Covid-19 and grocery retail: # 4/5: Technology

Thom Iddon-Escalante

Marketing Director

In this, the fourth of five posts dedicated to coronavirus and grocery retail, we explore the relationship between Covid-19 and retail technology. In general, retailers with better tech infrastructure have fared better during the pandemic. This is probably in part because those more willing to embrace new technologies are generally better prepared to face new challenges. But there is something to be said about the role of technology itself.

Thinking short term

Technology has already played a decisive role in the fight against covid-19. Cutting-edge AI, like Google’s DeepMind, has been used to map the structure of the virus; track-and-trace apps have been developed to warn users when they’ve been in contact with an infected person; and a host of startups specialising in everything from disinfectant robots to proximity sensors, have seen their stock rise.

Retailers, too, have embraced new technology. But even the most accessible tech takes weeks or months (even years) to roll out in large organisations. Early on, retailers have had to rely on their existing systems, no matter how insufficient. Exacerbating this, the consumer response to the pandemic has developed unpredictably, affecting markets, stores, and product lines in different ways at different times. It’s understandable, then, why so many retailers have struggled. Even those with sophisticated granular and predictive capabilities have found it tough going. Ocado, the UK’s largest dedicated online grocer, closed temporarily unable to keep pace with demand.

And yet, in the face of such extraordinary circumstances, retailers have coped remarkably well, serving their communities and enabling precious resources to be focused elsewhere. Retail professionals everywhere have been held up as heroes, and rightfully so. They deserve the praise!

Short term adoption of technologies such as predictive analytics in demand forecasting and baseline estimations; good e-commerce platforms; extended customer support for online purchases; and click-and-collect services have been priority. What will it lead to in the longer term?

Thinking long term

Longer term, coping won’t be enough. In the recession that followed the 2008 financial crisis, established retailers across Europe lost ground to discounters better placed to serve increasingly price-sensitive consumers. Economists fear the current recession could be markedly worse. The circumstances are different, and, at least from a retail perspective, more complex, too. This time shoppers are being forced to weigh up health and economy, and this could manifest in interesting ways. Price-sensitive shoppers in risk groups may elect to order online, even though bricks-and-mortar discounters offer them better deals. Upmarket destination grocers that usually offset higher costs by charging more, are scrambling to serve their older, wealthier, and increasingly tech-literate base, online. And, chastened by their 2008 experiences, major retailers have thrown down the gauntlet to discounters, determined to match them on value, and outmatch them in safety.

Some shoppers might have changed their ways temporarily, longing to get back into stores. Some might not come back at all. For retailers in markets where global players like Amazon and Google have not yet made their consumer shopping presence felt, this pandemic could be viewed as a dress rehearsal for changes in shopping patterns that can occur when consumers become more familiar with online shopping. Most likely, the majority of shoppers will mix their channels of choice. Just as Amazon has built physical stores, many bricks-and-mortar retailers have enhanced their online offering, and they will most likely stand the test of the global giants better because of it.

So much of what happens next is up for debate, but one thing at least isn’t: technology will play a critical role. In light of this, here’s 3 questions we think every retail executive should ask themselves in the coming weeks and months:

#1 How can investment into online and/or click-and-collect models be accelerated?

During March 2020, 47% of US consumers said they were grocery shopping online, compared with just 11% three weeks prior. This seems to be reflected in sales data too, with US retailers experiencing a 10-30% bump in online sales over the same period. Likewise, in the first week of April UK online retail sales rose by 22% year-on-year. Undoubtedly shoppers will gradually return to stores, but many will continue to shop online for ease and convenience. How do you anticipate your customers will act? And how will you serve them?

#2 How can more self-checkout solutions be implemented?  

Self checkout is well established in many markets, but according to recent research, covid-19 has made it significantly more popular amongst shoppers. Although it reduces person-to-person contact, it still requires using a touchscreen and card reader other shoppers have already interacted with. Mobile self checkout technology, on the other hand, enables shoppers to scan items with their own devices. In the distant future we may not need to check out at all (consider Amazon Go Grocery). Until then, retailers can make incremental changes that make shopping safer and more efficient.

#3 How can we become more proactive and adopt faster, using predictive analytics?

Retailers sit on awesome amounts of data; data housed in systems designed for storage, not analysis, and certainly not analysis at scale. However, advancements in machine learning, combined with the ever decreasing cost of data processing, are making powerful analytics, once the preserve of Amazons and Alibabas, available to a much wider range of retailers.

One application of this new technology is promotions analytics. Here, Formulate have leading solutions. We can help most retailers improve the profitability of their promotions by at least 10%, typically generating tens of millions Euros in savings.

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