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Pure-play not likely the way in online grocery

U.S. consumers are taking a cross-channel approach to online grocery shopping in which brick-and-mortar retailers are holding their own versus pure-play e-tailers, a CoreSight Research survey finds.

Of U.S. adults who have bought groceries online in the last 12 months, 50.8% chose to pick up their orders in stores, while 45.3% opted to have their purchases delivered, according to CoreSight’s “U.S. Online Grocery Consumer Survey,” released this week.

About 60% of shoppers who purchased groceries online from Walmart collected their orders at the store, and 74% of those who bought online from Kroger picked up their groceries themselves.

“It is much more difficult to make pure-play Internet retailing work in the grocery category than in nonfood categories, and Amazon’s recent history supports our conclusion,” New York-based CoreSight said in the report. While Amazon’s acquisition of Whole Foods Market and launch of Amazon Go stores have given the online giant a brick-and-mortar retail footprint, the company has withdrawn AmazonFresh from some areas and folded AmazonFresh into Prime Now.

“Meanwhile, other major grocery retailers have been rapidly expanding their collection services, enabling more shoppers to pick up their grocery orders from stores,” the study said. “This reflects the strength of cross-channel shopping in the grocery sector.”

Amazon’s grocery order pickup options are limited, since the company doesn’t have stores that serve as regular collection points, CoreSight noted. Shoppers who want to collect their groceries must have them shipped to Amazon pickup lockers, which are also available in some Whole Foods stores. Two AmazonFresh pickup centers also have been in operation for over a year.

“The mature online grocery markets of the U.K. and France, where multichannel retailers dominate, further indicate that it is not pure-plays that tend to lead in online grocery,” CoreSight said. “We expect to see Amazon innovate further to avoid facing a similar situation in the U.S. as online pure-plays have faced in mature European markets.”

Still, Amazon sits at the top of the list for online grocery shoppers. Of online grocery purchasers in the past 12 months, 59.5% said they got items at Amazon. The next highest was Walmart, well below at 25.5%.

The drop is more dramatic after that: Kroger Co. banners (Kroger, Harris Teeter, Fred Meyer, Smith’s Food & Drug) at 8.1%, Target at 6.9%, Costco at 6.2%, Whole Foods at 3.7%, Albertsons/Safeway at 3%, Publix at 2.8%, Aldi at 1.6% and Ahold Delhaize’s Hannaford and Food Lion chains at a combined 0.7%.

“Amazon is by far the most popular retailer for online grocery purchases. Otherwise, Walmart, Kroger, Target and Costco are the only retailers with meaningful numbers of online grocery shoppers — and Walmart has a big lead among those retailers,” the study said.

Online-only grocery services Peapod (owned by Ahold Delhaize) and FreshDirect were cited by just a sliver of shoppers — 3.7% and 2.5%, respectively — as a recent online grocery purchase destination. “Only a very small number of consumers we surveyed said they shop at Peapod and Fresh Direct,” CoreSight said. “This may be attributable to the two pure-plays’ limited geographic coverage.”

Overall, 23.1% of respondents have bought groceries online in the last 12 months, and 25.8% said they expect to do so in the next 12 months, the survey found.

Most shoppers purchase only a fraction of their groceries online. Of those polled, 38.4% said they bought a “small amount” of groceries, 33.3% bought “almost none,” 14% bought “some,” 8.5% bought “most” and 5.8% bought “all or almost all” online.

“Amazon may be the top choice among consumers buying grocery items online, but few shoppers appear to be using the site for regular, full-basket food orders,” according to the report. “By contrast, those who have bought groceries online from Walmart in the past 12 months are more likely than average to do most or all of their grocery shopping online.”

This year, e-commerce will account for just 2.4% of total food and beverage sales, or about $23 billion in a nearly $1 trillion market, CoreSight estimates.

And with major supermarket banners and regional players “piling into e-commerce” via acquisitions, partnerships with delivery services and rollouts of collection points, Amazon “appears to be recognizing how hard it is to gain traction in grocery with an online-only operation,” the researcher noted.

“The popularity of grocery pickup services and the extension of same-day delivery by retailers such as Target seem to foretell a polarization in online grocery,” CoreSight said. “We expect to see lower-cost, collection-based services fulfilling the majority of large, family-type orders and premium services such as Amazon Prime Now and Shipt fulfilling smaller orders via same-day delivery.”

