As the Christmas and New Year break fast approaches, RTIH Founder and Editor, Scott Thompson, runs through his key retail tech related takeaways from a hugely eventful and fascinating 2024.
Ignore AI at your peril
Using AI to nudge people towards better choices, like suggesting alternatives to high sodium products, could revolutionise how shoppers interact with retailers. So says Global Head of Analytics Ikea Customer Support, Cristina Rutgers-Astolfi.
She comments: “By leveraging data from its Clubcard loyalty scheme, British retailer Tesco is aiming to create tailored recommendations that encourage healthier choices and reduce waste.”
“Their approach not only enhances customer loyalty but also aligns with growing consumer interest in sustainability and health. It’s exciting to see how technology can transform traditional shopping into a more personalised journey, making it easier for consumers to make informed decisions.”
Rutgers-Astolfi was responding to comments made by Tesco CEO, Ken Murphy, at FT Live: Future of Retail 2024, which took place in London during October.
“There have been waves of technology disruption historically. We are on the cusp of another one with AI,” said Murphy in conversation with moderator, Laura Onita, Retail Correspondent at the Financial Times, during the opening session of the conference. “AI will impact every facet of our business.”
Murphy argued that we’re already on the fourth or fifth generation of AI, starting in the late 2000s and moving into machine learning applications last decade to improve supply chains, promotions in retail and so on.
“AI has already had a huge impact,” he commented. “But we’re now into the generative AI era with ChatGPT and the like, which is even more powerful.”
“You still need to be careful and have good oversight when introducing it. But it is developing so fast you do need to embrace it. Allow yourself to make mistakes in a controlled environment.”
Innovation takes time and money
In October, Amazon announced it was closing three of its Just Walk Out technology powered Amazon Go locations in New York City.
The leases for these locations were due for renewal and the online retail giant decided that the associated costs were too high.
“When a lease comes up for renewal, it is standard business practice for retailers to evaluate their store portfolio and decide if it is best to renew or to close the location,” an Amazon spokesperson said.
“In this case, while these three stores were performing well, we couldn’t make the economics work with the lease cost, so we’ve decided not to renew and have closed these locations.”
Meanwhile, US-based checkout-free stores technology startup, Grabango, has shut up shop.
“Although the company established itself as a leader in checkout-free technology, it was not able to secure the funding it needed to continue providing service to its clients,” a spokesperson told RTIH. “We would like to thank our employees, investors, and clients for all their hard work and dedication.”
Launched in 2016, Grabango raised just over $73 million, according to Pitchbook data.
Physical stores still have an important role to play but they can’t operate on their own
While some industry observers might think the future’s bleak for the UK high street, there’s actually a huge opportunity for retail stores to claim a new place in consumers’ lives.
That’s the view of Asif Aziz, Retail Director at EE, which continued to open Experience stores in 2024.
Aziz says: “There’s no doubt that the way we use the high street has changed in recent years. The global pandemic, confidence in the economy, and the cost-of-living crisis have all taken their toll.”
“On top of that, there’s more consumer choice than ever and convenience is a dominating factor. Why go to your local shop when Deliveroo can have groceries at your door in 20 minutes?”
“But despite all this, people are slowly coming back to the high street. And they’re coming back for a reason. They want to interact, to learn, to be inspired, and they want to do that with someone they trust.”
There are ways for brands to digitally deliver expertise, and with advances in AI, it can get even better, he adds.
Aziz comments: “At the end of the day, we’re all human beings who want to be with other human beings. To have an emotional connection with them and make things better in their lives. That’s what motivates people to keep coming into stores. And that’s what motivates us at EE to create a personal experience when they’re here.”
However, stores can’t operate on their own. To truly create the experience retailers want for customers, they need to work with, not separate from, digital channels and call centres.
Stores need to be part of an ecosystem that gives customers the connection, advice, solutions, and service they want, in whichever way they interact with the brand.
Aziz says: “I see our retail stores as one part of an omnichannel experience, where shops act as a showroom for everything EE can offer. I see them as spaces where customers can talk to our Guides, experience the technology that’s out there, be shown how things work and encouraged to imagine the difference it might make in their homes and lives.”
“Beyond that, it genuinely doesn’t matter how customers buy their tech. As retailers, we need to value more than what goes through the tills. Instead, we should be focusing on the lifetime value of our customers where retail plays its part in experience, brand presence and customer acquisition for the total business.”
