Data Engineering is (Finally) Rewriting the Grocery Playbook

Surviving on an average net profit of just 1.6 percent, grocers haven’t typically had much room to experiment with new ways of doing business.

At the same time, advanced data analytics and machine learning have rapidly disrupted how retailers operate and raised the bar for consumer expectations, including other low-margin retail sectors.

Why has grocery lagged behind? One big hurdle is that top data engineering talent has historically gravitated toward tech giants or moonshot startups, rather than what they (fairly or not) perceived to be an unsexy, traditional retail sector.

However, the pandemic and the rise of artificial intelligence fundamentally changed the equation. With remote work enabling engineers to work from anywhere and the brighter spotlight on fundamental human needs like groceries, specialized technology providers focused on the grocery industry could suddenly compete for top talent that retailers themselves couldn’t attract or afford. The result? Enterprise-grade AI capabilities built by Silicon Valley-caliber engineers are now accessible to grocers through the right partnerships.

This shift means grocers can finally access and apply advanced data analytics and machine learning across pricing, promotions, merchandising, category management, and e-commerce without investing in expensive in-house engineering teams. In essence, AI for grocery is as interesting a problem to solve as any, and it’s finally created an opportunity for the industry to rethink how it goes to market.

Rethinking Promotions: AI’s Role in Modern Grocery Marketing

Of course, to fully leverage AI’s transformative potential, grocers must first establish clean, unified data across traditionally siloed functions. The right technology partner can help ingest immense volumes of data and make it actionable, enabling internal teams to collaborate with each other and their suppliers in (near) real time without discrepancies.

Once this data foundation is in place, grocers can finally tackle their most entrenched and inefficient practices, with promotions being one of the most impactful. Much of food retail’s marketing and merchandising strategies still largely rely on CPG brand manufacturer-funded promotions. These promotion funds have embedded high-low pricing, but this method is becoming less effective.

As grocery supermarkets lose market share to mass retail and club format stores, like Walmart and Costco, respectively, traditional high-low pricing can’t make up for lost revenue. This is where AI comes in; the technology can help provide strategic, individualized marketing at massive scale.

Retailers can grow sales in only four main ways:

1. attracting new customers;
2. encouraging existing customers to buy more items;
3. increasing shopping trip frequency; and
4. raising the average price per item.

AI-driven personalization can effectively influence each of these areas to directly boost revenue.

This is partially a scale issue. When grocers expand the types of promotions they offer (e.g., moving beyond only discounting CPG brand-funded promotions), they can leverage their full store product catalog. This is a primary reason why clean data and cross-department collaboration is key. AI-driven personalization, guided by retailer-defined guardrails, can then create tailored promotions and discounts for each and every shopper, at any scale.

This new approach ensures marketing and merchandising dollars are allocated more effectively, helping grocers increase margins.

For example, instead of offering a $1 TPR discount, the discount displayed on the shelf can be $0.65, and the rest of the promotion budget is redirected to provide additional personalized offers to shoppers for whom the product is most relevant.

Retailers strengthen customer loyalty with this advanced personalization as customers enjoy impactful savings on the items they most frequently purchase. Without the need to visit other stores searching for discounts, shoppers buy a wider range of products across the store, leading to higher spend and stronger gross margin for the retailer.

This is how automated, strategic hyperpersonalization truly transforms how grocers can go to market.

Unlocking a New Era: Endless Collaboration and Personalized Strategies

Today’s advancements in AI, big data, and real-time processing have enabled the pinnacle of grocery marketing and personalization: a true focus on the individual shopper while driving strategic growth for the retailer.

With the right foundation in place — clean, accessible data, advanced insights and analytics, and AI-driven hyperpersonalization and automated marketing campaigns — grocers open the door to a new era of possibilities.

Now, food retailers can collaborate with technology vendors and CPG brand manufacturers to create new go-to-market strategies that benefit brands, retailers and shoppers alike.

Shekar Raman is CEO and co-founder of Birdzi, a grocery retail AI solutions company.