Source: Supermarket News

Kroger, Sprouts Farmers Market on the future of the grocery store

How does the retail grocery industry adapt to the challenges wrought by e-commerce, and the consumer’s propensity to shop with their mobile devices and wanting access to more information about the food they buy?

It’s a tall order, to say the least and a topic a pair of retail grocery executives tackled in a session at the recent ShopTalk conference at the Sands Expo Center in Las Vegas.

Amin Maredia, CEO of Sprouts Farmers Market, and Yael Cosset, chief digital officer at Kroger, agree the grocery store of the future will be more experiential and visual. As to what this store will specifically look like still remains uncertain, however.

The two executives were interviewed in the panel by moderator Diana Leza Sheehan, vice president of retail and shopper insights as Kantar Consulting.

Home delivery and click-and-collect

Sheehan wasted no time asking Maredia about two of the hottest retail trends — home delivery and click-and-collect.

Maredia said the future for home delivery and click-and-collect is foggy for the grocery segment. He acknowledged that these are critical areas and that no retailer wants to be left behind. But he also explained that most food e-commerce is in commoditized, non-perishable products as opposed to the categories that his company focuses on — fresh food.

While e-commerce is expanding, there is another consumer trend taking place in the grocery segment that favors physical retail: the rising importance of fresh product.

“There’s a movement toward fresh since everything’s shrinking back down in the (homeowner’s) pantry,” he said.

Mareida said his company is testing click-and-collect, but noted most consumers are still in the habit of visiting the store for fresh food.

In response to the rising importance of fresh food, supermarkets are focusing more on understanding the consumer’s mindset and simplifying the customer’s experience than on pursuing a “sales” approach, he said.

Integrating physical with digital

Sheehan shifted focus to another hot retail trend: the integration of digital and physical commerce.

Asked how his company is addressing integrating the two, Cosset said using digital tools to enhance the physical experience is both a challenge and an opportunity for supermarkets.

One immediate way retailers, partnering with brands, can make the shopping experience more personal is by leveraging consumer data in developing recipes, Cosset said.

He noted that enabling curated experiences through digital channels will involve more data than ever used before.

“It’s really bringing the two (the physical and digital) together,” Cosset said.

Asked to specify what technologies will make this happen, Cosset said augmented reality and virtual reality are two that will provide opportunities to use data in ways that impacts the physical store.

“The technology is an enabler and the data is the fulfiller,” Cosset said.

Digital and physical support each other

The more digitally engaging a grocery is with the customer, the more they shop the physical store, Cosset said. He cited this as one of the most fascinating discoveries about the physical versus digital issue.

“We do have to invest significantly in the digital,” he said, adding customers are demonstrating daily that they aren’t choosing one (physical or digital) over the other. It may be a counter-intuitive observation, he said, but it is a reality. He said over three quarters of Gen Z consumers desire access to a physical store when shopping for a specific brand.

Cosset said he wished e-commerce was happening faster for groceries and noted that younger consumers tend to spend more time shopping through digital channels. The U.K. which is further ahead in grocery e-commerce than the U.S., offers some guidance for U.S. grocers, Cosset added.

Source: Retail Customer Experience

Amazon Report Sends CVS, Walgreens, These Drug Distributors Soaring

Amazon has shelved plans to become a wholesale distributor of prescription drugs due to the cost and complexity, CNBC reported.

The news lit a fire under shares of beaten-down drug retailers and distributors. CVS Health (CVS) shot up 4.2% and Walgreens Boots Alliance (WBA) jumped 3.8% on the stock market today. Both were off session highs.

Among drug distributors, McKesson (MCK) rose 3.5%, AmerisourceBergen (ABC) 2.25% and Cardinal Health (CAH) 3.1%.

Amazon shares didn’t react negatively to the news, rising 0.75% on Monday.

The report seemed to have the most direct connection to the trio of major drug distributors that handle logistics for major drug manufacturers, a big revenue but low-margin business. Complexity, such as handling temperature-sensitive products, and the lack of interest among hospitals in switching purchasing relationships, will keep Amazon out of the business.

Investors seemed to interpret the move as decreasing the likelihood that Amazon will enter the retail prescription business, giving a boost to CVS and Walgreens. If so, then Amazon investors apparently don’t think the internet retail giant needs prescription drugs to win over and keep customer loyalty.

Amazon could still enter the prescription business, such as via an acquisition of Walgreens. Or it could start small with just online pharmacy.

