This makes absolute sense. It's sort of like vertical integration: "The companies will partner in the development of cloud-based solutions for restaurant operators designed to better connect customers via mobile ordering, third-party deliver solutions and more."
Regarding the comparison to Amazon, I'd say be careful and look closely at the differences if you are a retailer considering this. I once interviewed with AWS for a marketing job for retail and posed the question of how you sell the service to businesses that view you as competitive? The answer was they operate AWS separately from Amazon Retail -- which is a fine point lost on most people in the retail space. It's all Amazon, right? One business losing money, propped up by a high margin business. Brands selling on Amazon to improve sales is one thing, but for retailers the thought of using AWS for anything is hard to swallow when you are in competitive category. Big opportunity for Microsoft and Google.
I think both Walmart and Kroger have made similar moves already or are considering them. These are not food service like Starbucks but it's good for the overall health of the retail space that options to AWS for competitive cloud services exist, especially ones tailored to industry needs and which are complementary.
An interesting trend that for retailers makes sense. It's also yet another point of contention between retailers and suppliers. Productive collaboration remains an admirable objective and the more consumer insight a supplier has about its own products the more it can equally collaborate with retail partners.
The challenge over time with retail/CPG brands is that both are starting to realize the benefits of ruling the consumer relationship. It's leading companies like Kroger to vertically integrate and offer more of its own private label brands to reduce dependency on suppliers. It's leading retailers like Walmart and Target to build digital advertising marketplaces to monetize data and sell new digital products to suppliers. It's leading CPGs to figure out more direct to consumer channels themselves and invest in better analytics and consumer insight.
Drop shipping is just a symptom of a rapid evolution in the retail and consumer goods industries.
Anything that attracts a monetizable audience is a great promotional channel. Consider how much retailers spend to create and continuously improve their online properties and this is a great idea to capture more value. Hopefully CPG brands realize the opportunity to fold this activity into trade promotion and shopper marketing plans.
Hope isn't a good strategy here: "marketers are increasingly hoping that artificial intelligence (AI) can take personalization to another level." Are AI (rules or ML) solutions for marketing personalization worth exploring? Absolutely. Is it a good idea to explore this in isolation from a corporate or enterprise plan for leveraging data, AI and advanced analytics? No way - there's no evidence to show that companies are winning in that way. Personalization is one use case of many. Companies should prioritize and have a plan to test new methods relative to the current state.
I think it’s important to put examples like this into context. Walmart’s investment in analytics and AI is probably only matched by Amazon, to a lesser degree Kroger. These use cases are terrific, but require a LOE that few retailers or their CG partners can understand, let alone have the resources to execute.
Most companies need to step back and check their analytics maturity while mapping out a plan to leverage data inline with their business strategy. The first use cases that fall out of this exercise will focus less on complete store transformation like this Walmart example, and more on pilots for marketing personalization or supply chain planning. Success with initial use cases funds the type of lab concept you see here.
Walmart’s application of AI relative to Amazon is notable by retaining the use of store associates as part of the overall CX. It’s also helpful to showcase the technology and tracking in the store itself to overcome customer concerns about transparency and trust.
AI or advanced analytics of any form for demand forecasting or any use case continues to be a confusing topic for retailers, consumer goods companies and really any industry. Viewed as a one and done point solution or one time effort, it’s certainly possible that the hype exceeds the reality. The challenge companies have is developing analytics as a competency, and having the ability to test, learn and improve. The reality is the analytics leaders are using AI to improve forecasting because they make the investment in the right people, processes and technologies. For any other company they need a plan beyond looking at a single use case with a fixed outcome. The reason this is so challenging for retail and CPG is because of silos, decades-old processes and challenges to meet earnings quarterly. It’s a hard problem, but IMO it’s one that retailers thriving in five to 10 years will have overcome.
I liked Bob Amster's comment. He's talking about the elephant in the room here which is peronsalization of the CX, which consists of numerous elements including price. It's the optimization of the personalized experience that is the challenge - which isn't easy, but obviously worth exploring. You can look at price in a silo and all the related factors (competitors, demand), but I think future retail winners are going to balance price with other CX elements like as Bob suggests assortment, store size/format, online/offline fulfillment, loyalty, offers and content.
