What’s in my Basket and What’s your Number?
In the month since our last blog, there’s been a growing interest in the new chatbots showcasing a recent breakthrough in artificial intelligence, generative AI. Generative AI is the latest example illustrating the “age of with” – a new era where humans and intelligent systems will work side by side to create new experiences, services and business outcomes. (Deloitte’s AI Institute has recently completed a thoughtful piece covering generative AI).
Generative AI might be grabbing headlines of late, but as we’ve been discussing in this blog, the scope of change that traditional grocers face extends beyond individual technologies like chatbots and automated checkout. Their transformation agenda is so broad and historical that we’ve coined the term “Omniscient Grocer™” to fully reflect its magnitude. An Omniscient Grocer will harness ubiquitous computing, interconnected devices and pervasive intelligence to become a new kind of grocer. One who is everywhere. One who is aware. One who cares in new ways by providing a diverse array of services across a broader set of customer needs. Helping to enable this journey is a comprehensive portfolio of use cases that Deloitte has developed to modernize a grocer’s experiences, operations and interactions while charting the path to “omniscience.”
Whereas the journey to this end state may cover many years and investment cycles, the starting point is quite simple. In fact, it starts with understanding a couple of important things about your customers and their households. “What do you buy from me on a regular basis, and when do you buy it?” If one can derive and predict these two things, one may be able to make even more important predictions about the consumer’s behavior. Like “What else would you like to buy from me?” and “What would be the best way to get those products to you?” or “Where should I store those products to best balance customer service with inventory holding costs?”
Patterns of behavior and catalogs of information are building blocks for today’s intelligent systems. Even the development of asking a computer to compose an essay or piece of art (i.e., generative AI) originates with computers learning fundamental patterns relative to various forms of input. Once machines learn patterns across broad swaths of data, many activities can likely be automated and served up in some new way. In fact, the process of pattern recognition preceding automation helped originate many of today’s leading digital-first companies.
To better understand this issue in grocery, Deloitte developed computational models to measure the magnitude and predictability of a store’s repeatable revenue and – by extension – its potential attractiveness as a target for automation and potential disruption. Using data from two major grocers in the United States, Deloitte’s analysis indicates that predictable/repeatable shopping carts can be a significant revenue source – between 50% and 65% for the grocers studied. More significantly, these models could accurately predict this revenue all the way to the shopper and SKU level.
The ability to predict shopping carts at such scale and granularity expands the possibilities for how grocers can serve customers and support their shopping habits. However, it may also create a revenue vulnerability and industry risk, since digital-first partners and competitors could move faster to innovate around this same insight.
Knowing the size and composition of these shopping baskets, or, put another way, the predictable/repeatable revenue, should be a new and urgent strategic imperative for the traditional grocer. Grocers should “know their #,” and then develop plans to strengthen ties to loyal shoppers at risk of switching to new, automatable methods. Possible responses could include anticipatory outreach, personalized recommendations in the event of stock-outs, or pushed services by geo-location or timebox – all capabilities designed to be enabled by current and future use cases in Deloitte’s Omniscient Grocer program.
Deloitte is working with major grocery banners across the US to identify “their #” and build the follow-on response plans to protect their loyal customer base and build enduring businesses for the future. We look forward to partnering with you.
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