How AI is Reimagining Grocery Retail

By Keith Mercier, General Manager, Retail & Consumer Packaged Goods, Microsoft

Grocery retailers hold a unique position in our modern world. Directly or indirectly, they touch nearly every person’s life and are seen as trusted presences in the communities they serve. In recent years, the segment has dealt with uncertainty and change brought on by a unique swirl of macro trends and forces, including supply chain disruption, inflation, changes in consumer preferences, and workforce shortages, to name a few. It’s true that grocery remains among the most consistent and resilient retail segments, but grocers have nevertheless had to reassess and adapt their strategies and operations in the face of these economic and societal shifts.

These challenges have been compounded by encroachment from volume discounters, big-box stores, and specialized online delivery services. Because of grocery’s traditional low-margin, high-volume business model, many incumbent brands understandably put great stock in reliable and repeatable technology solutions. This makes intuitive sense – small changes to operational processes can echo loudly across millions of daily transactions nationwide, which explains why grocers are much more likely to invest in new technologies with low risk profiles and a clear return on investment.

Today, we are witnessing the grocery industry enter a transformative era. AI platforms are influencing nearly every component in the grocery value chain. With cutting-edge ML and generative-AI tools, grocers are building supply chain resiliency, empowering store associates, personalizing their consumer engagement, and optimizing product assortment, pricing, planograms, and inventory management. French grocery giant Carrefour is even leveraging AI-powered conversational commerce to help shoppers answer the question "what should I make for dinner tonight?" Or put another way, Walmart is working to help its customers evolve from "scroll-based" to "goal-based" shopping with AI-informed recommendations in their customer app.

At Microsoft, we’re energized to be playing a role in shaping the future of this industry. Today, our tools are already helping our grocery customers uncover actionable insights in their data. Many of those insights have been hiding in plain sight, waiting for the right technology to make them visible and legible. The introduction of a new AI platform and the insights it enables are helping grocery retailers unlock innovation and run stronger, leaner, more resilient operations in a rapidly changing world.

Together with our customers and partners, we are also committed to enabling a more sustainable food culture. We believe that the most valuable role that AI can fulfill in the grocery retail segment may be to help bring joy back to meal planning, reduce food waste, and empower consumers to live happier, healthier lives.

A good example of this is Albert Heijn, the Netherlands’ leading supermarket chain. Their mission is to help customers live a healthier lifestyle while minimizing environmental footprint. To accomplish this, we are working together to execute a series of AI initiatives addressing some of the key causes of food waste within their value chain and driving more efficient operations. Now, the grocer leverages AI to carry out daily sales predictions for more than 15 million store-item combinations. By performing these predictions more than 5 weeks in advance (resulting in 1 billion daily predictions) Albert Heijn is better able to deliver food to their customers at the peak of freshness.

And with the Dynamic Markdown initiative – which allows an increase to a product’s discount throughout the day via an Electronic Shelf Label – the grocer can entice customers to buy items before they become out-of-date. This now saves 250,000 kilos of wasted food per year. But the commitment to sustainability doesn’t end at the point of sale. Albert Heijn’s app also enables customers to snap pictures of leftovers in the refrigerator to receive recipes ideas that increase food utilization and reduce waste. These and many other AI-fueled efforts have helped Albert Heijn drive down food waste and fulfill their commitment to reducing their environmental impact – all while increasing operational efficiency and wallet share.

Microsoft’s mission is clear: to empower every person and every organization on the planet to achieve more. We are committed to unlocking AI opportunities for all industries and across every role. By empowering store associates, reinventing customer engagement, and reshaping business processes, we seek to modernize the grocery experience for consumers and grocers alike. Our co-innovation efforts are focused on enabling our customers and partners to drive targeted business outcomes through their AI investments. And through it all, we remain steadfast in our commitment to a more equitable, more sustainable future.