How artificial intelligence is driving the independent grocery revolution

As retail technology tools entered the grocery scene and quickly gained momentum, it was large chains and e-commerce giants who were able to explore, adapt and enter the market. This has left regional and independent players in the dust while their larger peers have captured the lion’s share of customer and revenue growth through solutions such as retail media networks and mobile apps.

Fast forward to today, and independent food retailers are gaining their own tools to combat retail giants like Walmart and Amazon, thanks in large part to big data and the rapidly evolving capabilities of AI and machine learning (ML) technologies.

Despite the development of e-commerce, the data on customer behavior is clear: the preference for shopping in stationary stores remains. According to a recent study by Prosper Insights & Analytics, 78.3% of customers made a purchase in a brick-and-mortar store in the last 30 days.

32.6% of respondents decide to shop closer to home due to higher prices. For independent grocers who can be the store of choice in their communities, this is not just a trend, but a great opportunity to improve their digital technology and connect with shoppers in their own backyard.

The first key step is to create the infrastructure needed to capture first-party data via a mobile app or website. Artificial intelligence and machine learning will then interpret this data, providing insights that enable personalized and efficient shopping experiences. By leveraging their strong social connections and the advantage of deep data, independent grocery retailers can now develop content that is more relevant to the customer, thereby improving engagement.

Alasdair James, commercial director at Swiftly – a leader in retail technology solutions – highlights the unique position of independent grocery stores. “It’s not just retailers; they are at the heart of their communities and generate significant amounts of shopping data every day. Unlike large chains, many of these local stores have not exploited the full potential of this data. Technological advances in artificial intelligence and machine learning enable independents to draw conclusions from their data, allowing them to deliver more engaging and relevant content to customers. This helps them compete with larger competitors and retail media chains for their customers’ attention.”

In a recent study commissioned by Forrester titled Artificial intelligence will change retail41% of retailers said that the direct impact of AI and machine learning on the customer experience is the main motivating factor for investing in this technology. It allows them to connect with shoppers across touchpoints, which becomes especially effective when integrated with loyalty programs that deliver personalized and relevant offers and advertising that significantly improve the shopping journey.

James expanded on this point by sharing that many grocery retailers use solutions like “Just for You” recommendations, which not only identify products purchased in the past, but then provide offers during times when they are regularly repurchased or on sale . These programs become especially important for shoppers as inflation continues to impact their purchasing decisions and habits.

He quickly moved them through recently The true cost of the grocery store survey and found that 82% of respondents use coupons, 64% participate in loyalty programs, and 34% use retail applications. “These numbers show that a mobile-first strategy that focuses on data-driven, personalized experiences is a surefire way to increase customer engagement,” said James. “The rise of digital circulars delivering coupons and promotions that include information about past purchases is also proving to be extremely effective and shows an ongoing awareness of the importance of saving money for today’s shoppers.”

It is also important to consider the upcoming phase-out of cookies and third-party data, which will have a significant impact on the industry. However, James sees this shift as an opportunity for independent clients to leverage their own data to create lean and targeted experiences for their clients.

“By integrating artificial intelligence and machine learning to truly understand first-party data, independent grocery retailers can better understand their customers’ preferences and behaviors,” James said. “When shoppers receive a personalized and therefore highly relevant digital coupon in-store, it gives them the impression that the store knows them and their needs. This direct connection between customer preferences and real-time marketing is a game changer for independent grocers, building loyalty and driving repeat visits that might otherwise be lost to competitors.”

Moreover, the use of artificial intelligence and machine learning is not only about improving the shopping experience, but also about operational impact that retailers can benefit from. Forrester’s research found that 30% of respondents said the main driver for investing in AI is reducing operating costs, and 33% cited improving operational efficiency and effectiveness.

“Artificial intelligence can quickly analyze massive amounts of data and provide insights that would take humans much longer to discover,” 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 feature helps grocers manage inventory more effectively, reducing waste and ensuring popular products are always available.

Additionally, AI-powered customer service solutions can increase the operational efficiency of independent workers. “When you contact a retailer, you can talk to an AI-enabled system that directs your conversation based on the nature of your inquiry, reducing the need for human intervention and allowing associates to focus on customers and store operations,” James said. This approach not only improves efficiency, but also reduces costs for independent retailers.

Artificial intelligence and machine learning have transformative potential for independent grocers. By leveraging these technologies, independent grocery retailers can not only stay relevant, but also lead the way in creating smarter, more personalized shopping experiences for their customers. Most retailers understand this, but cost has been a challenge in the past. Operating in a low margin environment, making the necessary investments to unlock such opportunities previously involved significant financial risk. However, as these technologies continue to evolve and their costs come down, the potential for innovation and growth in the independent food sector is now truly present.