Price Check on Aisle 3: Grocers Use A.I., Devices to Battle Amazon

Xconomy National — 

[Updated 3/13/18 1:07 pm. See below.If a shopper interacts with technology in a typical grocery store, it’s usually at the very end—as they are paying for their items.

That could be about to change, though. “Scanning loyalty cards at checkout is a lost opportunity,” says Eliahu Sussman, marketing manager at Aila Technologies, a Boston-area maker of retail devices such as digital kiosks and handheld scanners. “We do it at check-in and give [shoppers] personalized recommendations, coupons, a wayfinder in the store.”

The idea, he says, is to bring the supermarket circular—the printed weekly publication that advertises a store’s discounted items and other promotions—into the digital age. “This is doing what the circulars have done but on a personalized level,” Sussman says. “This improves the experience; an improved experience improves loyalty, which improves profits.”

Grocery shopping is big business: Total retail and food service sales in the United States amounted to about $5.32 trillion in about 38,000 stores in 2015, according to Statista. And it’s also an industry being buffeted by headwinds in the form of new technologies and e-commerce companies encroaching on the market. As time-strapped shoppers value the convenience and more personalized shopping experiences that e-commerce can provide, traditional grocers are responding by digitizing how shoppers interact with brick-and-mortar locations.

In the last month, Amazon (NASDAQ: AMZNannounced free two-hour delivery of products from Whole Foods Market, which the Seattle e-commerce giant bought last year. At the same time, Target announced same-day delivery of its products. The Minneapolis-based retailer delivers through Shipt, a startup Target bought in 2017. And about a week later, Walmart (NYSE: WMTlaunched free delivery for many items at its Sam’s Club bulk retailer business.

But, though online grocery shopping is growing, an overwhelming majority of consumers prefer to buy fresh goods in the store, Statista reports.

“Retailers have to think about the ‘new shopper,’” says Sy Fahimi, senior vice president for product strategy at Symphony Retail AI in Dallas. “The attitude now is, ‘I expect you to show me an offer that is relevant, or I can quickly put you in the spam folder and never communicate with you again.’”

To that end, he says, Symphony has developed artificial intelligence software that can prompt grocers to “send [shopper] X and Y promotions, and [know] that she traditionally shops on Wednesday, so send her the deals on Tuesday.”

Symphony uses A.I. techniques, machine learning, and other analytical capabilities on both the marketing side of retail operations as well as the supply chain. The 25-year-old company has around 1,000 employees globally and 1,200 customers in 70 countries, Fahimi says. While retailers have gone through periods of transition before, “this is a different disruption,” he says of retailers’ need to morph into technology companies.

Fahimi says that, through its customers’ data as well as outside data, Symphony has insight into the habits of about 70 million households, from what’s in their shopping baskets to how much time shoppers are spending in stores. “We do this in real time,” he says. “[Grocers] can ask, similar to Siri, ‘How’s my category doing in the Northwest?’ The system will come back and say price-sensitive shoppers are not responding to these promotions.”

So far, the software can respond to about 30,000 questions related to sales and customers, he adds. All of that data, which is owned by the grocery chains, is valuable to others, so Symphony has a program by which the grocer gets half the revenue when the software firm sells the data to brands, he says.

Symphony Retail AI’s “Supermarket 2020.”

Fahimi says the goal is to help customers such as Food City create what he calls “Supermarket 2020,” as well as helping brands such as Dr Pepper Snapple to respond to industry trends affecting grocers. “Supermarket 2020” stores de-emphasize goods like toilet paper and other non-food items—things that are easily ordered online—and instead favor fresh foods, especially pre-prepared, packaged meals. The outer perimeter of a store would have amenities like a coffee shop and smoothie bar, as well as a large area where shoppers can pick up online orders. Grocers may rent out outer areas of the store to spas, gyms, or banks in order to create a sort of one-stop place for shoppers to run errands. [The first sentence amended to further clarify how Symphony AI works with its customers.]

With more than 75 percent of Americans now owning smartphones—up from 35 percent in 2011, according to Pew—consumers seem to want the store experience to mimic that of e-commerce, at least in some ways. Used to the sort of “if you liked this, you’ll like that” prompts that appear on sites like Amazon.com, shoppers are increasingly expecting that sort of personalized service in stores as well.

“When they shop online, they have all of this product information: ratings, recommendations,” says Sussman of Aila Tech. “They don’t get that information in the aisle.”

Aila’s kiosks and scanners can bridge that gap, he adds. Supermarket employees use the handheld scanners to get real-time access to inventory and product nutritional information. When shoppers order online, employees use the scanners to quickly find and gather each item on the shopping list for pickup in increasingly popular “click and collect” programs, Sussman says.

Aila places kiosks at deli counters and in wine aisles at its customers’ stores. “In the deli line, it gives grocers tremendous data about the turnaround time for orders, the demand at the deli counter over time, and details on which products are popular,” Sussman says.

Wine kiosks serves as an “e-sommelier,” he adds, that can provide recommendations based on food or make recommendations based on previous purchases using a loyalty program. “A bottle of wine elevates the value of a [shopping] cart by $10 plus the bottle of wine,” Sussman explains. “If they’re buying wine, they’re usually buying other high-value items like cheese and olives to pair with the wine.”

Aila was founded in 2010 as Padloc and today counts as customers retailers such as ShopRite and Giant Foods. The company has raised about $5.6 million in venture capital, according to Crunchbase.

Like their more general retail counterparts, grocers are undergoing a culture change in adopting new technologies. Sussman says he believes that Aila’s focus on using the iOS system—a technology that’s very familiar to most people as Apple consumers—as a foundation for its devices helps make this tech transition smoother.

“There’s a lot of conversation about really cool innovative futuristic technology,” Sussman says. “But there is a tremendous opportunity to leverage current, proven tech to bring digital in-store.”