AI plays a new, bigger retail role IN BRIEF Blackouts and fuel costs hammer supermarkets
Shoprite is leading the pack with a 75% share of the online grocery market, while Pick n Pay is also investing heavily in digitisation. By
As technology becomes a bigger part of retailers’ operations, companies are putting more money into artificial intelligence (AI). Shoprite, South Africa’s largest retailer, is a sterling example of the value of such an investment. Neil Schreuder, head of digital at ShopriteX, the group’s digital innovation hub, told that north of R1-billion a year is being spent on digital projects, of which ShopriteX is just one arm.
Since starting out three years ago with a team of three, ShopriteX now has a staff complement of about 300 and is adding 100 new employees a year.
“ShopriteX was born out of the realisation that the future of retail requires slightly different skills to the skills that got our business to where it was,” Schreuder says. “It was a realisation that scarce digital talent – data scientists, software developers and smart technologists – are the people who will either disrupt us or who we could hire in an environment they felt comfortable in so we could attack ourselves.”
The ShopriteX team includes staff with titles such as agile coach.
“We have disciplines in our data science team from machine learning to data engineering to advanced analytics. These are not positions that the business had five or 10 years ago,” Schreuder says.
Two of the big projects the ShopriteX team has brought to market include the Xtra Savings rewards programme launched twoand-a-half years ago and the group’s Sixty60 online delivery platform.
Although the rewards programme was arguably the last launched by a food retailer, it has proved the most disruptive, perhaps justifying the spend on digital professionals.
“It was the first programme to offer instant discounts without the customer having to do anything – you don’t have to activate discounts, or earn 1% back to use at a later stage. We give up to 30% off on things like chicken, rice, oil, washing powder, toilet paper, just by swiping your card and getting instant discounts at the till point,” Schreuder says.
“When we launched, it was so disruptive we signed up one million customers in 72 hours.” In two-and-a-half years, Checkers has signed up 9.3 million members, and Shoprite signed up 15.5 million in one-anda-half years. “We have just clipped 25 million users and we are the youngest grocery rewards programme in the industry.”
The retailer has also broken some international ceilings. It is the first retailer globally to offer personalisation on WhatsApp. If you add Checkers (087 240 5385) to your WhatsApp and type in “offers for me”, you will receive six images with pricing tailored for you.
This initiative is automated and run by algorithms. “It just made sense,” Schreuder says. “There are 14 million South Africans with access to WhatsApp compared with only six million with access to desktop email. We’ve also just launched the same functionality on the MoyaApp, which is a homegrown, data-free version of WhatsApp.”
The investment of time and resources is paying off in bucketloads. Shoprite has moved from having no grocery e-commerce offering to a 75% share of online grocery in South Africa in under three years.
Playing catch-up
Competitor Pick n Pay says it has invested more than R150-million in the past two years in AI or digitisation. Chris Shortt, group executive for information and technology at Pick n Pay, says the group uses an AI-driven algorithm that plots the best store to fulfil an on-demand purchase. It estimates and predicts the basket contents as well as the fulfilment time to meet strict target delivery objectives for each order.
“AI-driven algorithms are also used to drive our replenishment and allocation processes aimed at predicting and ensuring the most appropriate stock levels of the defined assortment at a store level. This drives the supply chain planning and fulfilment to stores.
“From a customer experience perspective, we also make use of a predictive engine that determines what we believe each Smart Shopper is likely to need and buy next and we send them personalised, specific discounts off the back of this predictive engine,” Shortt says.
When it comes to the Smart Shopper loyalty programme, he says the brand has used data from the programme to refine the range in its stores.
The company is playing catch-up with Shoprite and recently launched a partnership with Mr D to offer Pick n Pay customers an online delivery service. The online offering delivers items that customers would traditionally find in a hypermarket nationwide, but also stocks premium, online-exclusive homeware and kitchenware products.
Looking ahead, Shortt says PnP will be using new technology in-store, such as digital and interactive screens, for customers to view promotions or source additional product information.
“Going forward, customers will be able to build a shopping list in our new mobile app (watch this space). We will offer them the options of one-hour delivery, sameday delivery, in-store collection and the ability to go in-store and continue the transaction all the way through to payment,” Shortt says.
In the past six months, Pick n Pay has reported an online sales growth of 82%.
Shoprite CEO Pieter Engelbrecht says the year-on-year fuel price increase of about 56% continues to affect the cost of operations, more so because of rolling blackouts. Although investments in solar power and generators enabled the group’s supermarkets to trade seamlessly, he estimates the additional monthly spending on diesel at R100-million.
Pick n Pay says it spent R110-million more on energy in the six months to the end of August compared with the same period last year.
In two-and-a-half years, Checkers has signed up 9.3 million members, and Shoprite signed up 15.5 million in one-and-ahalf years