Shopping App Eases Store Exit

A Ralphs store in Studio City is a laboratory for the supermarket of the future. At the location, Ralphs parent Kroger recently introduced a mobile app that allows customers to scan items as they shop and then pay at a self-checkout station without having to remove the groceries from their cart. Customers can also opt to use a handheld scanner instead of their phone. Kroger unveiled the “Scan, Bag, Go” checkout service in February and aims to make it available in 400 of its more than 2,800 stores across its brands by the end of the year. “With every new product, service and technology integration, Kroger is redefining the customer experience and reimagining the store of the future,” said Chris Hjelm, Kroger’s executive vice president and chief information officer, in a statement. Kroger did not respond to Business Journal requests for an interview about the app. Reducing friction In January, Walmart Inc. tested a similar scan-and-go app at more than 100 stores before halting the service in May. The company has continued the rollout at its wholesale retailer Sam’s Club, however, where it appears to have been more successful. Walmart did not give a reason for discounting the app at its flagship stores. Andrew Lipsman, principal retail analyst at eMarketer, said retailers must account for their consumers’ specific shopping habits when introducing these kinds of services. In Walmart’s case, customers might have been more likely to have a full shopping cart and found the process of scanning and bagging each item to be cumbersome. “It’s not a one-size-fits-all approach,” Lipsman said. “Retailers are starting to discover right now that not every application works as retailers’ might hope – maybe it doesn’t reduce the friction that the consumer actually wants.” While it’s too early to tell whether Ralphs’ scan-and-go app will be a success, it remains clear that supermarkets need to continue to experiment with services such as mobile ordering or home delivery if they hope to compete in an increasingly crowded market where margins are already slim. Walmart and Target Corp.’s entry into the grocery business has put increased pressure on supermarket chains, but it was Amazon.com Inc.’s acquisition of Whole Foods last year that sent shockwaves through the industry. In March, Kroger’s stock dropped by more than 11 percent after it announced a disappointing earnings outlook for 2018, stemming in large part from “aggressive” new competition from “non-traditional competitors.” “There is heightened pressure across retail and it starts with Amazon,” Lipsman said. “You’re probably not going to be able to compete with them or the big box retailers on every dimension, so it’s important to find the smartest investments into what your core customers care about and make their lives easier.” Compared to Kroger or Albertsons, Amazon has far more resources to pour into its 484 Whole Foods stores in the U.S., Canada and the United Kingdom. The company’s Amazon Go grocery store in Seattle is its most eye-popping innovation. Using a combination of in-store cameras and artificial intelligence software, its proprietary technology recognizes which items a shopper selects from the shelfs and automatically charges their Amazon account without requiring any kind of checkout. Amazon plans to open two additional Amazon Go stores in San Francisco and Chicago soon. It has not announced plans to rollout the technology at Whole Foods stores. While it’s unclear exactly what Amazon has in mind for its automated system, supermarket analyst Phil Lempert doesn’t see scan-and-go-apps as part of a larger strategy to find ways to cut costs. “Scan-and-go is being driven by Generation Z and millennial shoppers who are very mobile-oriented and want to have everything at the convenience of their hands,” he said. Data on shoppers Gaining insights into how these consumers shop is likely another reason Kroger introduced the app. The new technology could allow the company to track what individual customers buy as well as how they make their way through the store. These data points can help inform Kroger in making key decisions ranging from how to place items in-store to what kinds of discounts to offer. “You want to know as much as you can about your shoppers,” said Lempert. “The next level is — just like Amazon does online — to predict their behavior.” In a press release, Kroger said it aims to create a more personalized experience for customers with the app, allowing shoppers “to view and download digital coupons, keep a running total of their order and view the current week’s sales ad.” With increased automation comes questions about how to prevent theft and shrinkage. A study from the University of Leicester in England found that self-service lanes and apps generated a loss rate of nearly 4 percent, more than double the average for regular checkout lanes. Checking out using Kroger’s app involves essentially the same process as the normal self-checkout, and the company hasn’t disclosed any new plans for preventing shrinkage.