Walmart Mulls Health Care Moves

Meanwhile, Walmart appears to be increasingly focused on health care and pharmacy as a key to boost sales and loyalty. Walmart is reportedly in talks to merge or deepen its partnership with Humana (HUM), whose managed care businesses is focused on the Medicare population.

Shares of Walmart climbed about 1%, but didn’t see much of an uptick after the Amazon news broke.

Cigna (CI), the managed care provider that is buying pharmacy benefit manager Express Scripts (ESRX), rose 2%.

Shares of UnitedHealth (UNH), the largest managed care provider, rose 2.7%. UnitedHealth reports before the open on Tuesday.

Source: IFEBP

U.S. sees slowdown in new grocery space

Addition of new grocery square footage slowed last year as retailers scaled back store openings and smaller formats took hold, according to real estate and investment firm Jones Lang LaSalle (JLL).

In 2017, grocery store openings dropped 28.8% year over year, JLL’s 2018 U.S. Grocery Tracker study found. The decline reflects chains’ efforts to re-examine their current store footprints and fine-tune strategies to deal with new competition — both online and brick-and-mortar, the report said.

Activity varied by market area. JLL said California led the way in 2017 with 1.6 million square feet of new grocery store space. Also seeing strong growth were Virginia and North Carolina, which combined had about 2.7 million square feet of new space. And Texas was described by JLL as “still one of the hottest states for grocery expansion” with 1.2 million square feet of new space, though that total dropped from 3 million square feet in 2016.

Across the United States, California accounted for 12.2% of new grocery square footage in 2017, up from 10.8% in 2016. JLL cited Sprouts and Grocery Outlet as growth drivers, as the chains represented 47.7% of California’s openings. Both retailers aim to continue “ambitious expansion plans for 2018,” with Sprouts looking more closely at the Mid-Atlantic region and Grocery Outlet sharpening its focus on its current markets, the report said.

Virginia had 10.4% of new U.S. grocery square footage in 2017, up from 5.1% in 2016, while North Carolina’s share rose to 9.4% from 5.2%. Also seeing gains were Florida at 6% of new U.S. grocery space (4.8% in 2016), Maryland at 4% (2.4% in 2016), Pennsylvania at 3.7% (2.7% in 2016) and Illinois at 3.7% (3.2% in 2016.)

Texas’ slice of new U.S. grocery square footage shrank to 9.2% in 2017 from 16.1% in 2016, JLL reported. Other states with decreases included New Jersey, down to 3.6% from 5%, and Georgia, down to 3.3% from 4.3%.

Germany-based discount grocery chains Lidl and Aldi remain movers and shakers in the U.S. market on the expansion front, JLL noted in its study. Lidl opened its first stores in the Mid-Atlantic and expanded swiftly, edging toward New Jersey. That helped boost supermarket space in Virginia and North Carolina, which together had 19.7% of all new grocery square footage in 2017.

Yet Lidl, after rolling out nearly 50 stores last year, “may have experienced a rocky start in the U.S. and could be rethinking its real estate strategy. This is evidenced by the fact that several construction projects have been halted, and 2018 projected openings are a fraction of those the year before,” the report said, adding that the chain “will require a slower and more tailored real estate strategy going forward.”

Meanwhile, Aldi plans to invest $3.4 billion in store expansions over the next four years, which will include remodels of 400 stores to enhance the shopping experience, according to JLL. During 2017, Aldi focused its expansion on California, Virginia and Texas, “although many other communities across the U.S. also saw an Aldi open,” the report said.

Going forward, supermarkets should retain high interest as anchor tenants for shopping centers. Investment in grocery-anchored centers grew 5.3% in 2017, JLL reported.

“It was one of the only retail sectors to see growth in a year of low transaction volume,” the study said. “Grocery-anchored centers remain a safe bet for investors, as overall transaction volumes for retail have been down, indicating that the asset remains a stable sector.”

Another clear trend is smaller-footprint stores — not just from more compact formats like Trader Joe’s and Aldi but also from traditional supermarket chains and mass merchants like Walmart and Target, JLL said.

For example, grocer Hy-Vee recently announced that smaller stores of 10,000 square feet will be part of its expansion strategy, and supercenter chain Meijer aims to bring its Bridge Street Market format — about 37,000 square feet in its downtown Grand Rapids, Mich., location — to more cities.

