The Coresight Research team explores the transformative technologies that are reshaping the grocery retail landscape, focusing on AI (artificial intelligence), automation, smart shopping carts and personalization. The discussion highlights how these innovations improve demand forecasting, inventory management and customer engagement, ultimately leading to a more efficient and satisfying shopping experience. The future of grocery shopping is envisioned as a connected ecosystem where technology enhances every aspect of the consumer journey.
Takeaways
Chapters
00:00 This Week in Research: New Data and Reports
02:32 The Role of AI and Automation in Grocery Shopping
05:49 Demand Forecasting and Inventory Management
07:05 Smart Shopping Carts: Revolutionizing the Shopping Experience
14:15 Personalization and ESLs
17:05 The Future of Grocery Shopping and Retail Adaptation
Dive into our comprehensive research report on this topic: AI Underpins the Tech-Driven Shift in US Grocery, from Smarter Forecasting to Faster Checkout
Philip (00:00.11)
Welcome to Retaili$tic, the official podcast of Coresight Research for February 18th, 2025. This week, we're chatting with Stephen Diemer from the research team about the new technologies that are reshaping how we shop for groceries. But first, let's check in with Georgina Smith, Head of Editorial, about the new research publishing this week on coresight.com.
Georgina (00:05)
We have been focused on the effects of the new US tariffs in recent research reports and this week we've released a free infographic spotlighting essential data on the consumer economy in the context of tariffs covering inflation and consumer sentiment. Coresight Research survey data reveal overall negative perceptions of tariffs among US consumers regarding the impacts for the economy and their personal finances and we will continue to stay on top of this in our weekly surveys, macroeconomic research and retail projections.
Data is at the heart of our research, and each week we highlight three data points we're watching in a graphics series that is available for free. Follow Coresight Research on LinkedIn to make sure you don't miss out on essential data-driven insights that can support your retail strategies as 2025 unfolds. Other new data analysis for our premium subscribers this week includes the latest installment of our monthly US Retail Sales Outlook series, where you can track several major macroeconomic indicators and their likely effects on US retail sales.
Our Earnings Insight series continues, bringing together recent management commentary from major retailers on their performance. Last week, we covered nine companies in the Coresight 100, including Clorox, Estee Lauder and PepsiCo, which all posted sales declines. This week, featured companies include Crocs, Coca-Cola Company and CVS Health, to name a few. Focusing on US grocery retailing, our upcoming Deep Dive builds on themes and trends discussed in our market navigator on the sector to explore the real estate landscape.
We analyze retailers' portfolios, opening and closure strategies, and recent store traffic data. Visit the Coresight Research Food, Grocery and CPG retail hub to explore sector data, reports and company profiles. Turning to global retail, Spring Festival in China has recently come to an end. Celebrating the start of the Year of the Snake, we will review the Lunar New Year holiday, highlighting the impact of the event on the consumer market, and revealing retail trends, consumer preferences, and market opportunities that emerged during the festival.
Philip (02:20)
Thanks, Georgina. And we're excited to have Stephan Deemer from the Research Team with us this week to discuss the technology that is showing up in grocery stores. How are you today, Stephan?
Stephan (02:21)
I'm doing well, how about yourself?
Philip (02:23)
I'm doing great. So what is the best things we should talk about in terms of what's going on in the massive grocery sector, which is something like $1.6 trillion projected in 2025. What's kind of driving the ship these days.
Stephan (02:26)
Yeah, I think there's really three main things, which is that AI, machine learning and automation. In the US grocery space, those are no longer futuristic concepts out of a sci-fi movie. They're actively driving transformation throughout the entire space. They impact everything from demand forecasting through the supply chain.
all the way to personalizing the shopping experience for consumers when they're in the grocery store picking up their daily and weekly essentials and even streamlining in-store operation for store workers and even the people in the back and stuff like that.
Philip (03:26.816)
Now, let's dive deep. Let's get into some specifics about the technologies that you're seeing and what they can do.
Absolutely. think, you know, starting at the beginning with demand forecasting, that's a pretty, a pretty good place to start, especially since it's so critical for grocers. mean, almost all grocers deal with some degree of perishable goods, which is very important. You know, it directly impacts demand forecasting and AI and machine learning powered tools. They're now being used to analyze all of the data that's coming in from grocery stores, including historical sales data, consumer shopping and behavior patterns, even external factors like the temperature and weather events and, you know, local events to predict demand with at least until now unprecedented accuracy. It not only helps reduce waste, which again, when you're talking about perishable goods is paramount, but it also helps minimize stock out.
