magine 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 them up 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 indus-
try 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 Center
for Advancing Retail & Technology (CART), Los Angeles.
“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 invest-
ing tens of millions of dollars in technology every year.”
It was Stephen Hawking who says every aspect of our
lives will be transformed by AI. We won’t 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%.
“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.
Gary Saarvenvirta, Daisy's founder and CEO, says,
“Our system delivers the final decision to the retailer on
three fundamental questions,” which are: Which products should I promote, what prices should I charge and
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 flyer. In the almost three years it’s
been working with Daisy, comparable store sales have
jumped by 5% each year.
“[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
The question of AI isn’t what it’s going to do for grocery stores
in the future—it’s what it’s not going to do. By Amanda Baltazar
Operations & Supply Chain