James Cook, director of retail research at Chicago-based JLL, noted that smaller formats give retailers more flexibility in terms of property availability in desired locations, opening up opportunities in population-dense urban neighborhoods as well as mixed-use projects.

“The traditional concept of a grocery store is changing. We’re seeing more smaller boutique brands with specialized inventories,” Cook wrote in JLL’s “Real View” blog earlier this month. “Traditional and niche grocers alike are increasingly considering, and actively leasing, smaller spaces in line with changing consumer food shopping habits.”

But ultimately for retailers, it comes down to giving customers the optimum mix of choice and convenience — from online shopping to grocery delivery and click-and-collect platforms — no matter what the size of the store, according to Cook.

“The grocers that can deliver the right in-store experience, combined with the right online pickup or fulfilment plan,” he said, “those are the ones that will thrive, whether their stores are 15,000 square feet with limited products or take up a footprint four times as large.”

Source: Supermarket News

These 7 international retailers want to make a splash in the US

Most shoppers have probably heard of Zara, H&M, Uniqlo, Aldi or Lidl, all retailers that ventured into the U.S. after they found success overseas.

Now, the number of international retailers — apparel brands, grocers, cosmetics companies and more — looking to move to America is growing at a rapid clip, industry experts have told CNBC. But making a splash in a new country isn’t easy, even for well-established brands. H&M and Zara, for instance, had to pull back on opening new stores as sales rocketed online and foot traffic disappointed in certain cities. There’s often some trial and error involved, as shoppers’ taste preferences vary by market.

“We see many international retailers reluctant to come to the U.S. [after] you’ve seen big retailers take longer to resonate here than elsewhere,” said David Zoba, chairman of the global retail leasing board at commercial real estate firm Jones Lang LaSalle. “It’s not an overnight success.”

Still, there are plenty of brands preparing to make the leap. It’s an opportune time, considering the amount of vacant storefronts and the number of older retailers going bankrupt.

Many of these companies are getting a chance to test the U.S. market by selling goods at a pop-up exhibit called “The Edit” at the Roosevelt Field Mall on Long Island, New York. Simon Property Group, the mall’s owner, last month announced the latest round of brands rotating into the space, and all but one came from overseas.

Many international brands are leveraging their e-commerce expertise to generate bigger sales when they finally do move to America. They also tend to operate on the forefront of proven retail trends by opening smaller stores and pushing fast-rotating inventory.

“If you have a unique product or you’re luxury, that’s what has done the best in the U.S.” so far, Zoba said. “I really think the future [of retail] will have more … international brands.”

Here are seven international retailers looking to grow in the U.S.:

    • Primark

      Having opened its first store in Dublin in 1969 and growing steadily in Europe since then, Primark is just starting to make its mark in the U.S. The clothing and accessories retailer now operates a handful of stores in New York, New Jersey, Pennsylvania, Massachusetts and Connecticut. With some of its locations, Primark has partnered with Sears Holdings to move into unwanted space in high-demand and high-trafficked malls, like Staten Island. While the retailer is still looking to build brand awareness in the U.S. before opening more stores, real estate landlords tell CNBC they’re excited to bring Primark into their properties.

      A customer walks with her purchases outside Primark's flagship store on Oxford Street in London.

      Getty Images
    • L:A Bruket

      L:A Bruket is one of eight international brands now housed at The Edit. The Swedish brand sells homemade spa products like soaps and scented candles. L:A Bruket can also be found at J. Crew and Anthropologie, among a handful of other established U.S. retailers. The company is testing its stand-alone shop at Simon’s mall before embarking on further expansion.

      Source: L:A BRUKET
    • KidZania

      Some of malls’ vacant storefronts will come back to life with nontraditional retailers. Mexico-based KidZania plans to jump into the market soon, and shoppers should expect to see more experiential-play offerings across the U.S. KidZania currently runs 24 entertainment centers worldwide and will make its debut in America in Dallas, Chicago and New York by next year. Inside a KidZania location, kids role-play in interactive cities, managing their own money and learning about various careers.

      Vyacheslav Prokofyev | TASS | Getty Images
    • Parfois

      Parfois is another tenant at The Edit, where it’s operating its first U.S. shop. The Portuguese women’s fashion and accessories brand has more than 700 stores around the world, having amassed a loyal following among shoppers in Europe. Parfois is most famous for its eclectic handbags and wallets.

