What could the future hold for AI in grocery retail?

Retail is changing, and Artificial Intelligence (AI) is leading the charge. In this second article in a series from dunnhumby’s Chief Data Science Officer, Sandra Stanley explores some of the very real opportunities that retailers have to implement AI in their businesses today—and those that promise to transform the industry’s future.

Over the last decade, retailers that prioritise speed, efficiency and data-driven decision making have risen to the top. Brands like Amazon and Shein have redefined the way retailers interact—and transact—with their customers.

But what does this mean for grocery retail? Does the disruptive influence of AI-adopting brands extend to the grocery marketplace too? Inevitably, it does. Even the more "traditional" retailers will need to embrace cutting-edge technologies and strategies to stay current in the retail arena.

The speed at which these technologies have evolved—and the relentless pace at which they are revolutionising almost every area of retail—can feel daunting. But perhaps the most pertinent question for those who find themselves needing to consider the implementation of AI ought not to be "why should I have to?", but "why should I want to?"

First and foremost, embracing the transformative potential of AI lets retailers create a smarter, more relevant, and more dynamic offering for their customers. What’s more, they can improve their working relationships with suppliers and equip their employees with the tools they need to deliver a better and more engaging service.

How? Let’s look at some of the ways that AI can help retailers today—and how it promises to transform the way in which they operate tomorrow.

1. By making each customer feel personally supported
2. By keeping shelves stocked with the right products (at the right time)
3. By pricing products in a way that builds trust, as well as maximising profit
4. By reinforcing the strength of supply chains
5. By looking after customers in the ways they prefer
6. By creating better omnichannel experiences
7. By supporting and nurturing employees

1. By making each customer feel personally supported
   • AI-Driven personalisation: advanced AI can power hyper-personalised shopping experiences. By analysing vast amounts of data, AI can help retailers to understand customer preferences and predict their needs, enabling additive services like personalised product recommendations, dynamic pricing, and tailored promotions.
   • Contextual shopping experiences: going forwards, retailers will need to develop AI-powered platforms capable of providing contextual experiences based on real-time data. Information on location, weather, past behaviours, and more can all be used to guide customers through their shopping journey, with AI delivering relevant suggestions and seamless support.
2. By keeping shelves stocked with the right products (at the right time)
   • Predictive inventory management: with the help of AI, retailers will be able to predict demand with a high degree of accuracy. In turn, this will enable them to optimise their inventory levels, reducing waste and maximising product availability in the process. AI will also help them to predict trends and adjust stock accordingly.
   • Smart assortment planning: using AI to curate product assortments that resonate with target audiences will also come to differentiate successful retailers. Here, AI will be used to analyse market trends, changing consumer preferences, and competitor ranging decisions—allowing retailers to continuously refine their product mix and create a more localised range.
3. By pricing products in a way that builds trust, as well as maximising profit
   • Real-time dynamic pricing: retailers are turning to AI to adjust prices dynamically in response to factors like demand, competitor pricing, and customer behaviour. While these real-time adjustments help optimise revenue, maintaining price stability on key products is crucial for building and sustaining customer trust.
   • Transparent pricing models: beyond dynamic pricing, transparent and trust-building pricing models are essential. AI can help to create value-based pricing strategies that clearly communicate the fairness of prices to customers.
4. By reinforcing the strength of supply chains
   • AI-driven supply chain optimisation: using AI to enhance supply chain efficiency—from procurement to delivery—will be a key goal for data-driven retailers. Predictive analytics will continue to improve forecasting accuracy, reduce lead times, and minimise disruptions.
   • Sustainable practices: data will be the currency of collaboration as retailers look to partner with sustainability-centric suppliers. AI will be capable of ranking and optimising the environmental impact of their supply chain operations, helping retailers meet sustainability goals and appeal to eco-conscious consumers.
   • Blockchain for collaboration: blockchain technology could enable greater collaboration between retailers and suppliers, offering a secure way to build trust and transparency around data sharing.
5. By looking after customers in the ways they prefer
   • AI-powered customer service: AI-driven chatbots and virtual assistants that provide instant, personalised support across multiple channels will be expected. These AI agents will be capable of handling complex queries, offering product recommendations, and helping with order tracking and returns.
   • Interactive and social commerce: AI will enhance social commerce on platforms like TikTok, Instagram, and emerging social networks. AI could be used to analyse social trends, engage influencers, and create interactive shopping experiences—all direct within social media feeds.
   • Emotion AI: retailers will look to AI to help them understand and respond to customer emotions in real-time. Emotion AI could improve customer interactions, enhance service delivery, and personalise marketing messages based on emotional states.
   • Virtual and Augmented Reality shopping: retailers with a General Merchandise (GM) offering will need to integrate AR and VR technologies to create immersive shopping experiences. Customers will expect to be able to virtually try on clothes, visualise furniture in their homes, or explore products in a 3D space.
6. By creating better omnichannel experiences
   • AI-driven unified commerce platforms: will integrate online and offline channels. This will help to ensure a consistent and seamless shopping experience, no matter whether customers are shopping online, on mobile, or in-store.
   • AI-Powered fulfilment networks: AI will optimise fulfilment networks, including automated warehouses, drone deliveries, and autonomous vehicles. This will enable faster and more efficient delivery options.
7. By supporting and nurturing employees
   • An AI-augmented workforce: employees will be equipped with AI tools that enhance productivity and decision making. AI will assist with tasks like inventory management, customer service, and sales analytics, allowing staff to focus on higher-value activities.
   • Continuous learning and development: AI is constantly evolving. Retailers will need to invest in continuous learning programs to ensure that employees can keep up with new opportunities.

To continue to thrive in this new landscape, retailers will need to use the power of AI to help them enhance customer value, optimise their operations, and strengthen supplier relationships. And, as well as getting their business "AI-ready", that will also mean being aware of the factors that underpin AI’s success.

Next up in this series, Sandra explores the “AI enablers”—the key capabilities that retailers need to ensure the success of their AI initiatives.