More than 10 years have passed since Marc Andreessen quipped that “software is eating the world.” In that time, e-commerce has reached as much as a 15% share of retail and Amazon’s revenue alone grew from $60 to nearly $500 billion. In a show of just how much software is eating retail, longtime e-commerce holdout grocery joined the party in force in 2020, setting online sales on a trajectory toward 20% of total U.S. grocery consumption by 2026. But grocery’s software evolution has gone way beyond digital storefronts and online payment systems. With the help of AI, the e-commerce value offering is now shifting dramatically from being about “endless choices” to being about “just the choices that are exactly right for you.” In fact, I would argue that AI will disrupt retail even more in the next 10 years than did e-commerce over the previous 20. And grocery will be the tip of the spear. Here are some predictions for what to expect:
A SUPERMARKET JUST FOR YOU
The importance of personalization in e-commerce has been talked about for years. It’s a really big deal. But the average grocery store sells 30,000-50,000 items. Most other retail shopping missions entail buying just a few items, but a grocery shopper typically purchases dozens. Personalization in grocery, more than any other category of retail, is truly personal. You have to take into account allergies, dietary restrictions, brand loyalties, budgetary constraints, and preferences about foods and flavors. That stunning confluence of factors requires that grocers get to know their customers, their products, and how the two interact in ways that other retail categories wouldn’t dream of. Technology is the ingredient that will allow retailers to deliver a “hyper-personalized” user experience. Imagine a grocer that can predict exactly what you want and stock the shelves just for you. Online grocery shopping will be so personalized, it will feel like you have your own personal supermarket on your phone or laptop.
(ALMOST) ANYTHING, IN UNDER AN HOUR
Last year, rapid delivery startups like Gopuff, Gorillas, and Getir disrupted last-mile delivery in force, speeding their way to valuations as high as $40 billion. They did so not by promising to deliver anything and everything the way Amazon does with general merchandise. They also didn’t recreate the way your local grocer delivers their full inventory. Instead, they elected to curate limited assortments of the snacks, alcohol, pet products, and daily household items customers need frequently—and in a hurry. Forget “next-day” or even “same-day” delivery—they’ll get it to you in 30 minutes or less.
As customers get used to this level of immediacy, and as the Gopuffs of the world continue to expand their product range, online shopping will never be the same. Time is money to a degree that we have never seen before. I believe that AI-powered optimization of the customer journey and chain of order custody is the only way grocers, liquor stores, pet shops, pharmacies, and convenience stores will be able to keep up with this intense new pace. Artificial intelligence will drive which items these retailers carry and offer, how they are arranged in fulfillment centers, which products are promoted or hidden to shoppers, and what order they are picked, packed, and delivered during the fulfillment process.
GET READY TO ‘RUNDLE’
One more area where AI is set to disrupt retail is in recurring revenue bundles—what NYU marketing professor and digital economy thought leader Scott Galloway calls “rundles.” Replenishment of household staples like flour, rice, and cleaning supplies make the perfect use case for this—we all need to acquire them, but there isn’t really a whole lot of decision-making or creativity required. AI can determine, based on our family size and past purchasing behavior, how often we are likely to need these items and simply add them to our monthly rundle of goods. This will make it easier for grocers to execute on rapid delivery since more spontaneous grocery orders will contain fewer items.
Rundles will also leverage hyper-personalization, suggesting both short- and long-term subscriptions that match our buying personas to a tee. Do you have a taste for the tipple? Here’s a wine-of-the-month club offer. Did you have a child recently? Consider this rundle of diapers, baby powder, and high-quality formula. Are you a junk-food junkie? Maybe you’d like to receive rundled value packs of snacks and sweets. There is an unlimited reservoir of ideas for rundles across retail, but grocery provides extremely low-hanging fruit. And AI is the organizing principle that makes it all possible.
Of course, while AI’s role in the evolution of retail may be most visible online, retailers need to understand their customers across all the shopping channels they offer. Brick-and-mortar retailers will continue to include smart shopping carts, companion apps, and scan-and-go checkout capabilities in their physical stores as a way of developing the most three-dimensional view of customers they can. By helping grocers know what their consumers want to eat, AI is giving us a sneak preview of the sophisticated and integral role it will play across retail in the coming decade. It won’t be long before hyper-personalization, rapid delivery, and recurring bundles are “what’s for lunch” across all retail sectors.
Chief Marketing Officer at Halla.io, Co-Founder and Partner at 19Y Ventures, Partner at 19York, board member, investor, and mentor.