Physical AI — bringing digital personalization into the physical store

Grocery retailers have invested heavily in digital personalization. The challenge is bringing that intelligence into the store, where most of the revenue is.

The gap hiding in plain sight

Investments in digital personalization are paying off for grocery retailers. Loyalty programs are providing a positive ROI and driving value retailers wouldn’t otherwise get. Recommendation engines and personalized offers boosts sales and customer loyalty. Grocers see 10pp+ year-over-year sales growth and a 5pp+ lift in new user retention after switching their ecommerce platform to Instacart’s Storefront Pro, thanks to its AI-driven personalization.

For retailers, these are some of the benefits of going online and providing personalization at scale. And for customers, personalization is one of the things they love about shopping for groceries online. Apps can remind them of staples they forgot to add to cart or surface coupons or sales that are relevant. 

How can retailers match that level of personalization offline, when the very same customer walks through the front door? The online experience is personalized and dynamic but the in-store experience of course has to work for everyone — the product in that prime spot everyone sees when they walk in can't change depending on who it is or what kind of shopping mission they're on.

That difference creates a gap in the shopping experience and the amount of personalization retailers provide to their customers. The sophisticated infrastructure retailers have built — the data, the algorithms, the behavioral signals — goes largely unused in-store. And despite the sustained growth in ecommerce, that is still where the majority of actual customer transactions occur, with approximately 80% of grocery revenue generated in-store. 

Why closing this gap is now a strategic priority

Consumer expectations have risen sharply as digital shopping experiences have become more refined. Customers who encounter personalized recommendations, relevant promotions, and seamless interactions in a retailer’s app or website carry those expectations into the physical store. Research by McKinsey found that 71% of consumers expect personalized interactions, and 76% will switch to a competitor if they don’t receive them.

Retailers who have focused on omnichannel data unification are beginning to see the compounding benefits. When online preferences inform in-store interactions — and in-store behavior feeds back into the digital profile — the result is a more complete picture of each consumer and a more relevant experience across every touchpoint. Omnichannel consumers already demonstrate higher purchase frequency, larger basket sizes, and greater lifetime value than those who shop through a single channel. Connecting the in-store experience to that data loop amplifies all of those outcomes.

Of course, personalization already exists in the store. In the form of a baker who recognizes that customer who comes in first thing to get a baguette right from the cooling rack. The butcher who knows what cut their customer is waiting for. The cashier who reminds regulars of that great promotion running. Technology won’t replace this but it can augment it, so that it happens at scale, automatically and precisely. 

With the right technology, retailers can put their data to good use in-store and online. Online preferences informing in-store interactions, and those feeding back into the digital profile, better aligns online and in-store experiences for omnichannel customers. But it’ll take more infrastructure that digital-only tools alone can provide. 

Digitizing the in-store shopping trip

Digitizing in-store shopping trips with AI smart carts is one way to bring the best of online shopping into the in-person trip. With an interactive screen, smart carts can provide more of the online shopping personalization, connecting what the retailer already knows about the customer to their physical trip, surfacing relevant recommendations, applicable offers, and running totals that make the experience easier to navigate and more valuable throughout.

For Instacart’s AI-powered smart cart, Caper Cart, 97% of trips are completed by a logged-in loyalty member, meaning the vast majority of in-store activity on these carts is already tied to a known customer identity. That’s a data signal most in-store experiences simply don’t generate. The carts can drive incremental lift in loyalty sign ups as well, converting anonymous store visits into identified, personalized relationships — exactly the kind of conversion retailers optimize aggressively for online.

Caper Carts are an example of Physical AI in the store and combined with AI in the cloud, can build the best understanding of a retailer's customers, the store, shelves, and how they interact in real-time, yielding highly personalized shopping experiences that retailers report increase store sales.

The next growth opportunity is already in your store

Better serving the customers shopping in-store with a personalized experience many have come to expect from their online shopping trip is the next growth opportunity for grocery retailers. Retailers that can close the gap between what they know about their online and in-store customers with technology that digitize in-store shopping trips are going to deepen loyalty with their customers and deliver a better experience. 

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^{Results are based on Caper’s average year-to-date performance across stores as of March 2026}