Generation Next Thinking: Higher tech in the grocery store
During the pandemic, grocers big and small made significant strides in improving their e-commerce platforms to make online shopping a viable way to buy groceries. But now that shoppers are back in-store again, they’re looking for the same conveniences they’ve become accustomed to online. With brick-and-mortar stores still being the primary sales channel and driver of long-term loyalty in grocery, analysts say retailers who want to keep tech-savvier customers coming back will need to use technology tools that help meet evolving in-store shopping expectations. That means implementing solutions that will create a frictionless and more engaging in-store experience.
“Digital engagement is becoming really, really important to shoppers in the physical store,” says Gary Hawkins, CEO of the U.S.-based Center for Advancing Retail & Technology. Yet, he adds, many grocers aren’t yet delivering on expectations. He points to grocers’ mobile apps as a key example. If shoppers can access a store’s full inventory and get recommendations based on their preferences online, why can’t they do that while they’re standing in-store with their mobile phone. “So, if I’m in front of the pasta section, help me identify those products that are gluten free or best for a diabetes diet,” he says. “As a shopper, give me a way to easily research and find what’s most relevant to me among the 30,000 items in the store.”
PERSONALIZING THE CONSUMER EXPERIENCE
These days, not only are consumers continually connected with their smartphones when shopping, but the latest statistics from Forrester Research show that 48% use these devices with a specific research purpose. The most common categories of in-store mobile research are looking for or redeeming coupons, comparing prices or searching for product information.
Along with more intuitive mobile apps, interactive digital signage is expected to gain favour in the grocery sector to showcase product information, promote special deals and give customers a more personalized experience through touch screens. We can expect to see further innovation such as displays that provide customers with personalized maps of the store so they can find specific areas they’re looking for. Hawkins says QR codes—introduced more than a decade ago—are also making a comeback to provide product details or promote deals. Major U.S. supermarkets like Hy-Vee have even slashed the size of paper flyers by adding codes customers can scan to access promos and coupons digitally while shopping.
Looking ahead, the analysts say we’re still a way off from truly immersive virtual reality grocery stores, but some retailers are starting to experiment in blending live and virtual worlds. “Over the next two to three years, companies like Apple and others will bring out their smart glasses and that will be game-changing,” says Hawkins. Driven by all the processing power on your smartphone, these glasses will provide a digital overlay to the physical experience, giving customers instant information on products they’re perusing or relevant coupons based on their specific food selections.
In the meantime, enhancements in computing power due to 5G networks, edge computing and the cloud are making it much more feasible for grocers to effectively push the right kinds of promotions for their customers, says Marty Weintraub, partner and national retail leader at Deloitte. “All the big grocers have been relaunching loyalty programs over the last few years and these programs and the platforms they sit on will be able to serve up personalization in-store just like online.”
Weintraub says improving the customer experience in-store through friction-free checkouts is very much a priority for the grocery sector, too. “We see self-checkout continuing to roll out, even though it comes with risks around shrink,” he says. Truly frictionless checkout options like Amazon Go and Amazon Fresh (where customers scan an app upon entering the store and receive a digital receipt when leaving), however, are still too expensive to scale, he says. “[This tech] relies on camera vision, which is getting cheaper, but you still need to outfit the store with lots of cameras and then connect them … so there is lots of expensive infrastructure at work.”
IMPROVING OPERATIONAL EFFICIENCIES
With major advancements in computing power and artificial intelligence (AI), more and more grocers are also looking to invest in technologies that improve operational efficiencies on the back-end. According to the 2023 Connected Retail Experience Study, sponsored by Verizon, the vast majority of grocery and general merchandise retailers are focusing upcoming investments on inventory accuracy and visibility (96%), store and digital integration (94%), store operations efficiencies (96%) and sales and associate productivity (88%).
While the use of robots for store associate tasks is still very niche, retailers surveyed expect that to change over the next few years. In fact, they anticipate up to 70% of routine tasks to be partially or fully automated by 2025. Respondents also said this would allow them to redeploy their associates to more customer-facing tasks and business operation support.
“What’s changing now is a focus on smart-task management,” says Weintraub, noting that new technology applications allow store leads to get digital signals that help them more intelligently deploy labour hours. “The biggest controllable cost in a grocery store is labour, so how do we optimize that spend by deploying your talent at the highest and best use of their skills.” Grocers like Kroger (see sidebar on the next page) are actively working with technology providers to do just that.
