Between foreign competitors entering the market and a slew of cross-category forays into grocery from the c-store, drug, dollar stores, internet pure plays, and meal-kit delivery companies, over the past few years, traditional mid-market and regional grocery chains have been under siege.
Today, we’ll delve deeper into the specifics of adopting AI in the retail industry for mid-market and regional grocery players.. As recent as a decade ago, investing in AI systems was cost-prohibitive for all except for the massive retail companies. Today, almost every retailer of any size can afford to fund AI initiatives.
The mid-market and regional grocery category is in fact ideal for AI The disruptive capabilities driven by AI enables these grocery chains to match the same capabilities that the dominant players employ, and, in fact, the impacts are significantly magnified.
As one of one of three vendors designated for the 2018 list of “Cool Vendors in AI for Retail” (1) by Gartner, Inc., we can directly speak to the promise and potential of AI to enable the early-adopters in this segment to compete - and even thrive - while the industry continues to reshape itself.
In our previous blog post “AI and Change Management – How to help a company embrace AI”, we discussed some of the issues involved in gaining buy-in from key personnel when making an investment in AI. For this post, we’ll examine the change management issues involved with AI and different organizational roles in mid-market and regional grocery chains.
The Role of the Merchandiser
Obviously, decision-making processes and cycles differ from chain to chain, however, the typical job description for merchandising professionals at mid-market and regional grocers involve working off of a quarterly plan which selects categories to be promoted. "Merchandisers have had their hands full processing and understanding data to make decisions, and that is compounded by the need to do it across time with an ever-widening assortment of new products," said Sterling Hawkins, from the Center for Advancing Retail & Technology (CART).
One of the merchandisers’ many important tasks within that role is choosing the specific products to be promoted each week, along with determining promotion pricing. Post-promotion, merchandisers and their team will then compare actual results to projected forecasts. “They’ve done a really great job in building out categories, and AI is an opportunity to understand that expanse of data in a more effective way,” he added.
Change Management Challenge
While some may simply accept at face value the fact that AI helps them do a better job of selecting what products to promote and the promotion cadence of those products, others may harbor the belief that AI will diminish their value as decision-makers - and perhaps, at some point in the future, even eliminate most merchandiser positions entirely. However, the reality is that AI changes and heightens the value of decisions that can now be made to impact at a P&L level, compared to simply impacting product or category.
Value as Decision-makers
Without the computational power required to analyze 100% of the raw transaction log (TLOG) data in real-time, it is near-impossible to determine whether promotional and pricing merchandising decisions that may look “good” for the brand and/or category actually support long-term profitability for the retailer. When they have access to AI to augment their decision-making, their decisions actually have a greater impact on overall store profitability.
AI offers merchandising professionals at mid-market and regional grocers the ability to massive analyze data sets and thus gain a deeper understanding of the relationships between variables like cross-category cannibalization, promotional cadence, associated product affinities, price sensitivity and seasonality. “When processing merchandising data, AI can represent hundreds of people running thousands of calculations; something that’s literally not possible without this kind of technology, and merchandisers now have access to a tool that can bring that kind of horsepower to make even better decisions,” says Hawkins.
Future of Work
Once AI-driven improvements make the merchandising decision-making processes more efficient and less time-consuming, merchandisers can apply the shift to their deep category knowledge and experience to focus more on innovation and overall category improvements. Instead of eliminating their positions, AI actually enables merchandising professionals at mid-market and regional grocers to become the change agents within those organizations.
According to Hawkins, “AI isn’t a question about viability of the technology, it’s about adoption and how long that takes. Merchandisers, or any leaders within an organization, have an opportunity to get involved with some of these emerging tools on their terms… before it becomes cost of entry.”
It is fair to say the days of autonomous decision-making is out there on a foreseeable horizon, but by no means is it eminent. At the end of the day, the “secret” to ultimate job security in the private sector is being employed by a successfully competitive and profitable organization. While AI is inevitably going to become as commonplace as electricity in mid-market and regional grocery chains, it’s the AI early adopters who are gaining the earliest competitive advantage from AI - and those most likely to lead the disruption to survive through the current industry evolution.
