Grocers planning to boost digital grocery and AI budgets in 2024

Digital grocery sales are projected to end 2023 in decline from the previous year, with sales estimated to drop more than a full percentage point to make up just 13.1% of the total grocery market, according to a Grocery Doppio report released Thursday.

The “2023 Digital Grocery: Year in Review” report by Incisiv and Wynshop shows that while the overall grocery market is expected to increase to $926 billion over the course of 2023 (up 3.1% year over year), digital sales are estimated to end the year capturing $121 billion, down from $128 billion in 2022. 

Grocers took an estimated $19 billion loss in digital sales over the course of the year due to unavailable or unsubstituted items, along with a $281 million sales margin loss, the report noted. Those numbers outperformed 2022, though, when the losses were $23 billion in digital sales and $298 million in digital sales margin loss. 

Inflation drove prices up 12% over the course of the year, which hurt brand name selection and the quantity of items purchased, the report stated. 

“Inflation put a dent in 2023 digital grocery sales,” said Gaurav Pant, chief insights officer of both Incisiv and Grocery Doppio, in a statement. “As customers modified their shopping strategies to battle rising costs, they did more in-store purchasing. However, grocers' technology investments for 2024 demonstrate confidence that the long-term trend for digital grocery is still up and to the right.”

Related:Digital grocery sales plateau, but confidence rises: report

Grocery executives surveyed for the report said the biggest challenges for digital grocery sales in 2024 include top line revenue growth (77%) and profitability (67%). More than four out of five (83%) executives said that improving the integration between their brick-and-mortar operations and digital systems is their top digital priority for 2024.

Grocers were optimistic about digital grocery sales next year, with 59% saying they expect to perform better in 2024 than in 2023. 

The pickup method of omnichannel shopping continued to dominate in 2023, accounting for 51.4% of all online purchases, while delivery trailed closely behind at 48.6%.

Meanwhile, grocers are planning to increase their digital grocery budgets by 8% to 14% next year, and artificial intelligence budgets will go up 14% to 37%, executives told Grocery Doppio. Nearly three-quarters of respondents (73%) expect AI capabilities to be integrated into their technology by 2025.

“Inventory control, omnichannel shopping, and effective implementation of AI are key to aspects of achieving profitability in digital grocery," added Charlie Kaplan, chief revenue officer at Wynshop, in a statement. “Grocers need the technological ability to accurately measure shopper behavior and unlock value multipliers across shopping channels.”