The grocery industry is embracing technology at an accelerated pace as retailers seek to enhance the customer experience and address various challenges, according to a report by FMI (Food Marketing Institute). The report reveals that 85% of retailers surveyed in the 74th annual Industry Speaks report said they were experimenting with new technologies in 2022, up from 73% in the previous year.
These technology experiments allow grocers to improve customer service, gain operational efficiencies, address labor issues, and strengthen their e-commerce capabilities. While larger retailers have traditionally led the way in innovation, smaller grocers, including those with fewer than 10 stores, are now actively exploring new technologies such as automated fulfillment and electronic shelf labels.
Artificial intelligence (AI) is also playing a significant role in the industry, with one-quarter of retailers and over one-third of suppliers using AI to track product preferences and consumer spending to anticipate customer needs. However, FMI emphasizes the importance of responsible and ethical use of AI in grocery operations.
In terms of foodservice ordering and delivery, the report highlights a growing interest among retailers. While 21% of retailers used technology services for foodservice ordering and delivery in 2022, 26% have plans to do so in 2023. This shift reflects the increasing importance of offering convenient and efficient foodservice options to meet customer demands.
According to Doug Baker, FMI’s Vice President of Industry Relations, technology-enabled operations have become a competitive advantage in the grocery industry. He notes that “if you’re not technology-enabled, you’re competitively disadvantaged.”
However, FMI’s research also indicates that there is room for further improvement in technology adoption. Only 12% of surveyed food retailers reported using in-store technologies like robotics and AI as part of their service differentiation strategies in 2022. This contrasts with higher percentages for community support initiatives and curbside pickup. The report suggests that grocers should prioritize technology investments to fully leverage its potential.
The study also reveals shifting priorities among grocers regarding specific technologies. While dynamic pricing and micro fulfillment saw adoption rates of 29% and 11% respectively in 2022, only 13% and 6% of retailers plan to use these technologies in 2023. On the other hand, investments are expected to increase in mobile checkout, electronic shelf labels, smart carts, and product traceability technologies.
The report highlights that food suppliers are investing more in technology compared to retailers. In 2022, food suppliers spent 2.4% of sales on technology, compared to 1.3% by food retailers. This discrepancy can be attributed to suppliers’ higher margins, greater disposable income, and the need to manage complex and extensive operations.
FMI concludes that technology is a critical issue in the grocery industry, serving as a great enabler for financial growth. Retailers are encouraged to adopt a technology-driven mindset, with FMI Vice President Mark Baum stating that “every CEO needs to at least think like a CIO, if not act like a CIO going forward.”