guys.
Artificial intelligence is a combination of algorithmic retailing, deep learning and machine learning. It’s computer programs that learn from experience—like a human does, at least ostensibly—and uses that to get better at what it does. For example, AI analyzes results and learns, and takes that and makes predictions and decisions for the future. What’s key is AI does things humans aren’t capable of—such as analyzing enormous amounts of data—freeing up humans to do what they’re best at, such as negotiating with vendors.
We might not see a lot of AI right now, but it’s there and it’s about to be a huge disruptor in the grocery business. In its Technology Vision 2017 for Consumer Goods Report, Accenture said, “Seventy-eight percent of industry executives agree that AI will revolutionize the way we gain information from and interact with customers.”
And it’s going to be everywhere. “It’s weaving its way into nearly everything,” says Gary Hawkins, CEO of Los Angeles-based Center for Advancing Retail & Technology (CART). “Retailers have realized the world is changing really fast and they’re not competing just with the store down the street but with Amazon, Walmart, Kroger, who are investing tens of millions of dollars in technology every year.”
It was Stephen Hawking who said every aspect of our lives will be transformed by AI. We’ll not dig that deep, but here’s how it’s affecting the grocery industry and the potential it brings.
Pricing and Promotion Power
Harps Foods in Springdale, Ark., has been working with Daisy Intelligence, an AI company in Concord, Ontario, to improve pricing and promotions in its circular. Daisy initially analyzed two years of transactional information and pricing from Harps, with the goal of growing the retailer’s sales by 3%.
Photograph courtesy of PRWeb
“Daisy’s ability to provide us with the associated sales on every item within the individual transactions helps us promote the items most pertinent to our customers,” says David Ganoung, VP of marketing for 87-store Harps.
“Our system delivers the final decision to the retailer on three fundamental questions,” says Gary Saarenvirta, Daisy’s founder and CEO, which are: Which products should I promote? What prices should I charge? What inventory should I have in-store?
“Our system delivers answers,” Saarenvirta says. “We use historical data and simulate the future and find the optimal price and mix to grow the retailer’s sales. It’s doing something beyond human capability.”
Daisy is also working with Earth Fare, a 49-store chain based in Fletcher, N.C., which wanted help featuring the right products in its flier. In the almost three years it’s been working with Daisy, comparable store sales have jumped by 5% each year.
Photograph courtesy of PRWeb
“[Now] our category managers can spend more time finding innovative products and focusing on speed to market rather than selecting the items to write the best ad possible,” says Frank Scorpiniti, Earth Fare’s president and CEO.
Another AI company, Revionics, enables price optimization so stores can dynamically change their pricing as frequently as overnight, and run relevant promotions. According to a Revionics/Forrester Research study, 72% of consumers say price is the most important factor when choosing where to shop.
“So many promotions fail because the retailers don’t look at the cannibalization they have, because they canceled each other out,” says Cheryl Sullivan, Revionics’ chief marketing and strategy officer. “You can’t just throw something in an ad any more or on an endcap. You need science to tell you what the everyday low price should be and what, when and where you should promote.”
Business and Supply Chain Optimization
It’s hard for humans to step back and look at their business, but artificial intelligence can. It can also ensure business is running smoothly, keeping the right products on shelves; deliveries coming at the best times; forecasting the supply chain for inventory, demand and supply, thus minimizing both out-of-stocks and food waste; and make correlations between the number of employees in a store and sales.
Distribution centers are using AI to fulfill orders, and wholesalers are using it for their demand forecasting, says Hawkins. They’re also using the technology to route delivery trucks as well as schedule people and order fulfillment to make their business as efficient as possible.
Market research firm IDC expects that by 2020, half of mature supply chains will use AI. This technology will analyze enormous volumes of data to spot trends and predict problems and outcomes.
This, says Mara Devitt, senior partner with retail consulting firm McMillanDoolittle in Chicago, will remove friction from the shopping experience for consumers. It will also help retailers push their private label lines—helping them understand what consumers are looking for and why.
In the Netherlands, Ahold Delhaize announced a partnership last spring with the Innovation Center for Artificial Intelligence. Through this, researchers will study algorithms so the grocery retailer can make product recommendations to consumers and manage goods flows and optimize the supply chain, including taking the weather into account when looking into the availability of goods. “We want to … learn how AI can be used to better serve the interests of our customers,” said Frans Muller, deputy CEO of Ahold Delhaize, when revealing the news.
Standing in line for groceries may soon be akin to writing a check to pay, and cashierless grocery stores are becoming mainstream thanks to artificial intelligence. AI is also powering is the use of digital video analytics to understand customer behavior; a perfect example is Amazon Go. “Amazon’s AI-powered capability ingests all the feeds from cameras, shelf sensors, and other technology to understand the specific items customers walk out the door with,” Hawkins says.
