Artificial intelligence (AI) is high on the minds of grocery retailers, yet executives are still sizing up potential investments as they work out the technology’s business case, Grocery Doppio’s May 2023 Digital Grocery Performance Scorecard revealed.
Of grocers polled, 74% said they’re actively seeking new AI capabilities, in part reflecting the February scorecard’s findings that 82% deem AI a necessity to compete in the future, according to Grocery Doppio, a digital grocery intelligence resource created by Incisiv and Wynshop.
Driving the elevated interest in AI these days—in food retail and other industries—is the fast-growing content-generation tool ChatGPT. Grocery Doppio’s survey found that, between February and May, the percentage of grocers discussing ChatGPT in senior level meetings climbed from 67% to 83%.
Still, just 7% of grocers reported having actually made investments in net-new AI functionality for 2023, even though 13% indicated they plan to spend non-budgeted funds on AI technology this year.
Adoption of AI solutions is widely expected to impact personnel. Grocery Doppio noted that every grocery executive polled anticipated that AI would be used to augment (43%), automate (39%) or replace (18%) grocery staff. Nevertheless, just 11% expect AI to “significantly impact” staffing within the next 24 months, the May scorecard said.
When asked about the top challenges in implementing AI solutions, executives cited budget (71%), proof of performance (69%) and infrastructure limitations (63%).
“AI is clearly of interest to grocery executives, but they are cautious about its adoption,” Charlie Kaplan, chief revenue officer at digital commerce provider Wynshop, said in a statement. “Grocers need to have reliable infrastructure and proof of performance before they will commit limited budgets to new technologies.”
Online grocery sales growth flattens out
For May, digital grocery sales totaled $10 billion, up 1.1% from $9.9 billion in April but marking 19.8% growth from May 2022, Grocery Doppio reported. Online grocery sales accounted for 13.1% of overall grocery sales of $75.9 billion in May, compared with 11.9% of $70 billion in total grocery sales in May 2022.
Large grocers (over $10 billion in annual sales) saw e-grocery sales edge up 1.2% month over month in May but jump 20.1% year over year, with similar results (+1.2% month to month and almost 17% year to year) for regional grocers ($5 billion to $10 billion in annual sales. Meanwhile, small grocers (less than $1 billion in annual sales) experienced a 4.8% monthly decline and a 31.7% annual decrease in digital grocery sales. Midsize local grocers ($1 billion to $5 billion in annual sales) fared better, with online grocery inching up 0.4% month over month and rising 13.3% year over year.
Overall in May, 14.3% of sales at grocers with revenue over $10 billion were online, compared with 2.7% for grocers generating less than $5 billion in annual revenue.
Even with sales leveling off, Grocery Doppio’s analysis emphasized that grocery has become “truly omnichannel.” Of all grocery shoppers, 61% used digital channels part of the time in May, and 69% of all grocery sales in the month were digitally influenced in some fashion.
“Omnichannel is the new normal in grocery,” according to Gaurav Pant, chief insights officer for Incisiv and Grocery Doppio. “As the digital channel continues to mature, it is natural that we see a tapering off in growth alongside refinement in capabilities like fulfillment and AI.”
On the fulfillment side, the past year showed a distinct shift toward click-and-collect, Grocery Doppio’s data showed. Pickup accounted for 53.3% of online grocery sales in May ($5.3 billion) versus 50.1% ($4.2 billion) in May 2022. Delivery sales, in the meantime, dipped to 46.7% of May’s digital grocery sales ($4.7 billion) from 49.9% ($4.2 billion) a year earlier.
Digital grocery sales by third-party providers held firm at around $1.7 billion in May, ticking up 0.1% from April, but sank 22.5% from $2.2 billion in May 2022.
Grocery Doppio’s monthly State of Digital Grocery Performance Scorecards are based on data analysis of 1.8 million shopper orders and findings from surveys of more than 31,500 consumers and 3,041 U.S. grocery executives.