AI-powered smart carts that allow shoppers to completely bypass checkout lines may be the “killer app” supermarkets and grocery stores need to improve their shopping experience and fight back against other retailers and retail formats that have been whittling away at their market share for years.
Coresight Research reports grocery store market share has dropped from 69.7% in 2017 to 66.6% in 2022. With an estimated market size of $1.5 trillion in 2022, even a 1% slip in market share really adds up.
In the past five years, mass merchants have grown from 18.4% to 19% share, warehouse clubs have increased from 8.7% to 10.9%, and discount and dollar stores took share too, up from 3.1% to 3.4%.
“There is so much room for technology to improve friction in grocery stores, most especially the pain of waiting in line for a cashier, not to mention problems that arise in self-checkout when you are buying more than a handful of stuff,” said John Harmon, Coresight’s senior retail/technology analyst.
Shopping for groceries is something we all must contend with. The average consumer shops for groceries about eight times per month, and they are facing more friction at the grocery store from the rising cost of each bill (average $156) and the time required in store (around 40 minutes each), according to Drive Research.
Turning Away
Despite still holding the dominant market share, supermarkets and grocery stores have been steadily losing favor as shoppers’ first place to shop. Back in 2019, about half of shoppers said they preferred shopping for groceries in supermarkets and nearly one-fourth favored mass merchants.
This year supermarket’s most favored status dropped to 38% and mass-merchants rose to 33%, according to the food industry association FMI based on a survey among 2,000+ shoppers conducted by the Hartman Group.
Over the last few years, inflation sent consumers scrambling to other retail formats promising lower prices, not to mention more convenience. Mass merchants and warehouse clubs let customers get more needed items in one shopping trip. Smaller format stores, like Aldi, Lidl, discount grocers and dollar stores, speed up the process by limiting selection.
And online shopping allows them to avoid getting in the car altogether. But shoppers still prefer brick-and-mortar for fresh fruits, vegetables, meat and deli items.
Half Measures
To their credit, grocery stores have tried to adapt, beefing up their private label stock, leaning into online with buy-online-pickup-in-store (BOPIS) and direct delivery and adding more self-checkout stands.
But BOPIS’ novelty has begun to wear off, with its use down from 45% to 32% in 2021, and it is expected to decline further as shoppers are disappointed with the quality of items selected for them.
Self-checkout hasn’t proved a convenient time saver either. Problems are ubiquitous at self-checkout stations, with 67% of customers having experienced trouble with them.
They also contribute to shrinkage, either intentionally or just through human error, because customers aren’t trained to operate them properly. And shoppers aren’t deceived: self-checkout benefits the retailer more than the customer by making them do the cashier’s work without pay.
Scan-and-go technology, where customers scan product barcodes on their phone that links to the grocer’s app for payment, was offered as an alternative, but that technology has proven even more problematic than self-checkout for retailers and their customers.
Walmart
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Wegmans tried scan-and-go for two years, then pulled the plug last year, explaining “Unfortunately, the losses we are experiencing from this program prevent us from continuing to make it available in its current state.”
Others discovered the same issue with one study finding hundreds of thousands of items went unscanned at 13 retailers.
Making Cashier-less Shopping A Reality
On the horizon is an alternative technology that could benefit both retailers and their customers: smart carts. It gives customers the convenience of cashier-less, pick-and-go unattended checkout, such as found in Amazon
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However, this model requires retrofitting the entire store with cameras and shelf sensors, so it is probably not scalable in its present form except for smaller-format convenience-type stores.
On the other hand, a smart cart puts the cameras and other tech on or into the cart, providing shoppers with a video display showing what’s going in and coming out, and a running tally of their basket.
And smart carts also support retail media displays to highlight location-based promotions, discounts and add-along items to go with what’s already in the cart. For example, if a customer picks up cold and flu medication, it can suggest related items, like chicken noodle soup and tissues.
Two smart cart versions are available. The full-cart option requires retailers to invest in new techno-powered carts. And the other option is a clip-on device that shoppers affix to the retailer’s existing shopping cart.
The advantage of a full-cart option is they come equipped with built-in weighing scales for produce, but the full-carts can be costly. Clip-on devices sacrifice that convenience but can scan the bar code printout from the produce department’s scales. And the retailer investment is far less.
At the forefront of the smart cart revolution are:
Veeve and Alberston’s
Seattle-based Veeve was founded by two ex-Amazon engineers and is backed by about $11 million from investors. Albertson’s is working with Veeve to deploy smart carts in a few dozen stores. Veeve has also worked with Kroger
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It claims smart-cart powered stores increase basket size by 73% and reduce the time shoppers spend in the store to 24 minutes. Veeve offers both the full-cart and the clip-on options.
Caper AI and Schnucks
Caper AI is part of Instacart’s Connected Store business. Instacart has a foothold with over 1,200 national, regional and local retail banners using its e-commerce platform, so it has deep connections in the industry. But it requires grocers to purchase the whole Caper Cart smart cart.
The built-in Caper Cart scale is its advantage. It can recognize weights down to .01 pounds accurately. “If a customer were to shop a full basket and then add a cherry on top, the cart would be able to recognize the single cherry,” an Instatcart spokesperson shared with me.
Kroger and Sobeys in the U.S. and Canada are piloting Caper Carts. Further, they are currently deployed at a ShopRite in Spotswood, NJ and the Fairway Market in New York City, and St. Louis-based Schnucks is rolling them out this fall with the potential to include its 115 regional store fleet.
Fellow Forbes.com contributor Christopher Walton recently profiled Schnucks’ smart-cart implementation, though he expressed caution that widespread consumer adoption of smart carts is yet to be proven.
Shopic And Shufersal
Israel-based Shopic and Shufersal supermarket chains have answered that question. Shufersal is deploying 2,000 Shopic smart cart clip-on units across 30 stores, making this the widest full commercial-scale implementation to date. In the U.S., Wegmans is testing them in two of its New York State stores.
Shopic’s hybrid business model is designed for mid-sized and larger grocers, with retailers purchasing the clip-on smart cart hardware and paying a subscription fee for software licensing and service.
Shoppers pick up the Shopic unit from the charging station and fix it to the existing store’s shopping carts, making it easy for customers and more readily scalable than the more expensive full-cart option. Shufersal found 12% to 15% of store revenues come from the Shopic app.
Further, customers’ Shopic baskets were 78% larger than average and user’s monthly spending increased by 8%. And most importantly, Shufersal reported 89% customer satisfaction.
Besides removing friction for shoppers in the grocery store, the benefits of smart carts to retailers are without question.
“The operational side of smart cart implementation really drives efficiency, which goes right to the bottom line,” said Shopic CEO and co-founded Raz Golan. “It helps stores better manage layout optimization, traffic management, and shelf stocking from insertions and removals.”
Smart Carts Benefit All
“The shopping experience in supermarkets is so far behind other retail,” Golan added. “The industry is struggling with rising costs, hiring and retaining employees and customer loyalty. If customers find good products at a better price, they’ll go elsewhere without a second thought.”
Grocery stores need a fix for their market share loss and smart carts could just be it. “Smart carts are so innovative, and because it helps the shopper, it will attract them and help retailers retain them,” he concluded.
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