Amazon’s not alone. A year ago, H-E-B piloted H-E-B Go, a self-checkout mobile app, in two stores in its hometown of San Antonio; it has since expanded it to seven Austin stores. And last year, Kroger announced the expansion of its Scan, Bag, Go technology to 400 stores in 2018.
In China, Walmart opened a high-tech supermarket in Shenzhen, where customers pay with their mobile devices using a WeChat program as they shop. And in Shanghai, there’s Moby, a convenience store on wheels. Customers enter via a smartphone app and are greeted by a hologram. After consumers shop with a smart basket, Moby automatically takes payment as they leave.
When we think of AI, many of us imagine robots, and they’re another piece of the puzzle. AI includes robots such as the more than 100,000 in Amazon fulfillment centers; the drones it’s planning to use; self-driving cars (for supply chain and delivery to customers); and driverless forklifts, carts and pallet movers.
In Scottsdale, Ariz., Kroger is using self-driving cars to deliver groceries from its Fry’s store, in partnership with robotics firm Nuro.
Cars are also used by Farmstead, which uses Udelv to deliver groceries in the Bay Area. Customers receive a text announcing a vehicle’s arrival and use a code to open a door to access their groceries.
“This technology will [enable] us to get fresh groceries into our customers’ homes even faster and cheaper than before,” said Farmstead CEO and co-founder Pradeep Elankumaran at Groceryshop 2018 in Las Vegas last October.
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.
Walmart, too, is piloting robots. The Bossa Nova checks stores for out-of-stocks and ensures everything’s in the right place and correctly priced. The Bentonville, Ark.-based retailer also plans to use automated robotic carts for online grocery orders.
And the retailing behemoth announced last summer that it would start using a robotic picker—the Alphabot—by the end of the year. It will automate the dry-goods portion of online grocery orders assembly at a Supercenter in Salem, N.H. Walmart’s also using the Fast Unloader, which unloads delivery trucks and scans them, directing them to carts depending on their locations in stores.
And, though it’s a much smaller player, Miami-based Sedano’s plans to open a fulfillment center manned by robots, which can reportedly sort online grocery orders of up to 60 items in minutes. The centers have one-eighth the footprint of typical supermarket operations.
Ahold Delhaize has announced plans to open automated warehouses adjacent to stores to speed up order picking and reduce delivery times. These small “robot supermarkets” mean the retailer can automate order collection, and the hope is, according to Muller, that it will help the company expand its online business quickly and more cost effectively than with stand-alone warehouses.
Robots will not only speed things up but also relieve humans of repetitive tasks such as stocking shelves and ordering, freeing them up for what matters: customer interface, creative and skilled tasks, says Devitt.
The Personal Ads
Anyone who uses the internet is used to personalized content, and this is extending into grocery stores. It’s what shoppers are starting to expect because it makes them feel more valued and makes grocery shopping faster and easier.
Food retailers are starting to understand that loyalty programs can build up a database of a consumer’s purchases over time. Then AI can leverage that data to understand which products to promote to individuals to get them into the store, to add another item to their shopping basket and to better retain them. “We are talking massive volumes of data, which is an environment AI is made for,” Hawkins says. “A human being cannot begin to tackle that.”
This AI technology, he says, “can go incredibly deep and continues to learn over time, so it gets better at knowing which items to promote at what price. This will likely lead to different prices for different people, thanks to offers they are sent.”
St. Cloud, Minn.-based Coborn’s is capitalizing on personalization, using a capability that sorts through the items on sale in its 31 stores, then communicates to shoppers the six to 10 products most relevant to them.
Michael Sansolo, research director of the Coca-Cola Retailing Research Councils of North America, which provides relevant research to retailers, feels personalization could inject some energy back into waning center store sales. Stores could soon know who’s walking down their aisles. This technology, Sansolo says, may recognize that person’s dietary preferences, the recipes he or she likes and any food allergies, then use that information—via a handheld device or shelf signage—to recommend products or show what’s on sale.
Kroger’s already offering this, through smart-shelves technology. When shoppers use the chain’s mobile app in one of its stores, sensors detect them and send personal pricing and product selections to them, via their mobile device and shelf displays. This personalization will also tailor to everyone, depending on how they like to shop (such as quickly or slowly) and tailored to each person’s needs (via text or video, for example). Says Sansolo: “It’s about being relevant not to today’s shopper but to tomorrow’s.”
Devitt of McMillanDoolittle thinks AI might even take things further, predicting a shopper's grocery order and telling them what they need, then just waiting for the OK from the consumer to place the order.
“The key with technology is that it has to serve the consumer’s needs,” Sansolo says. “It’s going to be about experience and delighting the customers.”
How Retailers Will Use AI
According to the BRP Consulting 2017 Customer Experience/Unified Commerce Benchmark Survey of 500 executives of retailers in North America, 45% of retailers plan to use artificial intelligence for customer service within three years. Their priorities are:
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