So when consumers are going to stores, they're not not finding the things that they need. And it allows the retailers themselves to sort of optimize inventory levels and streamline their supply chains. So just for one example, I think some AI powered systems can make sense of really like hard to track variables, such as, you know, like I said, seasonality or holidays, or even just shelf life and imperfect scanning, it registers things like that in order to generate really intelligent order recommendations, auto orders, auto reorders, all of those things that used to take a lot of time and was an imperfect science.
And this can lead to significant improvement for grocery retailers. So for just one example, one provider, Afresh, they stated that their clients who use their AI powered system see significantly improved accuracy over what they call like perpetual inventory. And that increase in accuracy is around like 10 to 40%. They see 7% faster inventory turns, a 20% increase in labor efficiency, 25% less shrink on average. So those are huge gains in the grocery space.
They aren't the only ones that are providing these, you know, AI and ML power demand forecasting. Other companies that help these retailers adopt those kind of tools, they include a Rolex, Symphony AI, Upshop, there are others, but those are some of the biggest names in the game.
Philip (05:56)
Yeah, it makes perfect sense if you think about it. I mean, you're going to sell more ice cream in the summer than in the winter. Yeah. But you're also the summer if the way you think about it season is different in different places. So, you know, summer in Florida is a lot longer than summer in Minnesota. So you can't have one plan for all stores. You have to really figure out what works in each location. And that's very complicated without some kind of tool to help you do that.
Stephan (06:20)
Yeah, we've been seeing, I mean, I think, you know, we've also been seeing weather changes. You know, we've been seeing unusually warm winters and unusually cold summers and things like that over the recent years. And so being able to it makes plug and play, you the old Excel models just not they don't really capture any of that. So, you know, with all the changes that are happening worldwide, I think this kind of technology is really going to change the game for especially perishable goods.
Philip (06:47)
So instead of just saying it's July 1st, so it must be summer, these new models can actually look at things like the temperature, the barometric pressure, the forecast. Very interesting. Okay. So it seems like AI is bringing a new level of precision to inventory management.
Stephan(07:07)
Yeah, absolutely. And at the other end of the spectrum, we're seeing the emergence of smart shopping carts. They're equipped with everything from weight sensors to interactive touchscreens, and they provide real-time data into how consumers are spending, and it allows the consumers themselves to track the purchases as they shop.
I used to bring a piece of paper with me to the grocery store and write down how I was spending and now that you could do it all on a cart is just amazing. And that's just the beginning of what they offer. You know, these smart carts, they offer the convenience of checking out without having to queue up at, you know, at a traditional register or take everything out of your cart and scan it yourself at a self-service station. And some carts can even provide personalized recommendations, in-store deals, and these can connect to loyalty programs as well as other forms of data like shoppers' past behavior and even their exact location within a store.
On the retailer side, smart carts also offer a multitude of benefits, know, reduced labor costs, enhanced data collection capabilities, improved inventory accuracy. You know, the data collected from these carts can provide really valuable insights into consumer behavior, again, even within a specific section of the store. So the consumer behavior in the produce section or in the frozen aisles helping retailers optimize their layouts, their product placements, their promotional strategies. And as I said, you know, these can offer customers ads and promotions at certain locations in a store. So it's much more targeted personalized advertising, which just creates an additional revenue stream for, you know, grocers.
Philip (08:42)
yeah, interesting. So the smart carts can measure dwell times in front of particular products as a, I guess, as a measure of interest. And then I guess the stuff scans the products as you put them in the cart to assist with a rapid checkout. used to, well, early on it's been years now, but when they first came out with those handheld scanners where you could scan the items as you put them in the cart. And then, you know, when you got to the checkout, you just dropped the scanner in the little cradle and it rung you up. You didn't have to weigh anything. Yeah. It yeah. It makes it definitely makes it much more convenient, but I can imagine all the data that's collected as you're strolling through the grocery store and avoiding the chips aisle and dwelling in the wine and beer section. They collect a lot of info that helped them understand what, uh, what products are more popular and make sure those get on the shelf. That's interesting. Are there any specific companies that are excelling in this area, the smart cards?