      Source: Parfois
    • Compagnie de Provence

      Compagnie de Provence makes soaps, fragrances and other home care products, all naturally sourced from Marseilles, France. It’s currently operating at The Edit, and upscale department stores such as Nordstrom and Bloomingdale’s also carry some of its products. Like many beauty brands today, the company is experimenting with running its own storefront. Expect to see more of Compagnie de Provence’s shower gels and shea butter on shelves soon.

      Source: Compagnie de Provence
    • Superdry

      Superdry has been making its name known in the U.S. since opening its first location in New York’s NoHo neighborhood in 2009. The spunky British apparel retailer, famous for its Japanese design flare, now has a handful of locations in the Northeast and on the West Coast. It also runs locations in Florida, including some that offer thriftier goods in outlet centers. Superdry is experimenting with some shops in the U.S. dedicated entirely to sports apparel. The co-founder of the retailer, Julian Dunkerton, recently left the company but said Superdry is about to embark on “ambitious growth plans.”

      Source: Superdry
  • Bershka

    Europe-based Bershka is another effort from Zara’s parent company, Inditex, and it’s testing a retail presence in the U.S. in New York’s SoHo neighborhood. It opened a shop there last year and targets a slightly younger audience than Zara. The SoHo shop is only scheduled for a temporary run, allowing Bershka, which sells apparel and accessories, primarily for women,
    to test the U.S. waters. Bershka has already built a loyal following of shoppers overseas, especially in Spain. If the American store finds success, there could be more to come.

     

Source: CNBC

Reports of Retail’s Death Are Premature

Earlier this month, Senator Marco Rubio reacted to news of rising mall vacancies by calling for help for the “millions of workers who will be increasingly displaced.” Yet for all the talk of the “Death of Retail,” reports of store chains going bust and malls closing, the stock market appears to be telling a more upbeat story.

When it comes to equities, much of the downside is already priced in. For example, the S&P 1500 Textiles and Apparel Industry Index, a list that includes Michael Kors, Steve Madden and Perry Ellis, has been outperforming the broader market for the last year. Despite the reporting about Amazon laying waste to the sector, major department stores such as Macy’s and Kohl’s have been outperforming the broader consumer discretionary sector this year.

In many cases, the headlines overstate the weakness in the sector, but structural issues in the retail industry aren’t a new phenomenon.

There is a widely held belief that the rise of e-commerce has led to widespread job losses in the retail industry. However, employment in the trade has been declining as a share of private sector employment since the mid-1980s. At 12.7 percent, retail’s share is at its lowest point since the 1970s. This relative decline in jobs has occurred even as consumer spending climbed to 69 percent of gross domestic product from about 63 percent in 1985. Long before consumers started buying goods online, they were already shifting away from retailers.

Today’s market focus, nonstore retail employment, a proxy for e-commerce, has admittedly been surging since 2010. However, retail employment outside of nonstore retailers was advancing at a fairly respectable pace until early 2017. From 2010 to 2016, it grew just over one percentage point a year, broadly in line with the growth in recent cycles. Last year, retail employment excluding non-store retailers declined by just 0.3 percent.

Of course, some retail industries are not especially vulnerable to internet competition, at least for now. For example, since 2010, motor vehicle and parts dealers, gasoline stations, building-material and garden-supply stores, and food and beverage stores have been large drivers for retail employment. However, it is not immediately clear these subindustries are in direct competition with internet retailing. Thus, it seems there has been continued job gains in the retail industry since 2010 with some shifting of employment between subindustries along the way.

As the chart above shows, department stores have been the largest drag on retail employment since 2010. After a modest improvement after the end of the recession, department store employment has been falling steadily since 2012.

The Bureau of Labor Statistics places department stores under the umbrella of General Merchandise Stores, which are establishments that sell a wide variety of goods from a single location. Warehouse clubs and supercenters also do this, and employment growth in this category has been on the rise.

A similar phenomenon is occurring in commercial real estate. Since 2010, commercial construction of “merchandise shopping” has climbed at a mediocre 4 percent annualized pace. By contrast, real construction of warehouses, which benefits from online retailing, has surged 15.8 percent. Like employment, this is an example where changing dynamics in the retail industry have produced a shift from one subsector to another, not an erosion of total activity.

The gap between the subindustries of department stores and warehouse clubs suggests that for certain goods, consumers may not value the shopping experience all that much. Heading to a warehouse to buy staple household goods in bulk is fine, but Americans may want something more when going to a traditional department store.

