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5 Ways Grocers Can Build the Store of the Future Using AI

What will your grocery store look like in the future? Will it cater to the e-commerce shopper? Or perhaps you feel in-store will once again prevail.

Based on the trends and numbers, we believe it should be a mix of the two. The grocers of the future will create seamless omnichannel experiences to appeal to tomorrow's consumers.

But how will you get there?

In this article, we'll dive into the latest consumer trends and what it means to build a grocery store of the future.

How Grocery Shopping Changed

Did the pandemic really change the way shoppers behave? Or was it always on the path towards an eCommerce boom?

According to experts, the pandemic accelerated consumers' transition to online shopping by five years. It was inevitable to occur, but not as quickly as it did. And the sudden surge knocked a few grocers off-balance.

Even the big retail tech giants like Amazon struggled to keep up with demand. But if there's anything grocers learned, it's that the time to adapt and innovate is now.

Today, we see an increase in brick-and-mortar stores using eCommerce platforms for fulfillment, deliveries, and curbside pickup.

As retailers re-opened their doors, customers slowly reverted back to their in-store shopping habits. However, many still rely on delivery and pickup services. According to the State of Grocery Report, "mass delivery, buy online, pickup in-store (BOPIS) and curbside pickup sales are happening in previously unthinkable proportions."

Chart showing the growth of grocery delivery

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This is causing some retailers to rethink their store sizes and are downgrading. Others can't downsize because they're in a bind due to long-term leases they signed decades ago.

"Most retailers acquire space through long-term leases. But when many retailers signed their leases 10 or 20 years ago, few could've foreseen how quickly e-commerce would skyrocket. That leaves grocers in a situation where they may have many years left on leases for stores where fewer customers are coming in and much of their square footage is going underutilized." — Orlee Tal, CEO of Stor.ai

The good news is grocers don't have to reduce square footage. Instead, they should use that space to meet the needs of in-store shoppers, as well as the rising demand for online shoppers.

In this new paradigm, your store is your warehouse.

"Brick-and-mortar stores tend to be located close to where shoppers reside. Even when shoppers aren’t physically going into these stores, there are still significant advantages to be derived from their proximity to shoppers. Fulfilling grocery orders from such stores can enable retailers to swiftly scale up in-store capacity and ensure same-day delivery for shoppers without relying on off-site distribution centers that are expensive to operate and add time to order fulfillment." — Orlee Tal

It's also a solution to competing with retail tech giants like Amazon, which is great news since nearly half of grocers deem them their largest threat (followed by Walmart).

Chart showing the biggest threats to center store sales

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Yet, according to a survey by Grocery Dive and Inmar, despite supply chain disruptions (and e-retailer competition), 78% of retailers still expect to see improvements in center store sales.

Chart predicting future sales of center stores

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Their optimism isn't too far-fetched—right now, we're seeing shoppers straying away from the age-old habit of store hopping. Instead, they're doing all of their shopping at one location. This is great news for grocers looking to increase basket order sizes (AOV).

Imagine the mom who purchases baby formula from you, but shops elsewhere for diapers. Now, you can promote relevant baby products to her and increase her AOV. You can do this both online and in-store, thanks to the surge in digital and omnichannel adoption, which we expect will continue for the foreseeable future.

Let's delve deeper into consumers' behaviors and how they'll impact the future of grocery.

Evolving consumer behaviors

The global grocery market is expected to reach $1.9 trillion in sales by 2023 (a 28% increase from 2018). Stats show a sizeable portion will stem from e-groceries. Not surprising as younger digitally native consumers emerge into the grocery market and transform shopping.

It's not just them, though. Millennials, Gen X, and even baby boomers purchase groceries via the web. Because of this, online grocery sales will account for 20.5% of all grocery purchases by 2026.

Chart showing e-grocery sales market share

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We can thank the pandemic for making consumers comfortable using mobile shopping apps. They're doing it at home, and even while shopping at physical locations. Checking a retailers' app to find deals and locate products is as simple and familiar as sending a text. They even use the app to save time in the self-checkout line.

Online shopping for groceries isn't just a multi-generational thing; it's also prevalent across various backgrounds. Data shows African Americans have the highest adoption rate in online shopping and average order value.