Evolving AI capabilities are also helping grocers more rapidly harness large quantities of data (big data) to improve operational decisions. “We tend to think of AI as this science-fiction type thing, but it’s really this robust technology that can process data very, very quickly,” says Ethan Chernofsky, senior vice-president of Placer.ai, a U.S.-based, AI-driven technology solution that helps grocers (and others) determine customer trends, demographics and brand preferences by analyzing big data. One application of the technology could be to help a small chain looking to expand operations to find an ideal location. The technology analyzes the retailer’s current performance metrics and then determines where its best customer demographic would be (including the optimal co-tenants) for a new location. Chernofsky says rather than expanding based on a grocer’s perceived trade area, the technology can more accurately determine where the opportunities for growth truly are.
Once the technology assists in optimizing a retailer’s footprint from a real estate perspective, it can be used to garner competitive intelligence with real metrics to show how the chain is doing compared to its competitors. “It’s one thing to have your own data, but to be able to compare it side by side with everyone else’s is extremely valuable,” says Chernofsky. “During a certain period your chain may be down by 5%, but if everyone else in your segment is down 20% you’re doing pretty great.” (Placer.ai collects all its data by working with other app makers who collect consumer data and provide un-identifiable aggregate data.)
Whereas retailers—especially smaller chains with fewer resources—were historically forced to make decisions based on predictions and hunches, Chernofsky says AI is levelling the playing field for grocers of all sizes. “Data is how we improve decision making,” he says. “With better access to information, [retailers] can make better researched, more strategic decisions.”
WHERE SHOULD GROCERS BE INVESTING NOW?
As for where to focus technology investment right now, it’s about targeting “customer pain points” first rather than the latest “cool and flashy innovation,” says Brendan Witcher, vice-president and principal analyst at Forrester. “I guarantee that there is no customer waiting at their door saying that their package better come by drone or they’re not shopping with this grocer,” he says. Instead, as consumers are more likely to avoid pain than seek pleasure, Witcher says having pain points in the customer’s journey creates a reason for them to say, “maybe I’ll shop elsewhere.”
Pain point examples such as missing labels for prices, out of stock or expired items, malfunctioning self-checkout kiosks or the lack of associates on the floor to answer customers’ questions can be improved with technology solutions, says Witcher. It’s also important to recognize that pain points differ depending on the customer. “It’s not trying to find that one silver bullet that will solve everyone’s problem, but finding the things that solve groups of customers’ pain points and applying them over time,” he says, noting that most grocers already know what these pain points are. “If you truly believe creating better customer experiences will deliver better revenue, why wait,” says Witcher.
Deloitte’s Weintraub expects the days of using technology on a use-case basis are gone as we continue to build technology platforms that can be shared (interfacing to the cloud, edge computing, etc.). “The difference now will be in looking for common denominators from a tech ecosystem perspective, to enable multiple-use cases over longer periods of time,” he says. “It’s going to be about how many things can we enable by setting up this new infrastructure so we don’t have to redo it every time we have a new idea.”
On the operational side, demand forecasting and inventory management are both areas where grocers can better utilize the power of AI and other well-established technologies right now. “If you’re able to order more accurately, the less you’ll have to discount or throw away to end up in landfills,” says John Harmon, senior analyst at Coresight Research.
In surveying more than 200 large grocery retailers in North America, he and his team discovered most weren’t taking advantage of AI tools to better manage supply. Coresight’s report showed 68% of prepared food is discarded due to overproduction or over-ordering and 15% of unsold food is thrown away or sent to landfills. On top of environment issues associated with food waste, that translates into billions and billions lost in potential grocery revenue. Food waste, as the report notes, represents a “huge, largely avoidable drag on grocery retailers’ revenues and margins.”
With ongoing labour issues, Harmon says grocers can finally use established technologies like RFID or other electronic tags/labels and AI to offer safe food to consumers—while doing their part to avoid waste. “If you want to manage food waste you need to know what you have and when it’s expiring so you can bundle product or discount accordingly,” he says.
On a cautionary note, Forrester’s Witcher says grocers need to be careful about making investments that will crush margins but not create incremental revenue or value for their business. “It’s sad to see some grocers chase the shining objects and kill their balance sheets and profitability in the process,” he says. “I really do encourage companies to take a more strategic approach to winning customers through technology.”
Generation Next Thinking is an ongoing series that explores the cutting-edge topics that are impacting grocery retail today and in the future.