Lindsey Mazza, Global Retail Lead at Capgemini, guides retailers on integrating tech in supply chain, sales and marketing transformations.
The grocery business is a world of competing demands and even contradictions.
Shoppers are navigating the challenges of rising living costs by spending more cautiously. However, some are still willing to pay a premium for express home delivery. It’s an environment where much focus has been placed on introducing new digital shopping features; however, the largest volume of purchases still occurs in-store, as per the latest consumer behavior study by Capgemini, where I’m global retail lead. In fact, contrary to popular belief, while online shopping is more cost-efficient, in-store shopping often delivers greater margins.
Navigating all this to provide a service that works equally well for consumers and the business is a significant challenge, and we’re seeing grocery retailers apply innovative lateral thinking when tackling it. Before delving into these solutions, it is essential to examine the trends they aim to address.
Fast But Costly: The Challenges Of Rapid Delivery In Grocery Retail
Customer expectations for fulfillment have escalated. What started as next-day delivery evolved into same-day and then two-hour. In some countries like India, 10-minute delivery is becoming more accessible—so much so that consumers can now enjoy food delivery during a train ride, an initiative spearheaded by the Indian Railway Catering and Tourism Corporation with private partners.
Our report found that consumers are willing to pay an additional 7% of the order value for 10-minute delivery, with Gen Z consumers willing to pay up to 10%. This highlights a significant trend: In non-grocery shopping, prompt delivery has become so standard that, to many, waiting until tomorrow now feels unusual.
However, do these increasingly shorter delivery windows signal a broader shift to online grocery shopping? Far from it. Home delivery and buy online, pick up in-store options often result in low- or even negative-margin services. In cases where automating fulfillment has not been achieved, orders typically require manual picking, which can be costly.
This begs the question: If these services are so costly, why provide them at all? The answer is that they’re a loss leader. The convenience they offer helps to sustain customer loyalty and drive foot traffic to physical stores, where higher margins are achieved. Retailers operating at scale can afford these initial losses to gain long-term benefits, as in-store shopping will remain crucial for grocery retail in the foreseeable future. But how do we prevent eroding margins on digital orders or combine physical and digital for a winning proposition?
Blending Digital And In-Store Shopping
Retailers are challenging the status quo by not only enhancing their online experiences but also integrating digital technology into in-store shopping. My company provides tech solutions to retailers, so I’ve seen how this strategy can enrich the shopping experience and strengthen brand affinity.
The shopping journey begins at home. Before heading to the store, consumers typically create a list—either mentally or physically—of the items they need. This list often includes personal preferences and dietary requirements. Here, technology can play a role. Grocery retailers are beginning to develop apps using generative artificial intelligence to store this information, identify patterns and suggest items tailored to individual needs, tastes and budgets.
In-store, grocers can make check-in the new checkout by implementing solutions that recognize when consumers arrive and direct them to the appropriate aisles and sections for each item. This functionality mirrors the technology used by in-store staff for picking online orders. Augmented reality can further enhance the shopping experience, from home decor to fashion and beauty.
Technology can also be used to turn operational data into customer-facing information. For instance, grocers can use AI to anticipate demand and refine orders from suppliers. Grocers can also use technology to evaluate information from individual stock-keeping units to offer targeted recommendations. For example, Too Good To Go uses AI to help grocers identify goods nearing expiration, estimate how likely the product is to sell and recommend discount rates. This can not only enhance the consumer experience but also help retailers manage inventory more effectively and reduce food waste, delivering purpose with a profit.
Taking Stock: How To Implement Tech That Benefits Everyone
Many grocery retailers are leveraging technology to enhance the in-store experience, making it an integral part of their unified commerce strategy. However, the functionality described here is accessible to all. Businesses do not need to operate on a massive scale to use generative AI, augmented reality or repurposed supply chain and logistics data.
To effectively implement these technologies, it is imperative to establish a governance structure aligned with the company’s vision and goals. Organizations can begin by testing internal use cases of generative AI and digital citizen governance models. Once these are achieved on a broad scale, they can then move to consumer-facing programs. However, it’s important to acknowledge potential roadblocks in this journey.
The initial investment in AI-driven solutions, augmented reality or other digital technologies can be significant. Retailers can mitigate this by starting with scalable solutions that can grow as the business expands. Demonstrating quick wins in smaller implementations can help justify the investment to stakeholders.
Additionally, staff learning curves are an essential consideration. Comprehensive training programs, especially incorporating gamified elements, can enhance engagement and ease the transition. Continuous learning platforms can keep staff updated as the technology evolves.
Furthermore, as retailers collect more data to fuel AI and other digital tools, robust data security measures are paramount. Implementing strict data governance policies, coupled with regular security audits, will help protect consumer information and maintain trust. I’ve observed companies leading these efforts set up data organizations for the future that include governance, testing and production stage gates. This helps protect against failure and enable a transition in organizational culture regarding how data is used.
Ultimately, adopting digital innovation should improve both productivity and efficiency within the organization while elevating the shopping experience for consumers. With a tested strategy in place, execution becomes swift and seamless. What’s more, adopting such technology doesn’t have to just benefit the company operationally. They are innovations that can be good for consumers, too.
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