This is the information grocers need to understand their customers better. It's critical to personalize shopping experiences based on their particular needs.

However, let's not ignore the importance of the brick-and-mortar store. Although we saw online shopping for groceries skyrocket by over 500% in April 2020, it didn't remain at these heights.

Chart showing YoY grocery sales growth

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E-commerce sales are still higher than ever before. Yet, it only makes up a portion of the sales—in-store buying makes up 85% of grocery sales. Apparently, it'll remain a prominent method of shopping in the near future.

Roughly 75% of consumers say grocery center stores are absolutely or mostly essential to the way they shop today.

Chart showing relevance of the center store to shoppers today

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Another 64% say they plan to shop in the center store more in the future, and most will be buying center store products at least every other week (both in-store and online). This demonstrates why it's a must to have a seamless omnichannel experience.

Chart showing future shopping at center stores

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Especially with 70% of shoppers saying they purchase their preferred center store products from e-retailers like Amazon, Walmart, and Costco.

Chart showing where shoppers purchase center store products

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"Fulfilling orders from your store improves your margins by cutting delivery costs (or even eliminating them entirely by making in-store pickup a more attractive option for customers) and shrinks the size of each order’s environmental footprint. This is precisely what many customers are looking for, and this model offers a promising pathway for retailers to compete against e-commerce giants like Amazon." — Orlee Tal

To appeal to online shoppers, offering fast delivery is key. One study shows 76% of shoppers will buy locally (over Amazon) if the retailer offers same-day delivery.

What else is your customer looking for in grocery stores? Let's find out.

What customers expect from grocery stores (and how you can prepare)

"Customers are looking for personal experiences in their small local grocery store, where grocers know their purchasing habits and can provide relevant recommendations." — Orlee Tal

Not only are grocery shoppers demanding personalization, they're also expecting omnichannel services. A survey from Accenture shows more customers are using omnichannel services and will likely continue to do so.

Chart showing consumer usage of omnichannel services

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What is it about omnichannel that makes it so appealing? It's the convenience.

It's the same reason consumers were drawn to internet shopping. Now, customers want the same when shopping at physical stores.

Grocers paying attention are already making moves to accommodate—like creating a shopping experience that's fast and stress-free. Many of these retailers are operationally agile and technologically mature, so they're using digital technology to enhance the in-store experience.

One report shows 68% of consumers feel getting pop-up mobile notifications with product offerings while shopping locally entices them to shop with the grocer. Then another 66% state interactive store technology makes one retailer more appealing than another.

How can this translate into a real-world customer experience enhancer?

Building the store of the future with omnichannel (and an AI twist)

The grocery store of tomorrow won't focus on one area. It'll fuse the online and offline experience so it feels wholesome. Here's an example of how it may look:

Imagine a customer who shops with your store online walking into a physical location. All the data gathered from their online shopping is used to recommend items available at that location. Your app can show notifications with promos for relevant items based on past purchases, lifestyle, browsing history, and so on.

If the item the shopper intended to buy is out of stock, the app can make recommendations for alternatives, or the shopper can make an in-app purchase for same-day delivery. Then if they find a product they're curious about along their journey, they can scan the tag to see more details about it in the app.

After they check out, the app sees the purchase and uses the data to improve personalization. The next time they choose to shop online, data from their in-store shopping will adjust the recommendations and promotions shown in-app.

It's an endless loop designed to maximize the customer experience wherever they choose to shop with your grocery chain.

This is possible with AI software. For instance, stor.ai built its e-commerce, picking, and fulfillment platform with customer-first commerce in mind. It provides customers with a seamless, highly personalized, experience, whether they’re shopping in-store or online. The platform’s built on an AI-driven personalization engine to ensure every interaction with your brand is tailored to the shopper, driving profitability, customer satisfaction, and loyalty.

Grocers use it to create seamless experiences for shoppers. For example, allowing customers to buy in the app and have it delivered via Last Mile.

Creating this level of personalization across channels not only improves CX, it also grows customer loyalty. You can leverage this by integrating your loyalty system into stor.ai to build a customer rewards program. Its AI-powered data is constantly learning in real-time to make relevant and timely suggestions.

