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New Report: Retailers Take Cautious Approach to Exploring AI Opportunities

The technology offers benefits to fuel pricing, but comes with certain challenges.
Angela Hanson
Artificial Intelligence (AI)

AUSTIN, Texas — Convenience store retailers expressed a mix of interest and skepticism regarding the potential of artificial intelligence (AI) and its use in fuel pricing during the latest quarterly virtual meeting of the Convenience Leaders Vision Group (CLVG) think tank.

Frodi Hammer, founder and CEO of A2i Systems, gave a comprehensive presentation on AI and the future of predictive fuel pricing and dynamic in-store pricing for convenience retailing during the Oct. 26 meeting. The session included real-world examples of how AI can assist retailers in optimizing pricing strategies without jeopardizing customer loyalty.

During the presentation, Hammer addressed questions about transparency in retail pricing; the ability of AI to account for missing information; and the potential impact of AI on the competitive landscape; and proposed creating a "digital twin" with AI for concurrent pricing simulation, providing pricing managers with valuable insights.

Hammer also addressed the importance of nonpricing factors such as location, cleanliness, staff, and overall customer experience.

[Read more: Evolution of AI Sharpens Focus of Convenience Channel Operations]

During the post-presentation discussion, retail leaders such as Rutter's CEO Scott Hartman and Parkland USA President Donna Sanker expressed caution regarding the implementation of AI in the c-store industry, noting the complexity of data and the need for human insight in pricing decisions, while RaceTrac Inc. President Natalie Morhous raised concerns about the potential homogenization of the market if all businesses adopt similar AI models.

Attendees also discussed the role of external data, the challenges in standardizing it for integration, and the potential business model of selling external information to retailers.

"The idea of pattern recognition is really exciting when you consider all the data that we've got. For decades we, as an industry, and other retail industries have been collecting all this data and what do you do with it? I mean, you drown in the data," said Roy Strasburger, cofounder of The Vision Group Network. "If we can rethink this in regards to using the pattern recognition side of AI to help us better understand all that data, it will enhance, shall we say, the human component of the marketing and the retailing side of the business."

In addition to discussing potential concerns, some attendees highlighted the potential benefits of widespread AI adoption in the channel.

"My mind goes to where is the system getting all of the missing pieces of information that it might not have, and how do you account for all the qualitative pieces of information that are happening all the time?" said Mark Samuels, executive vice president of convenience retailing at The Wills Group/Dash In. "The station down the street running out of gas, you mentioned construction earlier. This store's down for a remodel. Pricing is going to be obvious, but you don't know all of the competitors' volumes at their price compared to yours. You know yours, but where do you fill in all the gaps and how does that system work to adapt for that?"

[Read more: Convenience Technology Group Sees Channel Retailers as 'Tech Trailblazers']

The adaptability of AI models to changing market dynamics and their potential extension into areas like car washes were also discussed.

"I think what's important for our industry [...] we're not just about fuel anymore. It used to be that's what drove all the trips and things have changed. And so any modeling we get into has to model what's happening to the total facility, not just what's happening to your gas gallons or your gas margin," said Joe Sheetz, chairman for the Sheetz Inc. board of directors. "What are you doing to your beverage sales or your food sales based on what you're doing with your gas pricing? It's all one big puzzle at the end of the day."

Hartman encouraged attendees to be aware of customers' already existing ability to access AI via their phones and cars and use it to find fuel locations, request certain items, place orders or other actions, according to the CLVG.

The latest CLVG report is available for download here, along with past reports.

The Convenience Leaders Vision Group operates under the Vision Group Network, which was formed in 2020 and gathers the collective knowledge and ideas of its members for the purpose of sharing within the retail community.

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