Will AI bring an end to grocery sticker shock?
Inventory, demand could drive price ranges, writes Sylvain Charlebois.
Many Canadian consumers have noticed how the price of lettuce has skyrocketed in recent weeks, as has that of celery. Such fluctuations happen all the time, regardless of whether Canadians are willing to accept them. Nonetheless, technological advances could make these occurrences a thing of the past.
Artificial intelligence (AI) is a hot topic these days. It’s nothing new, really, but many agree that we are on the cusp of a revolution in how we make decisions and how we manage things virtually. The agri-food sector is not immune to this phenomenon, either. While agriculture is an industry that has accompanied humanity since prehistoric times, cognitive technologies will quite simply change everything about how we feed ourselves, starting from the farm right down to the fork.
Let’s begin by looking at agriculture. Our planet will need to provide food for more than 9.7 billion people by the year 2050. We are on target to achieve this, for one good reason: how we embrace data in agriculture is changing at an astonishing rate. In order to increase yields, and to enhance plant and soil science practices, farmers need data, and lots of it. The average farm in the industrialized world generates a little over 200,000 data points per day. That may sound impressive, but by 2050, we can expect this number to be well over four million. To limit energy and waste, farmers will need to know in real time how much fertilizer to apply, or what seed to use and where, so they can get the most out of their fields. Farmers need all the help they can get, what with climate change and nature being what it is. In Canada though, farms are behind in use of technology, compared to many in the U.S. and Europe. However, the recent investments in rural connectivity by both federal and provincial governments should help to bring Canadian farms up to date.
Agriculture will not be the only sector affected by increased use of AI. Robotics, machine learning and AI will also be some of the key game changers for the retail grocery sector.
Food retailing, though, is a highly traditional sector. Many grocers have resisted digital transformational changes for years. The industry is only starting to acknowledge that it simply cannot efficiently manage all the data points it has access to. What’s more, the level of interest in certain products throughout the week will vary greatly, due to the weather and other factors. Amazon, a non-traditional food retailer, just opened a new store where consumers can come in, grab what they want and leave without visiting a cashier. Over 100,000 sensors follow consumers in their journey through the store and will instantaneously charge them for products they put into their bags. Amazon gets to evaluate consumer decisions, such as subtle hesitations between products, and how someone moves around in a store. With machine learning capabilities using sophisticated algorithms, some food grocers could very well understand consumers better than consumers understand themselves.
The most visible change for consumers coming from AI will likely be pricing optimization. Imagine a world of food retailing free of sticker shock. No more sudden appearances of $8 heads of cauliflower due to unforeseen macrosystemic circumstances. With AI, grocers can set acceptable price ranges for any product, and prices could change by the hour, depending on inventory levels and fluctuations in demand. Since fresh produce constitutes about 40 per cent of sales from an average food store, striking the right balance is key. The window in which to course-correct if an item does not sell could be measured in minutes or hours, rather than in days or months.
With AI, our relationship with food retailing will dramatically change over the next decade or so. Therefore, in a few years time, if you think a certain fresh item in a food retail store is overpriced, keep in mind that a computer probably told management that there’s a market for it.