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Left Coast / Right Coast: The future of food retailing

A recent story about the Kroger supermarket group (Fred Meyer, QFC, Ralphs - California mostly, many others) testing high tech shopping is quite interesting. About 94% of Kroger revenue comes from food stores, so this announcement is a really big deal.
Mike Gold living the dream in the Pacific Northwest. Photo credit: Scott Brown.

By Mike Gold, a retired entrepreneur "living the dream in the Pacific Northwest."

A recent story about the Kroger supermarket group (Fred Meyer, QFC, Ralphs - California mostly, many others) testing high tech shopping is quite interesting. About 94% of Kroger revenue comes from food stores, so this announcement is a really big deal.

Now when you read through what they’re planning, you get just a surface look at how they view the future of their food stores.

Three examples:

1. When you enter a Kroger food store, either you can pick up an electronic device at the store’s front, or use an app on your smart phone. If you have previously created a list of what you want to purchase, this app will direct you isle by isle (in the most efficient way) to the items on your list.

The app also has a complete history of what you’ve bought in the past. So the app will also make suggestions, such as: “You recently purchased charcoal and lighter fluid, so we recommend the following selections of meat on sale at our butcher counter.

2. Cameras located at the end of each isle, using face recognition will direct you to items in that isle that based upon your history you are most likely to be interested in. (Note: the ability of a computer system to predict what you might be interested in is called “an Inference Engine.” It uses artificial intelligence using past behavior to predict what your future behavior might be.)

3. Also, the price tags on the shelf front for each item will be electronic displays. So Kroger can update prices at the rate of 20,000 updates per minute. I imagine that the system will know what you are most likely to buy (along with what related items would logically go with that item) so your app can tell you what combination of items will give you the best discount.

The economic return on investment is based upon a reduction in labor to place current prices on each item (on its shelf), future reduction in cashiers, and other things this technology provides.

As the company moves into brick and mortar stores, Amazon already is testing stores in which there are no cashiers. The phone app shoppers use knows, based upon electronic tags, what you walk out the door with so your purchase is automatically added to your account.

So Kroger's (and I am familiar with similar developments going on at Albertsons/Safeway and other food retailer chains) adoption of these new technologies is simply an attempt to keep up with Amazon who currently controls approximately 50% of all on-line retail sales.

Note that Amazon’s purchase of Whole Foods simply addresses what is called “the final mile” along with their insatiable appetite to dominate every retail business there is. Every on-line business may require some “hands on” interaction directly with the retailer – things that require you to be at the point of sale.

In other words, items like food (where you might want to inspect your purchases before leaving the store) will require some “on-site” experiences. QFC, as one example, already allows you to shop on-line, then drive to the closest store – where there is a special parking area near the front door. A person then delivers your purchases directly to your car.

A neighbor of mine has a part time job delivering these purchases directly to your home. These retailers also have agreements with Uber/Lyft to deliver from store to your home.

All of these “advances” are designed for the younger demographic, already used to on-line shopping. It’s simply the next logical step.

We are also entering the era of “the Internet of things, Ultimately every electronic device will have a URL address (so it may be connected to the internet). So imagine that your refrigerator is one such device. It may, automatically, create a shopping list based upon what is currently in your fridge, your past food purchase history, the use of an inference engine, and how many and what type of meals you make at home per day/week, etc. So all you have to do is press the “go” button on your app, and depending upon whether you “pick up” yourself, or “have it delivered to your home,” with minimum effort, you are ready to prepare dinner.

Frankly, this type of automation scares me to death. Why? Because it is, to me, a violation of my personal space. Next thing you know there will be toothbrushes, which will gauge how well you’re brushing, and give you a dental report. (In fact, they are already under development.)

Pretty soon, we won’t have to ever get up from our sofa. So in the long term, our legs could become Vestigial Organs.

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