Grocery retail remains a tough nut to crack even for those with deep pockets
As Tony Hoggett departed Amazon in November, where he served as SVP of Grocery, to join Marc Lore’s food delivery startup Wonder as Chief Operating Officer, supply chain consultant and former Amazon executive Brittain Ladd argued that his former employer was failing in its attempts to crack the physical grocery market.
Ladd said: “According to over a dozen sources I spoke with since Tony Hoggett left for Wonder, Amazon’s physical grocery strategy is failing.”
“On 6th July 2021, Amazon hired Tony to be SVP for both physical stores and online. Tony was recruited from Tesco. He is truly an expert in all aspects of running a successful grocery retailer. He learned very quickly that Amazon doesn’t understand the grocery business.”
Ladd argues that, instead of solidifying a single integrated grocery offering supported by a best-in-class distribution and logistics network, Amazon chose to build a chain of competing offerings – Amazon Fresh and now Amazon Grocery – even though it had acquired Whole Foods Market (WFM) in 2017.
According to his sources, “Amazon Fresh is struggling to keep products on the shelves because our supply chain is so bad. The stores are nice but sales are low as customers know the products they want will be out of stock. The customer experience is terrible.”
Ladd continued: “Tony identified that WFM had to improve. He had “big plans” to grow sales by requiring WFM to stock and sell Coke, Tide, Oreos and other CPG products in their stores. “Selling CPG products at WFM won’t dilute the brand,” was Tony’s point of view according to sources.”
“WFM CEO Jason Buechel reported to Tony, “but Buechel refused to listen to Tony.” Andy Jassy and Doug Herrington failed to support Tony and force WFM to sell CPG products even though “95% of the customers leave WFM stores to buy CPG products at a competitor of Amazon.” Tony was frustrated. WFM’s refusal to sell CPG products forced him to “create workarounds for getting CPG products in the stores without customers seeing the products.”
Amazon is piloting an automated MFC from Fulfil inside a WFM at a cost of $7 million to hide CPG products in a back room. It is testing out an an Amazon Grocery store that sells CPG products near a WFM. A source told Ladd: “The workarounds add millions in costs. Everything we are doing is only to keep WFM happy.”
In 2025, Amazon is opening a 250,000 square feet Supercenter near Simi Valley, CA.
A WFM will be launched inside the Supercenter along with an Amazon Fresh store. Customers will be able to buy their favourite organics and Cheetos in one location. 50,000 square feet will be dedicated to automation. Fulfil is installing an MFC focused on chilled and frozen. Amazon is using its own MFC technology to manage all ambient temperature picking.
It has, meanwhile, ended its relationship with AutoStore. It wanted to invest in the 2024 RTIH Innovation Awards finalist or potentially acquire the company but AutoStore declined. Amazon walked away and partnered with Fulfil. It is also in discussions with Fabric and Instock.com.
As to who will replace Hoggett, Ladd says that his choice would be Eric Rimling. “Amazon should assess opening Whole Foods+ stores that will sell organics and CPG products. It should assess an acquisition of Publix,” he concluded.
An Amazon spokesperson told RTIH “We’re happy with the progress we’ve made in making it easier to shop for groceries, and saving customers time and money and our commitment to this space does not falter with Tony’s departure.”
“Tony built a strong team with some of the best grocery and tech talent in the industry and this team will continue in its charge to make grocery shopping simpler, faster, and more affordable for customers.”
Retailers must meet next generation of customers where they are online
Walmart’s second No Boundaries drop on ZEPETO recently went live.
This includes ten virtual twins of real-world NoBo items from the US retail giant’s winter collection and a “cozy chalet” video booth backdrop for the ZEPETO community to create and share with their friends.
Walmart has also partnered with ZEPETO creator, TuLiP TLP, to create three limited edition items inspired by the broader winter collection.
“This type of activation might not resonate with you, but it does resonate with the more than 20 million MAU on ZEPETO,” says Justin Breton, Head of Brand Marketing Innovation at Walmart.
“It’s another example of how we’re meeting the next generation of customers where they are online and empowering them to discover, try-on, and express themselves with virtual fashion, all of which translates to real-world brand love and purchase intent.”
Self-checkout backlash is, for the most part, unfounded
2024 has seen a backlash against self-checkouts, with the likes of the BBC laying into the technology. But self-checkout isn’t the problem; poor technology design and lack of user experience testing are. So says James Pepper, CEO at Vista Technology Support.
Responding to a RTIH Secret Shopper article, and discussing a recent trip to a Pull&Bear store, Pepper said in a LinkedIn post: “I am a big supporter of physical retail, but poor implementation and lack of user experience testing will only drive customers online.”
Amen to that.
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