Food retailers have been investing heavily in technology to enhance customer service and boost their e-commerce capabilities, according to a new report from FMI-The Food Industry Association (FMI). The study found that in 2022, food retailers spent an average of 1.3% of their total sales, which equates to over $13 billion, on technology investments. Retailers also allocated nearly half of that amount to maintaining existing systems and operations.
The report highlighted that 85% of retailers were experimenting with new technologies to enhance the customer experience in 2022, a significant increase from 73% in the previous year. Looking ahead, FMI expects technology investments to further accelerate. The survey revealed that 83% of food retailers are planning to increase their tech expenses this year, with 23% anticipating a significant rise.
Investing in technology allows grocers to improve customer service, achieve operational efficiencies that mitigate margin pressure, address labor challenges, and provide e-commerce solutions. While large retailers have historically dominated the innovation space, smaller grocers, including those with fewer than 10 stores, are increasingly seeking out new technologies and solutions providers. These smaller players are particularly interested in areas such as automated fulfillment and electronic shelf labels.
The report also highlighted the use of artificial intelligence (AI) in the industry. Approximately one quarter of retailers and over one third of suppliers are utilizing AI to track product preferences and spending habits, enabling them to anticipate consumer desires. However, FMI emphasized the importance of responsible and ethical use of AI in the grocery sector.
The study revealed that food retailers are gradually adopting technology services for foodservice ordering and delivery. While 21% of retailers utilized these services in 2022, 26% expressed their intentions to do so in 2023.
Mark Baum, FMI’s senior vice president of industry relations and chief collaboration officer, emphasized the significance of technology adoption, stating, We’d like to say these days if you’re not technology-enabled, you’re competitively disadvantaged.
However, the report also indicated that there is still room for grocers to prioritize technology innovation. In 2022, only 12% of food retailers used in-store technology such as robotics and AI as part of their service differentiation strategies. In comparison, 82% and 73% leveraged community support and curbside pickup, respectively, for this purpose. Additionally, only 20% of retailers employed technology solutions for fresh foods inventory and demand and production planning.
Certain technologies seem to be losing importance among grocers, while others are gaining traction. For example, while 29% of food retailers used dynamic pricing in 2022, only 13% plan to do so in 2023. Similarly, micro fulfillment usage is expected to decrease from 11% in 2022 to 6% in 2023. On the other hand, retailers are increasing their investments in mobile checkout, electronic shelf labels, smart carts, and product traceability technologies this year.
The report also examined technology investments by food suppliers, which were nearly double that of food retailers (2.4% compared to 1.3% of sales). The higher expenditure by suppliers can be attributed to their larger profit margins, greater disposable income, and more extensive operations.
Overall, FMI highlighted technology as an imperative issue in the grocery industry, acting as a key enabler for financial growth. The association emphasized that every CEO should think and potentially act like a Chief Information Officer (CIO) going forward.
In conclusion, the FMI report underscores the significant investments made by food retailers in technology to enhance customer service and bolster e-commerce capabilities. With a strong focus on innovation, both large and small grocers are exploring new technologies to optimize operations and improve the overall shopping experience. The responsible and ethical use of technologies like artificial intelligence is gaining prominence, while certain traditional technologies are becoming less popular. As the industry continues to evolve, technology adoption will remain critical for competitive advantage in the increasingly digital grocery sector.
