How Kroger Uses Artificial Intelligence (AI) to Innovate

Source: Kroger

Source: Kroger

 

By Tricia McKinnon

In a race to invest in the technology that is catapulting retail into the future,  Kroger is the latest retailer to develop its own version of the store of the future. Amazon has Amazon Go, Alibaba has its Hema grocery stores in China and Walmart is experimenting with self-service and artificial intelligence (AI).  Kroger, the largest supermarket in the US measured by sales, has decided that a partnership with Microsoft that has resulted in digital shelving in-store and an easier as well more customized shopping trip are key elements of the store of the future.  With growing competition from dollar stores and Amazon the grocery sector is poised for a shakeup but if Kroger has anything to say about it, it will continue to stay ahead of the competition. Here’s what Kroger has in store for its customers.

1.   Kroger has introduced new technology in its stores called Kroger EDGE.  EDGE stands for Enhanced Display for Grocery Environment.  The new technology enables Kroger to replace traditional shelves with digital shelves.  These shelves display a product’s price digitally enabling Kroger to change prices in real time, if for example, it wants to undercut the competition. Kroger can also use the digital shelves to display advertisements (including video ads) as well as nutritional information. Digital shelves have already been placed at the end of the aisles in 92 Kroger locations.

2.   Instead of playing it safe and only providing relatively standard data on its digital shelving Kroger decided to go a step further.  Kroger teamed up with Microsoft to provide technology that enables personalized offers to be presented to customers as they approach a digital display.  How exactly is this done? It is accomplished using Microsoft’s artificial intelligence technology that uses facial recognition to identify the age and gender of a customer as they approach a display.  If a customer has not opted in to receive fully customized ads via Kroger’s app then a more generic message is presented on the digital shelf based on a prediction of the customer’s age and gender.  But if the customer opts in they could be presented with a more tailored message based on their shopping preferences. Speaking about EDGE, Kroger Chief Information Officer Chris Hjelm said: "If you are standing in front of nutrition bars and you are gluten-free, we would highlight for you, in your color of choice, which of the gluten-free bars are good for you," 

Is this creepy or the way of the future?  Perhaps customers will see the functionality as beneficial, something that helps them to remember to pick up an item they forgot about.  Currently the technology is being piloted in two stores in the US and the results of the test will determine if the technology is rolled out to more stores.

In the test stores shoppers can also use Kroger’s Shop, Bag, Go self-checkout app or the store’s handheld shopping devices in conjunction with these digital shelves.  A customer can create a shopping list using Kroger’s app and when they arrive in-store the app will guide them along the fastest path to where the item on their shopping list is located in store.  Then as they approach the shelf where the item is located the shelf will display an icon signalling that it is the item the customer is looking for. Once a customer has picked up their item and scanned it, the app shows what the next item on their list is and guides them to it.  EDGE Shelf uses Microsoft’s Azure AI, to connect with Kroger’s Scan, Bag, Go app, to provide a guided shopping experience for customers.

3. The in-store technology that Kroger has launched is not only for the benefit of customers.  Employees are also benefiting.  For employees that are picking items for customers as part of Kroger’s curbside grocery pick up service, a light on the digital shelf lights up so that it is easier for an employee to spot the item they are picking.  It is estimated that this “pick to light” in-store technology can cut in half the time it takes employees to pick items.  

Cameras are also located on the ceilings of the test store to identify out of stock items and notify employees.  There are also sensors located in refrigerators to alert employees if the temperature rises too much, preventing food from spoiling.  

4. Taking a page from Amazon’s playbook (think Amazon Web Services) Kroger and Microsoft plan to monetize the service they have built. The two companies are planning to sell the enhanced digital shelf technology to other retailers who might want to use it in their stores.  There are already several retailers that are in the process of testing it.  Given the thin margins in the grocery industry this is a smart move.  To drive profitability retailers may have to continue to look for profits outside of their core retail business.  While Amazon is dominant in the eCommerce space it has primarily generated its operating income since 2016 from Amazon Web Services, a non-retail business. Speaking about the partnership, Microsoft CEO Satya Nadella said: “together, we will redefine the shopping experience for millions of customers at both Kroger and other retailers around the world, setting a new standard for innovation in the industry.”  

Additionally, the digital shelves will enable Kroger to sell digital advertising space to other brands such as Procter & Gamble Co., PepsiCo Inc. and Kraft Heinz Co. This could prove to be another lucrative stream of revenue for the company.

According to Microsoft, the Retail as a Service (RaaS) solution built by Kroger and powered by Microsoft Azure is a software: “built by a retailer for retailers, supporting modern retail experiences and harmonizing customers’ digital and physical shopping experiences. The rapid transformation platform enables retailers to prioritize its most desired initiatives. Future commercial products include: Scan, Bag, Go; Virtual Store Manager; sensor network; and connectors to corporate systems like point-of-sale, and inventory management, tag and merchandising systems.” Microsoft and Kroger will jointly bring the RaaS solution to market.

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