Grocers responding to this trend are reinforcing CX with a "customer-obsessed" approach. This focuses on store design, personalization, accessibility, and data. Together, it's enabling retailers to create stores with:

  • clean, user-friendly eCommerce (and in-store) experiences that empower users to set preferences and receive personalized offers, rewards, and discounts
  • integrated mobile experience while shopping in-store to enlighten customers about new products, find relevant products based on their shopping history, and customize their checkout experience at POS
  • transparency of the supply chain, including the picking and fulfillment process for curbside pickup and deliveries, to build customer trust

One example is how retail giant, Walmart, uses its app to assist shoppers. The Walmart mobile app provides personalized discounts and delivery pickup times. Plus, it builds shopping lists, which is a big deal for shoppers—61% say they want to share online shopping lists with family and friends for weekly shopping.

The app connects shopping experiences across channels and reduces friction and time spent in-store.

Even Amazon is jumping on the digital trend in 1,000 of its Amazon Fresh stores. There, you'll find digital kiosks customers use to ask Alexa questions. Shoppers can also use Amazon's app to navigate the store, learn about products, and use the Scan & Go checkout feature.

So as you look for ways to improve your CX, consider these three things to stay ahead of the curve:

  • Creating a frictionless shopping experience online and offline (i.e., self-checkout lines, fast delivery, one-click in-app purchases)
  • Personalizing the customer experience with AI (i.e., showing relevant ads and recommending related products)
  • Integrating mobile and in-store shopping (i.e., displaying relevant promotions and prices based on the customer's shopping history and profile)

What are your customers saying? Based on Grocery Dive's survey, they want retailers to focus primarily on offering better selections and improving designs for in-store shoppers.

Chart showing improvements for in-store shopping

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Then online, they want grocers to improve selections, app design, and product recommendations.

Chart showing improvements for online center store shopping

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These are savvy maneuvers, but don't overlook the power of AI solutions. You can use this to build an omnichannel experience that blows your competition out of the water. You can enhance your in-store experience by using AI in five ways.

1. Smart carts

Smart carts use AI to track what items customers add to their cart and recommend additional items that complement those choices. For instance, if a shopper adds apples, oranges, and bananas to their cart, it can suggest other fresh produce or complementary items, such as a juicer or a fruit bowl.

It'll even weigh the fruit to provide accurate pricing. This way, the shopper knows what they'll pay upfront.

Smart carts also assist customers with store navigation. If a shopper knows where they want to go, just tell the cart, and it becomes the guide. It can also scan products' QR codes for information or ring them up for purchase.

2. Scan and go

This technology allows shoppers to check out without waiting in line at a register. They simply scan their items and place them into the cart. Then, when they're ready to leave, they just tap the "go" button and walk away.

It's an excellent way to reduce friction and time spent in the store. Plus, it minimizes person-to-person contact, which is still on the minds of many shoppers today.

3. AI-powered store mapping

Retailers can use AI to learn how shoppers navigate their stores and make design improvements—for instance, identifying high-traffic areas and widening the lanes. Or creating destination zones for certain types of merchandise like toys or books.

In addition, retailers can use AI store mapping to predict where shoppers will look next and strategically display appealing options. For example, if a shopper looks at a shelf full of snacks, the retailer could offer healthier alternatives nearby.

Grocers can even identify high-value areas within the store to focus resources and increase sales.

4. AI-based inventory management

With AI, retailers can manage inventories efficiently and accurately. For example, predicting demand based on historical trends so they know when to order more stock. Plus, you can optimize the picking process by enabling pickers to quickly find products and alternatives for customers.

This will hasten the ordering process and reduce human error. Another feature stor.ai offers to its customers.

5. Smart shelves

Smart shelves are another way AI helps retailers streamline operations. For instance, monitoring inventory to prevent stockouts (using weight detection). They can also update the prices of goods on a whim to display new deals immediately.

Some retailers use them to identify buyers to determine the items they pick up and put down. Use this data to speed up the checkout process and understand customer behaviors.

Having an end-to-end AI eCommerce solution makes it easier to provide the personalized, frictionless, omnichannel experience today's customers desire. Stor.ai is a digital merchandising platform with order picking and fulfillment, automated marketing, in-store shopping, and delivery features. Everything needed to appeal to the modern shopper.

If this sounds like a solution to bring your grocery store to the future, then book a demo with us today.