How The Coronavirus Pandemic Helped Convince Grocery Chains To Experiment With New Tech

Grocery chain Giant Eagle turned one of its stores into a checkout-less shopping experience. A handful of Price Chopper stores in Missouri are offering shoppers access to an app that can scan items and tally up their order, allowing them to skip the checkout line. Wegmans piloted a self-checkout app at three stores prior to the pandemic, but rolled it out to 80 of its 103 stores this spring, as customers sought out contactless shopping.

The rapid shift to online grocery ordering during the pandemic has ushered in the next phase of grocery shopping. But grocers are investing in technology meant for stores, too. They’re launching innovative technology inside brick-and-mortar locations, where the bulk of consumers still shop. Even Walmart’s new membership program, Walmart+, will offer access to a tech-based perk: a smartphone app that lets customers skip the line at stores.

Before the pandemic, nearly 98% of U.S. grocery sales were in the stores, according to McKinsey & Company. Even with the gains in curbside pickup and home delivery, 85% of sales were still in stores at the peak of Covid-19, the firm found.

Many legacy grocers have held back on rolling out or promoting flashy technology. The investments could be hard to justify in a notoriously low-margin business — especially when it’s unclear if customers will download smartphone apps or embrace innovation.

Chart showing U.S. food retail market share, 2019 estimates, from UBS.
With the coronavirus pandemic, however, tech-based approaches that promote safety and speed are becoming table stakes for grocers. Customers of all ages have been more willing than before to download apps, try out services like curbside pickup and seek out ways to avoid interactions with cashiers or other customers.

Even before the pandemic, legacy grocers were getting pushed in that direction by a relatively new rival: Amazon. Known for its dominance in e-commerce, Amazon has been a smaller player in the grocery space. It owns Whole Foods, and is the ninth largest U.S. grocer with 2.2% of market share in 2019, according to data from UBS.

Walmart is the largest, with about 21% of market share last year. It’s followed by Kroger, which had about 10%.

Yet even as a smaller player, Amazon has been an ambitious one. It has rapidly expanded its physical grocery footprint to include dozens of cashierless Amazon Go stores, a new chain of Amazon Fresh grocery stores and hundreds of Whole Foods locations. It’s shaken up the ways in which consumers shop, pay for and receive their groceries. The company opened its first Whole Foods “dark store” during the pandemic to quickly pick and pack online orders. It has a service that delivers groceries to shoppers’ cars called Amazon Fresh Pickup. And most recently, it has rolled out smart shopping carts, called Dash Carts, that automatically track a customer’s order.

With the innovative grocery concepts, Amazon wants to delight customers and remove pain points in their shopping experience — and ultimately, win more business.

Sucharita Kodali, a retail analyst for Forrester, however, said legacy grocers have had good reason to hesitate on making similar investments. She said some of them increase long-term costs and create more work for the retailer. That drives down their profits.

That’s why she’s skeptical other grocers will automatically rip off each of Amazon’s additions, such as its smart grocery carts.

“They have to see an ROI first,” she said. “It would just be to keep up with the Joneses.”

Consumers’ changing preferences during the coronavirus pandemic have given grocers another reason to experiment and in some cases, take a page from the tech giant’s playbook.

Even as foot traffic has picked up at grocery stores again, many consumers say safety is still a top concern. Market research firm Ipsos polled 2,000 consumers in June and found 62% of them would stop shopping at a retailer not taking health and safety seriously.

That’s accelerated demand for technologies that can allow consumers to shop safely in stores and limit interactions with employees or other customers.

Skipping the checkout line
Giant Eagle was founded in 1931, but CEO Laura Karet said the Pittsburgh-based private grocer has kept an eye on innovation. She said it’s monitored developments in Asia and Europe, where grocery shoppers have been quicker to adopt contactless payments and online grocery shopping.

That inspired a deal with Grabango, a California-based start-up that’s retrofitted one of Giant Eagle’s GetGo convenience stores. The stores average 6,000 square feet. Starting this month, shoppers can walk into the store, pick out snacks or fill up a soda and leave without checking out.

The technology in the retrofitted store resembles that of Amazon Go. Shoppers download an app, where they add payment information. They get a QR-code to scan at the store.