Stephan (09;42)
Yeah, there's quite a few at this point. Amazon just recently, they deployed what they're calling Dash carts to all of their Amazon fresh stores, many of which have been revamped over the past few years or the past year, I should say, as well as select whole food markets, which they own. And they've even started deploying them to third party grocery locations.
Instacart is another major player. We saw this at grocery shop last year. They are piloting ads on smart carts created by with between Instacart and Capre at select good food holding stores. Technology vendors are sort of offering two different versions of this technology right now. They have sort of a full cart option or these clip on devices for lack of a better term. The full cart options such as those that you know that I was just talking about by Amazon and Instacart. These are full carts.
They do require though retailers to invest in you know in the full carts. So while they come equipped with lots of really cool features like built-in scales for weighing produce. They tend to be rather expensive because they are full carts and you tend to need to buy fleets of the carts and you know, you're not just buying one or two or anything like that. So they could be rather expensive.
And so an alternative to those full carts has sort of emerged and that's these clip-on devices that are offered by companies like Customate, Shopic, TrackXPoint, a few others. And they're basically like screens that are attached on to existing shopping carts.
And so they offer a much more cost effective solution. They do lack some of the convenience features that the full card options have, like the being able to weigh produce that's being added. But the technology vendors are figuring out ways to work around that. for the produce, for example, they still have that you can scan a barcode printouts from produce scales or from the meat department or something like that, and then scan those into the clip on which provides a similar sort of functionality to the weight-based system of the full cards, but just at a lower cost.
But one really good example of the clip-on device is ShopX, which includes both AI and computer vision technologies in the clip-on device. So it can even identify items that are placed in the card or removed from the card with 99.4% accuracy, according to ShopX. The screen offers a real-time overview of the products and prices allowing shoppers to track their purchases. Again, it has self-service payment and checkout, so you don't need to wait in line at the register. And it can even sync with the retailer's loyalty program. So it can offer deals through the loyalty program that are exclusive for loyalty program users only in those locations where those products are available.
One of the coolest features, I think, of the ShopX Clip-On device is that it can allow customers to request customer service. So from store navigation to promotions, product recommendation, sponsored content, it can do all of those things. And I can tell you, I used to be a bagger in a Kroger grocery store. having those questions taken off the store team, I think is going to be a huge improvement in the sort of customer service that's delivered. Because a lot of times the people at the store, they don't have a great recommendation for a different product, or they might not know exactly where that product is. This screen could help you them to help customers the minute they need it is is really amazing
Philip (13:17)
Yeah, where stuff is in the store seems to be the main question and this technology is well suited to address that. can imagine if not already, somebody will come up with an app where you can put your grocery list, you know, I need eggplant, and then some kind of AI LLM will figure out from the store's inventory what that means, because you might you might not call it exactly what the store calls it. And then it'll route, it'll create a route for you, maybe even an optimal route through the store. It tells you where to go to optimize your visit without spending extra time looking for stuff. So yeah, that's really cool.
Stephan (13:55)
And I think one other thing is actually minor admittedly, but we used to when I worked at the store, used to do we used to hand out printed out maps. And so you're going to save a lot of paper that I gave out hundreds of maps for just our grocery store. So getting rid of that to another another huge win.
Philip (14:09)
Yeah, it's fascinating how technology can personalize the shopping experience. What other tech advancements do you think are reshaping the grocery landscape?
Stephan (14:20)
Yeah, you know, personalization as you brought up is a huge one. you know, we're seeing this across many sectors, but in the grocery sector, AI driven personalization, it's another huge game changer. Grocers all across the country are leveraging AI and machine learning algorithms to analyze all of their consumer data, you know, whether that's purchase history, demographics, browsing patterns, dwell times, even, you know, customer service conversations that are either happened at the store or on the phone or online you know, and they're using all of that data as well as AI and machine learning to deliver really highly personalized recommendations and promotions, which, you know, it's not only going to enhance customer satisfaction and loyalty, but it's also going to lead to more purchases, driving sales growth overall.
So outside of AI driven personalization, a big one that's more specific to the grocery sector is electronic shelf labels. They're also known as ESLs. We've been covering those for a while now and they are definitely transforming the grocery landscape. For people who don't know what they are, they're basically digital labels that replace traditional paper labels and that not only eliminates the risk of pricing errors, but you know, as I was talking about earlier with the maps, this is another way to reduce paper waste.
