The future of shopping
How shopping is changing, as new technology blurs the difference between online and physical retailing
The 21st-century version of the helpful corner-shop owner is an algorithm supercharged with consumer data that knows what you want before you know it yourself.
At British supermarket Sainsbury’s, that means an online shopper in the habit of buying cat food won’t see any products for dogs under pet supplies; someone on a diet will be kept clear of tantalising snacks; and anyone with allergies will be warned about items that contain the troublesome ingredient.
“We know you. You trust us. It can be that two-way,” says Clodagh Moriarty, chief digital officer at Sainsbury’s. “The more we learn about you, the better we can be.”
Grocery loyalty programmes have been around for years, but with the help of sophisticated data analytics, they are becoming much more than another piece of plastic to swipe at the checkout. For retailers, they're a direct line into the minds of customers, and store owners are using data to personalise the shopping experience.
The urge to get into consumers’ heads is particularly acute in Britain, where more than 7 per cent of grocery sales happen online, compared with only about 1 per cent in the US. That has turned Britain into a laboratory for retailers trying to offer ever more sophisticated online shopping experiences to compete with internet giants like Amazon.com.
One of the leaders in amplifying online grocery sales is Ocado Group. The British online retailer operates warehouses with armies of robots that fill customers’ orders. While it has just over 1 per cent of the British grocery market, Ocado’s bigger business is to sell its high-tech model to other stores.
Ocado uses machine learning to get to know its customers so well that it can pre-fill a cart with all the items they are likely to buy. As well as delivering the groceries, Ocado will provide reams of customer data to companies on its platform. Clients will be able to see not just what its customers buy, but also what they clicked on and didn’t buy, the order in which items went into the basket and how long it took to shop.
For Jane Jux, 52, of Bray, England, volunteering her personal data is a fair trade. She’s been shopping at Ocado for years and says the grocer helps her keep up with purchasing.
“Sometimes they prompt me to add something to my basket that I hadn’t appreciated I was running low
on,” Jux says. “If they didn’t ‘know’ me they couldn’t do that.”
Ocado chief technology officer Paul Clarke likens the personal touches to the neighbourhood store owner who knew his parents personally and what they typically bought. “Instead of the local grocer who has that intelligence and knowledge, it’s algorithms and machine learning,” Clarke says.
The personalised experience can boost profits by allowing retailers to improve marketing, manage inventory and better design own-label products. Without those capabilities, companies will fall behind as Amazon grows its online business and reaches more customers at bricks-and-mortar stores like Whole Foods and Amazon Books.
“Brands need to start getting to know their customers in a way they haven’t before,” says Zoe Leavitt, a retail analyst at CB Insights based in New York. “If grocery stores don’t have a solid connection to the customer, if they don’t have their own private-label products, they’re only selling products that can also be bought on Amazon.”
Despite all the online buzz, in-store sales remain a key advantage for traditional retailers over their digital competitors. While e-commerce grows rapidly every year, most sales are still made in person. The ability to capture that data and merge it with an online customer profile could be a big asset.