Personalization needs to be driven by the CX a retailer is trying to execute. My sense is that it’s becoming table stakes to personalize on transactional and behavioral data where the outcome is a more tailored sales offer. The contrast with travel, hospitality and insurance sectors that rely less on transactional data is interesting. I think about how these other service industries use personalization throughout the customer relationship (your life stage, family situation, interests, etc. – relying on a lot more than just transactional and browsing behaviors). The challenge retailers have is determining the role of personalization beyond offers to really delivering a differentiated CX – I think too many fixate on marketing offers. That's an analytics problem requiring a good data foundation and strategy.
This is a terrific AI use case that all grocery retailers either should be looking at or are doing already. It affects not just the waste factor, but also improves outcomes with customers. Note the pilot to production mention - generally regarded as best practice for AI and productionized analytics work. Given the apparent success, I wonder what other AI use cases the company will approach next? The one mistake they can make is stopping here.
This is interesting given the very small relative size of Dick's versus Home Depot. Diverting a lot of resources in this direction as opposed to sourcing best in class tech may be risky. Absent in the news is anything about Dick's investments in analytics to better inform how it runs its business through technology. If anything, retailers need to invest more here and have a strategy.
One way to think about BOPIS differently is in terms of the store as a point of customer interaction and experience, inclusive of many elements that include the buy online/pickup in store ability. The problem I think most retailers implementing this model will have is bolting it onto a legacy environment – legacy process, legacy tech, legacy mindset, etc. – and the outcomes will not be as strong as hoped for as consumer adoption starts to scale (“most BOPIS solutions are not ready to scale to 40 percent of transactions as predicted for coming years”).
It’s hard to step back and view the store as a multi-use interaction point versus a fulfillment center but there is so much more to winning retail today that needs consideration IMO.
Remember when a Target analyst was criticized for predicting a young woman's pregnancy before her father knew, and how the company's marketers personalized their Sunday Circular with new baby products? This pricing issue is another similar example of not being transparent with your consumer.
The tactics of analytics are hard to get right, but so are the softer issues about how it unfolds with your customers -- needing a real executive commitment to trust.
Last point: dynamic pricing is a good analytics use case (think Kroger), but better applied based on supply/demand and done at a store level than individually, IMO.
Having the capacity to test analytic use cases like this is important for retailers in many segments to possess – fast fashion, big box retail, discount, and grocery. The hypothesis that consumer sentiment expressed in social channels – their words and language, phrases, and images can serve to gauge and predict product preferences and demand is a solid one. However it’s just one signal that must be combined and analyzed with others as pointed out (sales, PII, weather, economic). It requires testing relative to how merchandising and assortment is accomplished today – what’s the goal, how much can you improve? More ideally, it’s part of a plan across the company to deliver a seamless customer experience using available data and analytics methods. There’s also an element of organizational success required here since much of these decisions are today done more qualitatively. So it needs executive support.
Out-of-stocks remains a big problem for many retailers and it is a problem worth looking at with AI. For Walmart in particular, I think they once calculated the cost of this problem at about $3 billion a few years ago. The challenge is in the activation of the AI -- the operationalization of the analytics to automate processes. This has proven the biggest barrier to many use cases. For the use case underway at Walmart there are a lot of moving parts, human and technical. Companies taking a serious approach to AI but lacking the resources and will of Walmart might think smaller and more focused on improved human decision making with AI. Later with greater resources and expertise, it will make sense to automate related business processes.
The pros are that both off-the-shelf services and custom analytic methods based on a lot of data sources can help inform CLV scores to enable this approach. The con is that once high value potential customers are identified, what’s the optimal approach to engagement and treatment? I think that is a much harder question for retailers to answer. It speaks to the way the unique customer experience is articulated, and challenges related to content marketing, and life stage or lifestyle marketing. Otherwise, simply targeting unique discounts to these customers continues the drain on margin affecting almost all retailers.