So take the ominous reports of retail’s demise with a grain of salt. Yes, e-commerce has displaced many retail jobs, causing some very visible damage, such as empty malls. But other retail categories appear to have picked up the slack. Although this macro analysis could mask distributional and regional consequences, for now, let’s focus on the positive: Retail employment continues to rise, and the bad news is largely priced into the market.

Source: Bloomberg

How Instacart Is Ramping Up Its Grocery Strategy To Fend Off Amazon

Amazon’s announcement last June of its plan to buy Whole Foods served as a wake-up call to grocers that the threat of e-commerce could no longer be ignored. And grocery-delivery startup Instacart, known for its same-day delivery from big-box supermarkets, was ready to help.

In February, the company closed a $200 million funding round, which it will use to beef up its digital logistics tools, double the size of its corporate team, and help bring more grocers–both big and small–onto its platform.

“This industry has been waiting for a catalyst and a change moment for a long time,” says Instacart’s chief business officer, Nilam Ganenthiran. “We’re very thankful to the folks up in Seattle for helping drive [our growth].”

Since Amazon’s big buy, Instacart has signed on large grocers such as Kroger and Albertsons, while expanding its existing partnership with Costco. Instacart has long pitched itself as a “best friend” to retailers. Now, that angle is even more appealing to grocers eager to embrace mobile ordering and delivery while Instacart figures out the nitty-gritty logistics.

The company now partners with six out of seven of the largest grocery stores in the U.S. and is in more than 210 North American markets. And its member base tripled last year, Ganenthiran says. Instacart is drawing on the breadth of its local partnerships to better compete with Amazon, which recently began testing same-day delivery of Whole Foods groceries to Prime members.

“The connections that retailers have made in their communities are so important if you’re trying to get customers to buy groceries online,” Ganenthiran says. “We’re finding we can be a great complement to what these retailers already have.”

Milestones: This spring, Instacart acquired Toronto delivery startup Unata to help develop its voice-ordering and coupon-circulation technology, as well as help it delve deeper into international markets.

Challenges: Because of its scale, Amazon has the ability to offer reduced prices on produce and its two-hour delivery, which is free for Prime members.

Source: Fast Company

Walmart Partners With Postmates To Expand Grocery Delivery, Going Up Against Amazon

Walmart announced Tuesday that it was teaming up with on-demand delivery service Postmates to expand its grocery-delivery business, in another effort to compete with Amazon. The partnership will allow Walmart to provide same-day delivery of fresh food and other items to customers who order online, starting in Charlotte, North Carolina, and expanding to 100 other metro areas in the coming months. Amazon, which acquired Whole Foods in June 2017, and other retailers, including Target, also offer same-day delivery of groceries.

With the addition of Postmates, Walmart says it will be able to reach about 40% of households around the country. Customers place orders through Walmart’s website or already-existing grocery app, which is available on mobile devices, and choose a window of time for delivery. The minimum order is $30 and the delivery fee is $9.95, which seems a bit hefty, but Walmart does offer free pickup service in some locations to customers who want to order ahead and come into a store to get their packages. Walmart has also been partnering with delivery service providers from Uber and Deliv to haul groceries in California and other areas.

In another development, Bloomberg reported on Tuesday that Walmart was slowing down the pace of its acquisition of third-party vendors to its e-commerce marketplace, in an effort to make sure sellers it approves are offering useful products. The change comes after criticism that Walmart was being overly aggressive in expanding its marketplace offerings, with some vendors adding little or nothing in actual value. Walmart now says it aims to offer only quality items through its marketplace. By contrast, Amazon doesn’t have an approval process, but allows any vendor that applies to peddle its wares on the site.

Source: Forbes

The days of the retail clerk are over

What does the future hold for retail employees? Well, there’s just no way to put it gently. The days of the retail clerk are over. By clerk, I’m referring to the millions of retail workers who operate checkouts, greet customers at the door, count inventory, look up prices, scan bar codes, corral shopping carts and do their best to remember snippets of product information about the vast assortments they carry. These jobs will all but disappear within 20 years, perhaps sooner.

Part of what’s driving this change is the quickly growing gap between customer service expectations and reality. A recent survey indicated that a full 48 per cent of shoppers today believe that they know more about the product they’re looking for than the sales associate helping them, and chances are they’re right. It’s never been easier to rapidly gather knowledge about specific products.

