Is the “retail apocalypse” going to come for traditional grocery brands like Kroger and Albertsons? We asked that question back in September. We concluded that while digital transformation may not be happening quite as rapidly as other areas of retail — only 2.8% of food and beverage sales happened online last year, according to eMarketer — technological advancements could certainly accelerate that.
Enough advancements have occurred in the subsequent seven months that we felt the state of online grocery was worth revisiting.
Kroger fights back
When it comes to digital transformation, grocery brands admittedly fall behind those in other verticals. Last year, 49% of grocery executives reported being less tech-savvy than other retailers in a Phononic survey. However, Kroger, the third largest retailer in the world, reported a 60% year-over-year growth in digital sales during Q3. In 2018, the company’s digital sales were $5 billion, a number Kroger predicts could nearly double this year.
Kroger shoppers have many omnichannel options, such as picking up online orders curbside and delivery through Instacart. Seeing Amazon coming, Kroger merged with popular Southern supermarket chain Harris Teeter in 2014, thinking about ecommerce long before Prime members had Whole Foods perks.
More recently, in January, Kroger partnered with Microsoft to design technologically-advanced grocery stores. At two locations, the grocery giant is currently testing digital shelves that dynamically update prices, and display promotions and nutritional information. The technology also connects to the Kroger app, showing users personalized guides to their shopping lists when they enter an aisle.
On the back end, a network of in-store sensors monitors temperature and inventory. This helps ensure that refrigerated cases maintain their proper temperatures. It also enables associates to restock items faster; an IHL Group study found that results in nearly $1 trillion in missed sales.
Could curbside pickup keep Amazon at bay?
Kroger ranked fourth in the Digital IQ Index for grocery retailers Gartner L2 released earlier this month. However, a mere 10 points separated fourth and first place, a position naturally occupied by Amazon.
Groceries are Amazon’s fastest-growing category. The ecommerce giant plans to take that success offline with dozens of brick-and-mortar grocery stores separate from Whole Foods. The first store is scheduled to open in Los Angeles as early as the end of the year. While this chain will be separate from Amazon Go — which is more of a convenience store than a supermarket, comparable to a high-tech 7-Eleven — it’s not unreasonable to assume many of its features will carry over. Amazon’s “just walk out” technology combines deep learning algorithms, computer vision and sensor fusion, resulting in a seamless experience that requires Amazon Go shoppers to do nothing more than scan codes in-app as they walk through turnstiles.
The Wall Street Journal reported that Amazon’s grocery stores will be “heavily tilted to customer service and pickup capabilities,” something that’s increasingly becoming table stakes for grocery retailers. A new report from Cowen and Co. projects that curbside grocery pickup will generate $35 billion in sales by 2020. Interestingly, it’s also the rare area where Amazon, a relative newcomer to brick-and-mortar, doesn’t have an advantage.
Walmart didn’t click-and-collect for groceries five years ago. Today, it’s available in 2,000 stores, easily accessible to 70% of the U.S. population. Online ordering and delivery seems like a more obvious omnichannel option for grocery shoppers. But while Walmart offers that, the logistics are difficult given and curbside pickup is more popular. Between 11 and 13% of Walmart shoppers use this service, which contributes to the company having its best grocery sales in nine years.
Alexa, fill my grocery cart
Alexa’s skillset is ever-expanding and as of last summer, it includes managing people’s Whole Foods carts. Consumers can place orders in a standalone app, where Alexa is listening. Asked about generic food items — cheese, say, as opposed to Polly-O mozzarella — the voice assistant will choose for you based on your previous behavior.
Three weeks ago, Walmart announced a similar initiative through a partnership with Google. Users can request Google Assistant “talk to Walmart,” enabling them to do their grocery shopping through the smart speaker. Like Alexa, Google fulfills unspecified requests based on purchase history.
Checking weather and playing music remain the most popular commands for voice assistants. According to eMarketer research from February, only 5% of households have have bought groceries via smart speakers. However, analysts predict the voice shopping market will explode to $40 billion in the next three years.
The post Smart Kroger stores, click-and-collect: The state of grocery retail, part 2 appeared first on ClickZ.