How AI Is Powering The Indie Grocery Revolution

Artificial Intelligence

When retail technology tools entered the grocery scene and quickly gained momentum, it was the big chains and e-commerce giants who were able to explore, adapt and get on board. This left regional and independent players in the dust as their larger counterparts grabbed the lion’s share of customer and revenue growth, with solutions like retail media networks and mobile apps enabled.

Fast-forward to today and independent grocers are getting their own tools to battle retail giants like Walmart and Amazon, thanks in large part to big data and the quickly evolving capabilities of AI and Machine Learning (ML) technologies.

Despite the rise of e-commerce, the data around customer behavior is clear: there is a continued preference for in-store shopping. According to a recent Prosper Insights & Analytics survey, 78.3% of customers have shopped in a physical store in the past 30 days.

Prosper - How Have Shopped For Groceries

32.6% of respondents are choosing to shop closer to home due to increased prices. For independent grocers who may be the go-to store for their communities, this is not just a trend, but a golden opportunity to enhance their digital technology and connect with shoppers in their own backyard.

Prosper - Price Increases Leads To Shopping Closer To Home

The first crucial step is to establish the infrastructure needed to capture first-party data through a mobile app or website. Then, AI and ML will interpret that data, providing insights to enable personalized and efficient shopping experiences. By leveraging their strong community ties and utilizing their deep-data advantage, independent grocers can now develop content that is more relevant to the customer and thereby improve engagement.

Alasdair James, Chief Commercial Officer at Swiftly—a leader in retail technology solutions—highlights the unique position of independent grocers. “They're not just retailers; they’re at the heart of their communities, generating significant amounts of purchase data daily. Unlike the big chains, many of these local stores haven’t fully tapped into the potential of this data. Technological advancements in AI and ML are enabling independents to develop insights from their data, allowing them to provide more engaging and relevant content to their customers. This helps them compete with larger competitors and retail media networks for their customers' attention.”

In a recent Forrester-commissioned study titled AI Will Transform Retail, 41% of retailers shared that the direct impact that AI and ML have on customer experience is a top driver for investing in this technology. It allows them to connect with shoppers at various touchpoints, becoming especially impactful when integrated into loyalty programs that deliver personalized and relevant offers and ads that significantly enhance the shopping journey.

James elaborated, sharing that many grocers are leaning into solutions like “Just for You” recommendations, which not only identify products that have been purchased in the past but then deliver offers within the timeframe that they are regularly repurchased or are on sale. These programs are growing to be particularly important to shoppers as inflation continues to influence their purchasing decisions and habits.

Swiftly recently conducted their True Cost of a Grocery Shop survey and found that 82% of respondents use coupons, 64% participate in loyalty programs and 34% leverage retail apps. “These numbers show that a mobile-first strategy that focuses on data-informed, personalized experiences is a surefire way to drive customer engagement,” shared James. “The rise of digital circulars that deliver past-purchase-informed coupons and promotions are also proving to be extremely impactful and show an ongoing awareness of the importance of saving money for today’s shoppers.”

Also to consider is the impending deprecation of cookies and third-party data, which is set to impact the industry significantly. However, James sees this shift as an opportunity for independents to capitalize on their first-party data to create cost-saving and targeted experiences for their shoppers.

“By integrating AI and ML to really understand their first-party data, independent grocers can better understand their customers' preferences and behaviors,” James said. "When shoppers receive a personalized and therefore highly relevant digital coupon right when they're in the store, it feels like the store knows them and their needs. This immediate connection between customer preferences and real-time marketing is a game-changer for independent grocers that builds loyalty, and drives return visits that could otherwise be lost to competitors.”

Moreover, the use of AI and ML isn’t just about enhancing the shopping experience but also about the operational impact that retailers can take advantage of. Forrester’s study showed that 30% of respondents said the top driver for investing in AI was reducing operating costs, while 33% cited improved operational efficiency and effectiveness.

“AI can analyze vast amounts of data quickly and provide insights that would take humans much longer to uncover,” James explained. For example, AI can predict which products are likely to be in demand based on historical data, seasonal trends, and even local events. This predictive capability helps grocers manage their inventory more effectively, reducing waste and ensuring that popular items are always in stock.

Additionally, AI-powered customer service solutions can enhance operational efficiency for independents. "When you contact a retailer, you might be speaking to an AI-enabled system that directs your call based on the nature of your inquiry, reducing the need for human intervention and allowing staff to focus on in-store customers and operations," James said. This approach not only improves efficiency but also reduces costs for independent retailers.

AI and ML hold transformative potential for independent grocers. By embracing these technologies, independent grocers can not only stay relevant but lead the way in creating smarter, more personalized shopping experiences for their customers. Most retailers understand this, but the challenge historically has been one of cost. Operating in a low-margin environment, making the necessary investment to unlock such opportunities has previously been a significant financial risk. However, as these technologies continue to evolve and their costs decrease, the potential for innovation and growth within the independent grocery sector is now well and truly here.