More startling, though, is that 67 per cent of those surveyed have doubts about whether the sales associate helping them is even telling the truth. I suspect this has less to do with consumer paranoia and more to do with living in a world where the correct answer to any question is two clicks away. We trust Google infinitely more than we trust salespeople. And so, in a world where partly right is as good as being wrong, the relative utility of retail salespeople is diminished. In fact, as research released by Google indicated, two-thirds of shoppers said they’ve been unable to find the information they need in stores, resulting in almost half of them being left feeling frustrated.

Exacerbating the situation is the ongoing battle for higher wages by retail and hospitality workers. Few would defend the miserably low wages that retail has become notorious for paying. In other words, for at least 50 per cent of retail workers, supporting a family with a spouse and two children on a retail salary implicitly means living in poverty. In the United States, for example, the median wage for all retail workers in 2015 was US$11.01 per hour, or US$22,900 per year. In the same year, the poverty threshold for a U.S. family of four was set at US$24,339.

You might expect such a low income to insulate retail workers from technological disruption, but it actually makes them much more vulnerable. Here’s why. While the federal minimum wage is currently stuck at US$7.25 per hour (some states have minimums that sit slightly above that), labour groups have been fighting for a mandated US$15 per hour. Two U.S. states, New York and California, have already signed bills to move the minimum wage to US$15 and an additional nine U.S. cities have approved moves to a US$15 minimum, some already taking effect by 2017.

The problem inherent in this increase is twofold. First, most economists agree that even a US$15-per-hour minimum wage falls short of what it really should be if wages were properly indexed to inflation. Therefore, it’s likely that the push to US$15 is only a stepping stone in what will be ongoing pressure to raise minimums even further. And while raising wages is the morally correct thing to do, it doesn’t follow that there can possibly be a reciprocal increase in individual productivity to meet it. In other words, the nature and productivity of the work at US$9 per hour is likely to be no different than at $US15. The difference will have to be accounted for in either lower corporate profits or higher consumer prices. Sure, we can argue the bigger ethical questions that surround corporate and consumer greed, but none of it solves the problem at hand.

Second, compounding the case against workers is the fact that an army of technologies stands at the ready to take over their work. For example, California-based Simbe Robotics recently introduced its Tally robot, the world’s first fully autonomous stock-keeping robot. Able to operate for between eight and twelve hours on a single charge, Tally robots patrol the aisles of grocery stores visually checking and recording up to twenty thousand products at a shot, and they do so with near-perfect accuracy. They then relay this information to store management for action or correction. The robots can detect even the subtlest shelving errors or out of stocks. According to Mirza Shah, Simbe’s chief technology officer, companies such as CVS or Walgreens would have to dedicate between twenty-five and forty staffing-hours per week to accomplish the same amount of work as Tally, but even then, humans would complete it with far less accuracy.

New England–based robotics company Symbotic LLC makes robotic autonomous warehousing technology that can race through warehouse aisles and literally climb racking to put orders together in a fraction of the time it takes human workers. As a result, the technology can cut labour costs by up to 80 per cent and reduce the warehouse footprint by 25 to 40 per cent. Target is now using this technology in one of its largest distribution centres in California.

If you’re thinking that inventory and warehouse jobs are more suited to robotics but that the sales associate role requires the human touch, Lowe’s suggests otherwise. Following on the heels of two years of testing robots in its Orchard Supply Hardware store in San Jose, Calif., the company recently announced that it would be introducing a “fleet” of robots in its San Francisco-area stores. The robots, called LoweBots, are programmed to greet customers at the door, respond in multiple languages, field product inquiries and direct customers to the items they’re looking for. In addition, store staff can access the LoweBots for up-to-the-minute information on pricing or inventory. Moreover, the robots are able to analyze data and detect patterns that might influence business decisions in real time. And all without ever taking a lunch break, a sick day or even a paycheck!

