Grocery retailers have seldom been on the leading edge when it comes to advanced technologies, whether it involves behind-the-scenes, supply-side implementations or customer-facing tools that enhance the food-shopping experience.
Increasingly, however, the mountains of data available to retailers are creating opportunities for grocers who can leverage the vast trove of information at their fingertips.
Many of the most advanced customer-facing technologies, such as beacons and other mobile-based platforms, have seen more widespread adoption in channels other than grocery, says Scott Bauer, U.S. retail and consumer partner at PwC. Testing these technologies in grocery stores is often driven by CPG suppliers.
"We're seeing some of [these advanced technologies] in grocery, but the sector has been slower than other sectors of retail with things such as beacons, smart shelf technology and advanced loyalty," Bauer says.
Much of the focus of grocery retailers has been on data analytics, he notes.
"They are taking advantage of the data they have, and getting smart on that," Bauer says. "The next evolution of that will be using that data analysis to be more proactive and targeted and personalized with their offers."
For many grocers, those offers are likely to be made via e-mail, rather than via mobile, he points out.
The mobile opportunity is one that many grocery retailers have been slow to adopt. Although many food retailers have mobile apps, by and large they have not yet leveraged mobile's full potential.
"For most, the mobile app is pretty limited," Bauer says. "It's not really intended to engage with shoppers on a regular basis."
Some grocery retailers have begun using mobile technologies for location-based marketing, however, through the use of beacon technologies. Beacons use Bluetooth sensors to detect when a mobile phone is within a certain range to trigger a message sent to the phone via text message or via push notifications from an app.
In June, British supermarket giant Tesco said it was rolling out beacon technology to 270 stores in partnership with CPG supplier Unilever to promote Unilever's Magnum brand ice cream to customers who had downloaded the Mpulse app, which allows customers to find the nearest Tesco Express store in London offering discounts on certain Magnum ice cream products, according to a report in NFC World.
Several U.S. supermarket operators have also deployed beacons on a limited basis, generally in partnership with suppliers for specific promotions.
Beacon technology, shelf sensors and in-store cameras can all be used to detect patterns of shopper activity in the store, which can provide valuable information to both retailers and product suppliers, Bauer notes.
"They can be used to help understand whether a product has been moved or touched, or to understand if somebody lingers," he says. "In terms of understanding someone's moment–whether they linger around endcaps, for example–is of high interest to CPG companies. They want to see that they are getting a return on their investment in premium shelf space. I think we'll see more experimentation with that, and I see it being paid for by the CPG companies."
CPG companies have also enjoyed success around mobile and social media marketing efforts using things like photo-sharing and gamification, through which they are finding ways to communicate directly with consumers outside the store.
DIGITAL SHELF TAGS
Another customer-facing technology that holds promise for grocery retailers is electronic shelf tags.
Last year Kroger launched a test of digital shelf display technology, which it recently said it was expanding throughout the center-store aisles of a location in Cold Spring, Ky., near the company's headquarters, according to local reports.
The labels can be used to display video ads as well as prices, and they could potentially be used to interact with customers' mobile devices to perform functions like highlighting items on a shopping list.
"It has the potential to reinvent brick-and-mortar retailing," Brett Bonner, vice president of research and development at Kroger, told the Cincinnati Enquirer in October. The labels, he said, bring "the info-richness of the Internet" to in-store shopping.
Bauer says such technologies can not only drive labor savings for grocery retailers–who currently spend a tremendous amount of time changing shelf prices manually–but also to create more personalized experiences for shoppers. By tying them in with other data sources, digital shelf labels also allow for dynamic pricing based on factors such as inventory levels, weather conditions and other information.
"That's something where there's been some success in other sectors," Bauer says.
SUPPLY-SIDE DATA CHALLENGES
On the supply side, the key for retailers is not so much which tools they use, but how they use them, says Kurt Jetta, founder and chief executive officer of TABS Group.
"A focus on innovative analysis, not innovative software, is required to gain a competitive advantage," he says.
Defining technology as "the practical application of knowledge," Jetta says the most advanced supply-side technology involves the intelligent use of analytics and modeling.
"Given the historically weak growth of our industry, our insights technology is obviously not working," he says. "Therefore, better knowledge is needed in analyzing and predicting the major drivers of revenue and profits: distribution and trade promotion, and to a lesser extent, consumer marketing and everyday pricing."
Among the major hurdles retailers need to overcome in order to improve their technological prowess, Jetta says, are "organizational obstacles," which include bureaucracy and aversion to risk.
"A culture of empowerment is required for both retailers and suppliers to overcome" this hurdle, he says, noting that smaller technology vendors tend to be more adept at this.
Once retailers get past the organizational barriers to implementing advanced technology, the next major hurdle is their lack of expertise in data harmonization.
Retailers need to identify vendors with "true data harmonization expertise," he says. "Very, very few of them have it. Data integration is not harmonization, and most suppliers only provide integration."
Data harmonization involves the adjustment and correction of inconsistencies in information to make the data compatible across all systems, and it is becoming an increasingly important function as more and more retailers look to connect supply-side data with consumer-facing platforms such as e-commerce and digital loyalty programs.
The sharing of data among trading partners remains a key challenge for effective supply-side technologies, Jetta says.
"Most companies have relevant insights to share. Category captains can still play a valuable role in the process–aggregator of insights, ad hoc analysis support, planogram support, etc.–but giving them exclusive access to data and insights hurts the category," Jetta says.
WHOLE FOODS' PLATFORM
One recent development that seeks to connect the dots between back-end technologies and customer-facing platforms was an agreement between Whole Foods Market and technology provider Infor. The two are implementing a cloud-based system that will afford greater visibility into data, among other functions.
"The new retail platform we will co-create with Infor will be unlike anything currently on the market, better leveraging major technology advances to deliver much more value at lower cost," said Jason Buechel, Whole Foods' chief information officer, in a statement announcing the partnership.
The retail management solution will enable Whole Foods to automate more functions on the back end, says Nick Ciminillo, senior director, retail industry at Infor.
"Whole Foods will benefit by a number of improvements, including consistency of data and visibility to inventory and other operational data that will lead to increased efficiency, increased sales and profitability, while greatly lower the total cost of ownership," he says.
For shoppers, the system will enable Whole Foods to more easily provide product data to customers, and will also help Whole Foods provide relevant offers at the right time, Ciminillo says.