Post by Giulio Martinacci, founder of Tuidi –
Lately we’ve been talking about the “New Normal” era, what is it? The “New Normal” refers to the period we are experiencing in the food market after years of instability, due first to the COVID-19 pandemic, then to the start of the Russian-Ukrainian war. These phenomena have led to a transformation of the market and a change in consumer habits.
In fact, in 2020 and 2021, many consumers have changed their purchasing habits, favoring proximity to points of sale. This led to significant growth in small shops (+26.9%), followed by supermarkets (+12.9%) and discount stores (+7.9%). Starting from the end of 2022, however, purchasing behaviors have changed again, due to the rise of inflation, with the aim of saving on spending: consumers favor smaller formats and opt for less expensive products. Furthermore, they now require greater variety in the assortment, with new product lines, such as gluten-free, vegan, protein, etc. For example, from 2019 to today, across different customers, the variety of different types of milk has increased by 18% (according to Tuidi data).
What influences the public’s choices
These changes were dictated by fluctuating market conditions that changed every year. In fact, as is logical, the response of consumers also depends on the macroeconomic conditions in which they live. However, there are, at the same time, hundreds of other exogenous facts that influence purchasing decisions. In fact, what is not logical is knowing in advance how consumers will shop under all these conditions (or variables) that are potentially different every day. Although today we talk about the “New Normal”, i.e. a situation in which particular and adverse macroeconomic factors (a pandemic first and foremost) seem far from our daily lives, it is still essential to always be careful to intercept and anticipate sudden changes relating to consumer choices .
The advent of artificial intelligence: the importance of data
Therefore: what should we expect from the market in this ever-changing landscape? The advent of technology, large-scale distribution (large-scale organized distribution, i.e. the commercial distribution sector characterized by the presence of large supermarket chains, hypermarkets and other retail sales structures, ed.) now has the possibility of predicting the fluctuations of the demand for products so that it can organize its offer to the public in a better way. The tool par excellence to achieve this is without a doubt artificial intelligence.
Data is the new fuel for gathering consumer insights and making informed decisions. Through artificial intelligence, the collection and analysis of these allows us to learn in real time the different needs of customers, which are constantly evolving. In particular, it is able to analyze all those external variables such as holidays, atmospheric events, national and local events which can also determine a change in food consumption.
The aspect that makes this technology unique is the ability to be able to learn autonomously from the millions of pieces of information provided to it and use it to effectively manage even unexpected events. If retailers can enjoy a tool capable of reading the market first so as to organize themselves more efficiently, customers, when shopping, can consequently enjoy a shopping experience with fewer holes on the shelf, greater freshness of the products and a wider variety of items on display.
How can we read the changes in consumer habits?
Until some time ago, when we dealt with food chains, very often the management of fresh products (primarily fruit and vegetables) and promotions depended mainly on human experience, since there was a lack of adequate calculation tools to counteract the randomness of frequent changes in daily consumption.
Through an artificial intelligence platform, we operate with a flow of real-time data that allows us to start from the point of sale and the receipt to better understand preferences. We have noticed, for example, that more than half of the products on the shelf are often displayed in excess of actual needs. This could lead to the possibility of introducing many new items and discovering new interesting products, such as plant-based ones (plant-based).
Artificial intelligence and large-scale retail trade, here is the growth in Italy
In this context, large-scale retail trade is increasingly recognizing the importance of adopting new technologies: the growth of AI in the Italian market is expected to be almost 30% per year until 2028 with the majority of Italian retailers recognizing its importance of adoption (although the latter does not exceed rates of 25% according to Eurostat). Innovation, however, implies adaptation times: to speed up the process it is good to paint a precise picture of what the change implies and, above all, where it can lead.
At Tuidi we imagine a future in which supermarkets are completely connected: assortment, purchases and prices. For example, we might see a new cookie flavor on television, such as wasabi ginger cookie, created with AI based on the study of customer preferences. Going to the supermarket, we would immediately find the product on the shelves with an appropriate price depending on the best offer for the customers of that store, guaranteeing the greatest possible convenience.
Finishing the shopping experience by leaving the supermarket without going through the boring traditional checkouts. The first steps towards this revolution are already visible to the end customer with the introduction of the first cashless supermarkets, which represent an important evolution towards a more efficient and interconnected shopping experience!
The future of large-scale retail trade: this is how the food market passes through technology
Therefore, artificial intelligence as a tool for understanding consumers: does it allow us to understand what customers are influenced by and thus project large-scale retail trade towards the future?
There are hundreds of events external and internal to companies that describe how market conditions change and transform: the game is in understanding the “how” in advance. Taking an example, we observed that for one customer, sales of lemon tea recorded an increase of +61% if there were promotions. However, this percentage even goes negative (to –44%) if, by introducing a new brand of tea, a cannibalizing phenomenon is present. What if all this happens during the summer period? In this case, sales increase by +76%, but if accompanied by adverse weather conditions, such as rain, a drop of -30% is observed.
We cannot assume that these results are valid in all circumstances. Every day, hundreds of variables such as weather conditions, promotions, holidays, events, etc. can influence consumer choices. However, there is a conclusion: artificial intelligence is able to grasp these changes, different each time, and understand how to guarantee a better offer to the customer. In fact, the advantage of predicting what the customer will require is simple: having the right products at the right time, avoiding finding yourself without your favorite items at the supermarket. The future of the food market, therefore, inevitably passes through technology as an enabler to improve the offer to customers.
