Robots, Smart Carts, AI: Grocers Testing High-Tech Food Shopping...
ROBOTS IN AISLE TWO:
Supermarket Survival Means
Matching Amazon
The Amazon threat has forced
the stodgy grocery industry to experiment with smart carts, dynamic price tags
and in-store delivery warehouses.
By Matthew Boyle December 3,
2019
Armed with algorithms,
robotic warehouses and cashierless stores, Amazon.com Inc. is commonly seen as
an existential threat to traditional grocers. In recent weeks alone, Amazon
confirmed plans for a mainstream supermarket to complement its pricey Whole
Foods Market chain, and the company plans to bring its automated checkout technology
to full-size supermarkets.
It’s enough to make
old-school grocers adopt the fetal position and brace for the retail
apocalypse. They aren’t, of course. Animated by the threat and mindful that
Amazon remains a tiny player in the $900 billion U.S. grocery market, they’re
rushing to out-innovate the Seattle leviathan before it’s too late.
The advancements—being
tested by everyone from mighty Walmart Inc. to small regional chains—include
shelf-scanning robots, dynamic pricing software, smart carts, mobile-checkout
systems and automated mini-warehouses in the back of stores. While shoppers
should expect to see more technology in their local store, the innovations are
less about dazzling customers and more about improving day-to-day operations
and solving some of the thorniest problems facing food retailers today.
“Competition has started to
come from everywhere, and everybody has brought their game up”
If the new technologies work
on a broad scale—and that’s a big if—they could slow Amazon’s advance, boost
profits, help fend off deep-discount chains like Aldi and Dollar General and
diminish the treasure-hunting appeal of places like Costco and Trader Joe’s.
Just 44% of food sales today go to traditional grocery stores, down from 90% 30
years ago, according to Inmar Analytics. Supermarkets are locked in a war of
attrition, and right now, they’re losing.
“Competition has started to
come from everywhere, and everybody has brought their game up,” says Keith
Knopf, chief executive officer of Raley’s, a privately held operator of 130
stores in Northern California. “It’s clear that we have to become more agile.”
To do that, Knopf recently
linked up with a former McKinsey & Co. consultant named David Moran, whose
company, Eversight, sells predictive software that recommends price changes on
items throughout the store. Historically, grocers changed price tags once a
week largely in response to deals offered by local competitors, relying on
whatever strategy worked in the past. But now shoppers can check offers
instantly from their phones, so grocers need to move faster and look ahead, not
backward.
Eversight works with brands
like Coca-Cola and retailers like Walgreens on promotional offers, but Raley’s
is the first retailer it’s working with on everyday pricing. The software
analyzes millions of potential price variations across the chain and suggests
several different alternatives for a given item — say, cooking oil — which are
then tested in a few stores to see which one delivers the best results. The
winning combination then gets rolled out more broadly.
Raley’s prices are already
on the high end, so most of the experiments involve cutting prices, but not so
much that profitability craters. So far the moves have boosted sales about 2%
in the categories tested, and profits by 5% in some cases, enough to convince
Raley’s to buy a small stake in Eversight.
“We have to learn to think
and act differently,” Knopf says.
That doesn’t come naturally
to the supermarket industry. Its leaders got where they are by squeezing
pennies of profit out of bananas and bread, not through disruptive innovation.
The last technology to really revolutionize food retail arrived in the 1970s
and early 1980s with the advent of bar codes and checkout scanners.
“Retailers are risk averse,
and don’t want to get into trouble,” says Jeff Smith, an entrepreneur who’s
been selling software to big retailers for the past 20 years.
Playing it safe won’t work
for supermarkets anymore, evidenced by the spate of bankruptcies that have
claimed chains like Winn-Dixie, Tops and Fairway Market. For legacy retailers,
the benefits of automation can outweigh the risks. In a Giant Eagle supermarket
in Pittsburgh’s Fox Chapel neighborhood, a five-foot, four-inch-tall device
nicknamed “Tally” traverses the aisles twice a day for an hour or two, scanning
shelves for missing or misplaced items. It’s one of about 50 robots deployed at
retailers in the U.S., Europe and the Middle East by Tally’s creator, Simbe
Robotics. Walmart’s also rolling out shelf-scanning droids in 350 U.S. stores,
made by another vendor called Bossa Nova.
Rise of the Machines
Retailers are boosting
investment in robots that can improve productivity
Food retailers globally lose
about $325 billion annually due to items being out of stock, according to
researcher IHL Group. It’s the main reason why shoppers leave a store without
buying anything, surveys say, and manually checking shelves can take several
hours a day. Simbe’s founder and CEO Brad Bogolea wants to change that. On a
recent Friday morning at the Giant Eagle in Pittsburgh, Tally discovered that
Twix bars and some Febreze plug-in air fresheners were out of stock. Its 12
cameras can scan packaged goods at Giant Eagle but not fresh produce or the
freezer aisle. At the Giant Eagle location where Tally has been deployed the
longest, it has reduced out-of-stocks by 21%.
