Grocery AI: Exploring the Evolution of Inventory Management

Neha Ghai
April 17, 2023
Exploring the Evolution of Inventory Management

At a Glance

  • 82% of grocers believe adopting AI will be a necessity in the future.
  • AI-powered inventory management solutions can help grocers optimize forecasting, enhance efficiency, reduce costs, and improve the customer shopping experience.
  • Grocers face challenges in shelf monitoring, real-time visibility, and shrinkage, which can negatively impact their profits and positive shopper experience.
  • In this article, we navigate through grocer challenges and provide insights into innovative solutions.

Grocers consistently strive to optimize their operations and meet consumer demand more effectively. In recent years there has been notable growth in the utilization of AI to optimize inventory management processes, elevate customer experiences, and drive sales. A positive customer experience can be the difference between shopping and buying, a distinction that is pivotal to helping a store fuel sales.

Understanding the distinction between a shopper's exploratory mindset and their methodological approach to buying is crucial for grocers seeking to boost customer satisfaction and drive sales. Shopping is a sensory experience, creating positive memories and encouraging impulsive purchases. On the other hand, buying is a more deliberate process focused on acquiring essentials efficiently and quickly. Eighty-nine percent of shoppers are more likely to make another purchase after a positive experience, reports Grocery Doppio in its "Annual Digital Maturity Benchmark."

By leveraging AI, grocers can examine shopper behavior and make accurate predictions regarding in-demand products. With a deep understanding of demand, grocers can personalize the shopping experience and tailor their inventory to meet localized preferences. Harnessing AI to gain insights about the most frequently purchased products can help grocers optimize their forecasting to address the negative consequences of understocking and overstocking.

Embedded Inventory Management

Inventory management is often a pain point for grocers, which can significantly impact their profit margins. A robust inventory management system will maximize profits, while a poor one will erode them. 

In the past, record-keeping was a manual process subject to inaccuracies and guesswork. With modern software solutions, products are assigned unique identifiers known as stock-keeping units (SKU). Their movement from the warehouse to the store is digitized using barcodes. Products brought in are designated inflows, and sales are known as outflows. Once sold, the quantity is reduced, and a reorder is triggered. 

Digital inventory management solutions integrated with the POS enable sales tracking and enhance efficiency. Despite these advancements, inventory management systems still faced out-of-stock items, incorrect labeling, pricing issues, and expired products.

Eighty-two percent of grocers believe adopting AI will be a necessity in the future; adopting technology that uses AI and machine learning to forecast seasonal changes, storage space optimization, dead stocks, revision of assortments, and reduce labor costs is an operational imperative.

Using AI-powered solutions with machine learning capabilities is a game changer, allowing grocers to optimize inventory management to overcome advanced challenges.

Navigating the Challenges 

Inventory management is the art of balancing supply and demand in an ever-changing retail landscape. An intelligent inventory system is necessary for grocers, but to implement it successfully, they must overcome numerous challenges. 

Shelf-Monitoring. Grocery stores are strategically designed with shelves positioned in the front, middle, and back of the store. The placement of the products on these shelves is critical to driving sales, as it can impact a shopper's overall experience. Well-stocked, attractive displays can entice the customer, while the presence of perishable items nearing expiration can negatively impact the shopping experience by discouraging purchases. Shelf monitoring and scanning are essential to effective inventory management. Seventy-two percent of grocers lack an accurate view of their store inventory reports Grocery Doppio's "State of Digital Grocery: Growth at the Cost of Profitability."

Real-Time Visibility. Inventory information needs to be accurate to predict future demand and budget accordingly. Inaccurate inventory data stems from incorrect categorization, expired products, mislabelling, and inaccurate counting, which leads to understocked or overstocked products, increasing overhead costs and reducing profits. In Grocery Doppio's "Annual Digital Maturity Benchmark," 71% of retailers cite real-time inventory call-outs as a significant hurdle to successful onsite inventory management.

Shrinkage. Shrink refers to products that do not get sold at the correct retail price, encompassing theft, waste, and perishables. According to the "National Retail Security Survey, 2022," retail shrink is a $100 billion issue, and grocery retailers face some of the highest shrinkages at 3.1% of the typical grocer's revenue. The grocery industry faces a significant challenge of low-profit margins and high shrink rates, which impacts the grocer and shoppers negatively. Wasted fresh produce and meats and poor accounting of items and products with a shorter shelf life contribute to this obstacle. The costs incurred due to shrinkage are often passed onto the consumers in the form of higher prices. In addition, incidents of theft also contribute to the problem of shrinkage. 

Vision-Driven Innovative Solutions

Grocers must adopt innovative inventory solutions to remain sustainable in the fast-paced retail environment. Modern solutions can reduce waste, improve efficiency and enhance the overall shopping experience. 86% of grocers believe AI will impact inventory forecasting and optimization and will be one of the top use cases for its implementation.

Reviewed Checklist. Modern inventory management solutions powered by AI and ML provide customized solutions. Grocers need to assess their operational and financial goals ranging from lowering operating costs to improving inventory visibility across omnichannel sales models. A quality inventory software solution allows grocers to reduce labor costs, adapt to supply chain volatility, improve forecasting, increase employee efficiency, and enhance customer service. 

Intuitive AI Embedded Interface. Adopting simple-to-use AI technology allows employees across the organization to access and benefit from critical insights. Using AI-powered forecasting systems can help store managers with new product launches, while machine learning can forecast at a granular level, considering regional trends. 

Security Alert: To reduce shrink, AI-powered cameras equipped with computer vision allow grocers to address the root cause of thefts, which account for billions of dollars of retail loss each year. Incorporating computer vision can help store managers identify theft attempts and detect inappropriate behavior between customers and cashiers. 


Effective inventory management is critical for grocers of all sizes, providing insight into stock levels, shelf life, and customer demand. AI-embedded inventory management solutions can significantly improve a grocer's profitability. By streamlining inventory processes and enhancing customer experiences, grocers can achieve scalable growth and boost their bottom line.

Be sure to check out Solving Grocers Inventory Woes: 6 Cutting Edge Companies for an in-depth look at trailblazing companies pioneering innovations and revolutionizing inventory and forecasting for grocers.

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