“What people want is to get in and out fast,” she said. “It’s all about speed. And pre-Covid, we constantly challenged ourselves to say ‘How can we get people in and out of the stores more efficiently?’”

The pandemic, she said, “has definitely added a different slant to it” since standing in line is seen as a health risk now, not just an annoyance.

While Giant Eagle planned to work with Grabango before the pandemic, Karet said it’s made the tech an easier sell. She recently shopped the checkout-less store herself.

“I got stopped by at least six customers saying ‘What are you doing?‘” she said. “I explained it to them and they were like ’Oh my God. That’s the coolest thing!”

Giant Eagle plans to retrofit a second store in the next six to 12 months — and may add the system to more of its approximately 470 stores, depending on how customers respond.

“This has dramatically accelerated the potential for customer adoption,” Karet said.

Selling tech to the grocery sellers
Shariq Siddiqui and Umer Sadiq, both former Amazon managers, are counting on a future where smart shopping carts become tablestakes. They co-founded Veeve, which unveiled its smart grocery cart last year.

Customers scan a QR code to log in. The cart is equipped with sensors and cameras that automatically identify products as they’re placed inside. It calculates the cost of the order and charges shoppers on their way out of the store, eliminating the need to stand in line.

Veeve is already testing its smart carts with retailers in Seattle and North Carolina. But the pandemic, as well as the launch of Amazon’s Dash Cart in July, have set off a wave of fresh demand from regional grocers and some of the top retailers in the country.

Both events have “validated” the idea of using smart carts in stores, Siddiqui said. “When we would go pitch to retailers, they’d think it was too good to be true, but we’ve known this would work for a few years now,” he said.

Cashierless technology start-up Standard Cognition is seeing so much demand from retailers that CEO Jordan Fisher said he’s had to turn down prospective clients.

Rather than building a new store around cashierless technology, Standard Cognition retrofits retailers’ existing locations with ceiling-mounted cameras. The cameras are equipped with machine learning software that detects what each shopper picks up and puts back on the shelves.

“We don’t have to change the shelves, we don’t have to add gates,” Fisher said. “It’s the same store, but now there’s checkout free technology that allows shoppers to walk in and skip the line.”

Standard said this month it would bring its cashierless technology to a Circle K convenience store in Phoenix. It plans to announce new retail partners soon, Fisher said.

Will Hogben, CEO of FutureProof Retail, which creates mobile checkout software, said the start-up has fielded requests from clients who want to deploy the technology in their stores months ahead of schedule.

FutureProof Retail
“It can often be we talk to the company for two years before they decide to launch a pilot,” Hogben said. “What’s happened with us is that all of the people we talked to sort of came back during Covid and said, ‘How quickly can it be implemented?’”

FutureProof’s technology is now being used in three stores operated by Kansas-based grocery chain McKeever’s, as well as nine Price Chopper locations in Missouri. New York City grocery stores Westside Market and Fairway Market have also deployed FutureProof’s mobile checkout app, as well as in-store GPS navigation software created by Search in Real Life.

SIRL’s in-store GPS software allows shoppers to search in an app where items are located. It then gives shoppers step-by-step directions to the item’s location, cutting down on the time spent wandering through the aisles and limiting interaction with store employees — both important benefits in light of coronavirus safety concerns.

Fairway and Westside Market deployed the mobile checkout and GPS technologies before the pandemic, but shoppers started using the tools more beginning in March. “The adoption went from where it was around 10% to 15% up to 30% of customers going through the system,” Hogben said.

Hogben said he’s seen firsthand how technology can ease some of the anxieties around grocery shopping during a pandemic. At the early stages of the coronavirus outbreak, he watched a supermarket cashier handle everyone’s goods “one after the other.”

“Things like produce, stuff that’s going straight into your mouth,” Hogben said. “It can be difficult to watch people handle it when you’re being cautious.”

The extra step of downloading a mobile app might have stopped shoppers from using FutureProof’s technology before the pandemic. But now, Hogben is finding most consumers will go through the trouble just to stay safe.

“With Covid, it’s already complicated to go shopping,” he said. “You have to think about your mask, the time of the day, the store. So I expect the adoption to stay.”

– CNBC