Commerce

Microsoft and Kroger to create data-driven connected grocery stores


Microsoft and Kroger are taking a leaf out of Amazon’s book by building futuristic “connected” grocery stores.

As part of a pilot project, Kroger, the largest supermarket in the U.S. by revenue, and Microsoft have transformed two retail stores near each of their headquarters —  one in Monroe, Ohio and another in Redmond, Washington — using technology powered by connected sensors and Microsoft’s Azure cloud platform.

The first fruits of the partnership is a digital shelving systems, which was actually announced last year and is in the process of rolling out into dozens of Kroger stores across the U.S. EDGE (Enhanced Display for Grocery Environment), as it’s called, bypasses paper price tags for digital shelf displays that can be changed in real-time from anywhere, while it also can display promotions, dietary information, and more.

The two test stores, however, are where Kroger and Microsoft are taking things to the next level. In addition to EDGE shelving, it will include a new guided shopping experience, personalized ads, and something it calls “pick-to-light.”

Above: Kroger: Guided shopping

Here’s how a typical shopping experience could work with the new digital shelving system. A customer creates a shopping list in advance through the Kroger app, and as the app guides them around the store, the shelf display switches to a picture set by the customer so they can easily spot what it is they are looking for.

Above: Kroger’s EDGE shelving

Or, they may even be informed through the app that the item is out-of-stock.

Above: Kroger: Aisle guidance

These new smart shelves aren’t just for customers’ benefits, however. The so-called “pick-to-light” system means that the shelves light up to help employees spot items as part of Kroger’s curbside pickup service, which in theory should expedite their picking powers and mean customers’ items are ready to collect outside more quickly.

Monetizing data

What all of this helps generate, of course, is vast swathes of information — data on products and customer data. Microsoft’s Azure will take care of all the backend data storage and processing, but all this data can be used by Kroger to target ads at the customer as they waltz around the supermarket. This helps to highlight that the initiative is more than simply trying to create a more sophisticated shopping experience, it’s about creating additional revenue streams too.

“The EDGE Shelf will enable Kroger to generate new revenue by selling digital advertising space to consumer packaged goods (CPGs) brands,” Kroger said in a press release. “Using video analytics, personalized offers and advertisements can be presented based on customer demographics.”

Indeed, video analytics meshed with artificial intelligence may be used to identify customer traits such as age and gender, according to a separate Bloomberg report today, allowing brands to target specific goods accordingly. While that specific example may not be to everyone’s preference, other ad-targeting smarts could be — for example a customer may want it known that they are gluten-free vegans, and thus receive promotions only for relevant goods.

Above: Kroger: Personalized ad

Though this pilot is limited to just two stores for now, Kroger said that the results of it will determine future expansion plans throughout 2019 and beyond. But what is perhaps most interesting about Kroger’s plans is that it’s packaging this as a “retail as a service” (RaaS) offering for use by other retailers — yet another potentially gargantuan revenue stream.

“Our partnership brings together Kroger’s world-class expertise in the grocery industry with the power of Azure and Azure AI,” added Microsoft CEO Satya Nadella. “Together, we will redefine the shopping experience for millions of customers at both Kroger and other retailers around the world, setting a new standard for innovation in the industry.”

Online / offline / Online

Though Amazon dominates the online shopping realm in the U.S., accounting for roughly half of all e-commerce spend, it is still working toward gaining market share in the brick-and-mortar realm. That is why Amazon snapped up Whole Foods last year, and that is why Amazon has been doubling down on its efforts to bridge the online-offline divide with tech-infused cashierless stores.

After opening its first Amazon Go store in Seattle way back in 2016, the e-commerce giant is now expanding the program across the U.S. and is reportedly planning thousands of such stores in the coming years. This concerted effort to dominate both the online and offline retail realms hasn’t been lost on others in the industry, with the likes of French grocery chain Casino recently opening its first cashier-free location in Paris, while San Francisco-based AI checkout company Standard Cognition is continuing to raise big bucks and expand partnerships with retailers globally. Just today, Grabango raised $12 million to expand its cashierless store technology.

Over in China, Alibaba has been investing heavily in pushing supermarkets into the future, and last year it opened a bunch of new cashless Hema supermarkets following an investment it made in the company the year before. Alibaba also recently revealed a partnership with Starbucks as they seek to transform the coffee industry in China through leveraging big data to hook consumers into their respective ecosystems.

Elsewhere, long-time Amazon adversary Walmart recently revealed it was dipping its toes in the futuristic retail waters with a new mobile-first cashierless Sam’s Club outlet.

It’s clear there is a battle to bring the offline world into line with the online world, giving retailers more control, data, and insights into the actions of consumers wherever they roam. And that is why Kroger is now ramping up its retail efforts as part of its broader “restock Kroger” mission.

“Kroger is building a seamless ecosystem driven by data and technology to provide our customers with personalized food inspiration,” said Kroger chairman and CEO Rodney McMullen. “We are identifying partners through restock Kroger who will help us reinvent the customer experience and create new profit streams that will also accelerate our core business growth.”



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