Yesterday’s article from the french economic publication “Boursorama” reminds us of the tremendous global effort under way across grocery retail to update their business model to address changing customer trends.

Up to 10% of the cost structure is at stake

In the fight between online grocery, big box and smaller outlets, R&D expenses are on the rise. The race to define an optimal business model that meets latest customer requirements, such as a frictionless purchase experience together with advice wherever needed, is gathering pace.

In most grocery retail chains the cashier function represents between 30% and 50% of staff in store and up to 10% of total cost. There is opportunity to digitize this and free up staff and cash for other uses. With automation increasing across the value chain, the increasing move of technology from back-office to front-of-house is inevitable and presents some interesting opportunities, and risks, to grocers.

The prize for the perfect solution is still to be won

Amazon seems to go for the “perfect solution”, where a mix of sensors, cameras and artificial intelligence aim to track consumer’s behavior. This is not only expensive but it also raises data privacy concerns. It remains to be seen whether all countries will agree to the privacy risks gathering this data on such a massive scale may bring. 

There is also significant complexity. In bricks and mortar stores technology would need to manage successfully 100,000 + stock keeping units in some stores. This is one of the limitations of RFID where fewer than 95% are succesfully tracked meaning that the cashier process and staff are mostly still required. 

Some grocery operators are testing much more practical solutions: Auchan has implemented self operated stores (some in China) which use a process of digital self declaration of items; Monoprix has deployed balance technology to track when a product leaves the shelf. In both cases, hardware and software costs are likely to be much lower than Amazon’s, together with low risk in terms of privacy laws. Some of this cost could be offset by a reduction in the cost of stolen items. However, anectdotally, initial findings in French testing have, so far, been lower than expected.

From a mostly trust based system to a full immersive AI technology, net cost is likely to end up defining the winners from the losers. In this context, increasing consumer and retailer confidence in low cost systems should be investigated swiftly. The stakes are high and, with no clear winner in sight, there are huge opportunities for those that find the 'perfect solution'.