“It hasn’t revolutionized
grocery yet,” store manager Ian Kalinowski says. “But we’ve just scratched the
surface. There’s so much more we can do with it.” For example, it could reduce
discrepancies that occur when the price of an item on the shelf differs from
what gets rung up at checkout. When that happens now, customers get the item
for free.
While store robots are hard
to miss, most of the ground-breaking innovation is happening behind the scenes.
In their backrooms, some food retailers are building automated warehouses that
prepare online grocery orders, eliminating the need for the expensive armies of
human shoppers who currently troll the aisles harvesting products for Instacart
and other services. The technology is called micro-fulfillment, and analysts
say it could be a game-changer for grocers, saving them time and money while
providing faster service.
At a Stop & Shop
supermarket near Hartford, Connecticut, one of the nation’s first micro-fulfillment
centers (MFCs for short) opened at the end of last year. Ahold Delhaize, Stop
& Shop’s Dutch-Belgian parent, carved out 12,000 square feet from the store
during a recent remodel to make room for the MFC, which is operated by the retailer
and with support from Takeoff Technologies. Through a glass window in a corner
of the store, curious shoppers can get a glimpse at the automated
mini-warehouse, where robots whoosh around grabbing cereal and soup. The system
can handle up to 3,500 orders a week, although it’s nowhere near that level
yet. Stop & Shop’s not alone: Walmart, Albertsons and others are also
testing MFCs.
Micro-fulfillment is
promising for e-commerce, but more than 90% of food shopping still takes place
inside physical stores, where bottlenecks at the checkout counter have annoyed
shoppers for decades. Self-checkout kiosks can speed things up, yet the
machines are still glitchy, forcing employees to intervene. Canadian grocer
Sobeys is testing smart shopping carts, equipped with cameras and scales to
weigh produce, in one of its Ontario locations. Stores have been talking about
smart carts for years, but have been stymied by the challenge of making them
smart enough to identify every item in a store, while also tough enough to withstand
Midwestern snow storms and parking-lot pileups.
Amazon’s checkout-free Go
stores are complex and costly to operate, with scores of sensors and digital
cameras pointed at all angles. Amazon had envisioned opening thousands of them
in every major urban market, but seven years into their development, it has
just 21. (Amazon does plan to license the technology that underpins Go to other
retailers.) That’s created an opportunity for others to develop less expensive
rival systems, including one from a Bay Area startup called Grabango.
Like Amazon, Grabango’s
version of checkout-free shopping relies on ceiling-mounted cameras, but
dispenses with the turnstiles used by Amazon. Purchases are tallied up on
shoppers’ phones via a mobile app, or they can check out the old-fashioned way
at the till, even paying with cash if they want. Grabango’s cameras also deter
theft: “Shoplifting becomes impossible,” CEO Will Glaser said at a September
industry conference, and the money saved there can cover the costs of installing
the system within a year.
The dark side of all these
fancy gadgets is their potential to reduce the amount of human labor
supermarkets require. A May report from the management consultants at McKinsey
& Co. found that about half of all retail activities can be automated with
existing technology. Privately, retail staffers refer to the robots that scrub
floors and scan shelves as “job stealers.” Retailers counter that the robots
won’t replace humans; instead, they’ll allow workers to perform more less mundane
tasks like assisting customers.
Some retailers don’t want
robots cruising their aisles. “You won’t see robots in Target anytime soon,”
says Brian Cornell, the cheap-chic retailer’s CEO. “The human touch still
really matters.”
And in reality, the new technologies
still require a human touch. Tally’s stock reports are useless unless there’s a
person to find and replace the missing Twix bars. Checkout-free shopping
doesn’t work for age-restricted items like tobacco and alcohol, as shoppers in
Pittsburgh will soon learn when Grabango is deployed sometime next year at
Giant Eagle’s GetGo convenience-store chain. Stop & Shop’s MFC, meanwhile,
can’t pick frozen goods, which must be grabbed separately by employees.
What’s more, there’s no
guarantee that any of these technologies will perform well enough to deliver
the returns on investment that would justify broad deployments. Twenty years
ago, tiny radio-frequency identification (RFID) tags promised to revolutionize
retail by virtually eliminating out of stock items, reducing theft, and
speeding customers through checkout. That hasn’t happened, though, due to the
costs involved in universal deployment and the aforementioned aversion to risk.
Still, food retailers sense
the urgency. “We have to be willing to dive head first into this,” Rob Mathews,
Stop & Shop’s director of e-commerce strategy, says as employees lug
robot-picked totes onto trucks for delivery to hungry Hartford residents. “Retail
is under pressure,” McKinsey said in its report. “If you aren’t already
implementing automation, you are falling behind.”
Edited by Robin Ajello and
Matthew Townsend, with assistance from Ellen Milligan
Inline video by Allison
Farrand, Scott Eisen, Getty
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