But what if a customer isn’t sure what product they want or need? Can technology help them find exactly the right product? That’s precisely the problem Mumbai-based Fluid AI set out to solve when it partnered with IBM and U.S. retailer The North Face to create an artificial intelligence–powered shopping bot called Expert Personal Shopper (XPS). Using IBM Watson as the brains, Fluid created a customer service interface with which customers can find the perfect jacket simply by answering a series of questions posed by the application. Using natural speech processing, the app gradually narrows down the wide assortment of available products. For example, you can begin by saying, “I need a jacket for a trip to Vermont in the late fall.” From there, the program will ask you a variety of relevant questions. It may ask you what activities you plan to do. Or it may inquire about the weight of jacket you’d prefer. As you answer each question, the AI will modify the potential recommendations, eventually landing on a few suggested products that meet each of the criteria you’ve indicated. And it will only get better, because the more people use the program, the smarter it becomes. IBM was so impressed that it acquired Fluid’s XPS technology in October of 2016.

And if you’re among those who believe that our innate empathy and sensitivity to emotion is what safeguards humans from obsolescence at the hands of technology, it’s important to know that SoftBank Robotics is building emotional sensitivity into its humanoid robot, Pepper. Pepper will not only respond to commands but will do so with sensitivity to the emotional state of its user.

While Steve Carlin, SoftBank Robotics’ vice-president, agrees that these are powerful new technologies, he in no way considers them precursors to any sort of robot apocalypse. At least for now, he sees the use of robots in the retail environment as limited to low-level operational tasks such as helping customers navigate the store or gathering basic information about products or services. He doesn’t anticipate scores of robots displacing people in stores any time soon.

Yet, according to a recent study from Oxford University, the impact of robots and AI on retail employment may be coming sooner than most of us think. In examining the likelihood of different types of workers being replaced by technology, the study determined that there is a 92-per-cent probability of front-line retail workers being technologized over the coming decade. So, retailers everywhere will face difficult decisions in the years to come.

It stands to reason that companies such as Walmart will be watching such technologies with great interest. After all, consider that the company employs more than 1.3 million associates in more than four thousand U.S. stores. The potential cost savings from technologizing even a small percentage of that sales force would be astronomical. And Walmart is not alone. The retail sector is North America’s largest employer, accounting for more than 15 million workers, and in an industry continually challenged for profitability, the potential upside of replacing workers with technology has to be tantalizing.

But all this is not to say that we will soon be shopping in dystopian future stores devoid of people. In fact, while robotics and AI can be superior to humans at executing repetitive and linear tasks, there are as many things that they are poor at.

For one thing, robots tend to have weak fine-motor skills, making the manipulation and demonstration of complex objects or tasks very difficult and slow. Therefore, as retail spaces become more experiential in nature, they’ll require human beings to operate and demonstrate products for consumers. And artificial intelligence, while tremendous at retrieving factual data and solving linear problems, is not so adept at intuiting creative and sometimes lateral solutions, much less forging an emotional connection with a customer. Technology, on its own, tends not to be the optimal solution.

Above all else, what humans bring to the table is their humanity. The retail workers of the future will be creative problem solvers who use lateral thinking to assist customers. They will be adept with technology and employ clienteling and other technologies to expertly guide shoppers and personalize recommendations. The retail associates of the future will be brand ambassadors – enthusiastic superusers of the products that the retailer trades in – who can speak with customers from first-hand experience. They will be the ultimate personification of the brand.

And for all this, the retail associates of the future will not need to protest or picket for a living wage. Instead, they will have employers falling over themselves to pay them well because the retail shopping space of the future will marry the efficiency and effectiveness of technology with the expertise, enthusiasm, empathy and creativity of outstanding human beings. Retail will cease to be the job it has become and reclaim its rightful place as a profession people can be proud to pursue.

Source: The Globe and Mail

Kroger to hire 11,000 supermarket workers, including 2,000 managers

Amid sweeping changes in the grocery industry, Kroger announced on Tuesday it is hiring for 11,000 new positions, including 2,000 management roles.

It is also investing $500 million in associate wages and training and development over the next three years.

As an example of the expected wage changes, Kroger cited a labor agreement it recently struck with its worker union in Cincinnati, the UFCW 75. Starting wages will be raised to at least $10 per hour for associates in the Cincinnati/Dayton area. After one year of service, associate wages will rise to $11 an hour.

Kroger has been trying to transform its company as the industry undergoes massive changes, pressured by Amazon’s acquisition of Whole Foods and changing consumer preferences. Several grocers, including Walmart, have realigned its workforce and resources to readjust to the need to focus more digital efforts, including delivery options.

One Kroger effort is the roll out of “Scan, Bag and Go,” a platform that allows shoppers to bypass a traditional cashier in paying for items, to 400 locations by the end of this year.

Source: CNBC