ESLs also offer retailers greater flexibility in updating their pricing and promotions, ensuring that customers always have the most up-to-date information. And one of the really cool things I think, that will change again customer services. They can be integrated with a retailer's inventory management system to provide real-time updates on product availability because the person at the register probably doesn't know what's in the back. And so if you ask when this thing is going to be in stock or if there's any in the back, they might not know, but the ESLs can automatically update that information and provide it to the customer.
Philip (16:01)
It sounds like there is going to be soon going to be the infrastructure. If you think about smart fridges where the refrigerator knows what's inside and maybe even at some point smart pantries where they know from either, you know, scanning RFID tags or scanning the barcodes that you're kitchen will be connected to the grocery store and they'll know what you need. And then, you know, the grocers, if there's a particular product that they want to discount to try and drive you into the store can actually create personalized discounts and coupons just for you based on what you buy and what's running low on your shelves. It's, it's amazing what may be possible in the very near future.
Stephan (16:50)
Yeah, it would be interesting to get a coupon on your smart fridge from your local grocery store and letting you know like, we're discount, you know, here's a short, a small discount on milk because we noticed you're low. Right. Or your fridge noticed you're low. Yeah, it would be fascinating. Yeah. So
Philip (17:05)
What are the implications for retailers who are like not really paying attention or slow to adopt the advancements?
Stephan (17:15)
Yeah, so I think, you know, this definitely applies in the grocery landscape, but it applies to most sectors, which is that if you fail to embrace these technologies, you're going to fall behind and you're going to risk losing market share to the more innovative competitors. Customers are becoming more tech savvy, and I think the vast majority of customers are enjoying the benefits that we've talked about of becoming more tech savvy. So they're starting to expect...demand really a seamless and personalized shopping experience and the retailers that can't meet those expectations, they're going to lose customers to those who can. I think it's really is as simple as that.
Philip (17:56)
And we know that there are big retailers like Walmart out there who are on the cutting edge. So, and they see a lot of customers. So that sets expectations in the marketplace for sure.
Stephan (17:59)
Yeah, they just did a huge purchase of ESLs that could potentially even drive down the cost for everybody else since so much is getting made. So yeah, that's a great point.
Philip (18:12)
And so with all these options and emerging technologies, how does a grocer decide how to prioritize their investments?
Stephan (18:15)
So think that's really going to fall onto the technology vendors. think it's going to become increasingly crucial for technology vendors to be able to clearly demonstrate the value proposition of their solutions since there are going to be so, or there already are, and there's only going to be more so in the coming years. So I think emphasizing cost savings, efficiency gains, clear return on investment, all of those things are going to be crucial. Grocers need to see a tangible benefit to justify investments in these new and emerging technologies.
Philip (18:54)
Absolutely. There's very little margin in grocery and they don't have a lot of money to throw around for sure. Yeah. So what's your vision? Like, what do you think grocery shopping is going to look like over the next couple of years?
Stephan (19:06)
You know, it's definitely undergoing this rapid transformation due to technology. You know, we've we've covered a lot, but there's there's even more. And so and I think we've even talked a little bit about what that could look like. I think this sort of connected ecosystem where everything is connected and your smart fridge is connected with the loyalty program is connected to the shop, you know, the smart shopping cart and all of those things. I think that's the future of the grocery industry.
And so retailers and brands that embrace that innovation and adapt to the changing landscape and seamless shopping experiences and really prioritize the customer experience. Because like we said, they're becoming tech savvy and they're enjoying becoming tech savvy. They're going to be the ones that thrive in the years to come and the ones that still hand out paper maps. They're the ones that are going to fall behind a little bit.
Philip (19:56)
Makes perfect sense. Well, it's exciting times and we definitely appreciate your expertise in this area and your time for joining us today. So thanks again and we look forward to your next visit.
Stephan (20:09)
Yeah, thank you very much, Philip. It was my pleasure.
Philip (20:11)
Thank you. If you're not yet a premium subscriber, head over to corsite.com to view a full catalog of our proprietary research. You can also access dozens of free reports, learn about our AI council, upcoming events, and Corsite Research Strategic Advisory Services. Have a great day and we'll see you next week.