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Retailers Leverage Data, AI to Deliver Value

Conversations focusing on leveraging data and committing to offering value to shoppers took center stage at Groceryshop in Las Vegas, Wednesday.

Erica Thein, VP of food and beverage, Own Brands at Target, revealed a shift in the definition of value during the session, “Bringing Convenience and Value to Budget-Conscious Shoppers.”

“Value goes beyond price,” said Thein. “It’s also ease, convenience, and inspiration.”

One way Target delivers on this type of value is by listening to customers. Target shoppers shared that dinner time was a challenge, so the retailer developed meal kits to offer a simple, affordable, and convenient suite of offerings, she said.

Shai Eisenman, founder and CEO of the skincare company, Bubble, said that value means different things to different generations. For Millennials, it means exclusivity, as in “I’ll buy my meat here and fish there.” For these shoppers, price is a marker of quality. For Gen Z and Gen Alpha, however, value means “having it all.” They are less interested in exclusivity and seek products with the best possible quality and accessibility without compromising on other characteristics.

Ben McKean [pictured above], CEO at Hungry Root, a subscription-based grocery delivery service that also provides personalized meal plans, shared during, “The Future of AI in Grocery,” that his company’s value proposition is providing a more efficient online grocery experience by leveraging artificial intelligence to automatically fill a customer’s shopping cart and provide recipe ideas to make use of the ingredients.

“Consumers are much more interested or willing to hear AI as a value proposition,” McKean noted. “That being said, they still don’t want to, and generally are turned off by it. [Instead,] we talk about the value proposition that AI delivers. Customers want the magic that AI brings but they don’t want to hear ‘Oh, this is AI,’ as it feels a little impersonal or unrelatable for a lot of people.

AI and machine learning can be mobilized to reduce food waste, both for the consumer, by giving them an actionable way to use all their groceries for the week, and for the retailer, by minimizing ingredient spoilage, McKean said. If, for example, a customer prefers two similar vegetables equally, the basket algorithm will put the item that has the larger fulfillment center stock in the basket to minimize food waste, he said. This has helped the company to operate with an inventory spoilage rate of 80 percent less than that of a standard retailer.

To continue to offer more value, the online grocer is researching how generative AI, like that of ChatGPT, can help explain why the grocery selection algorithm chose to fill the customer’s cart with the items and allow the user to respond to the chat service and ask them to modify the cart without having to manually select items.

These tools focus on increasing consumer value by aligning with their social characteristics while hyper-personalizing the shopping experience.

For different retailer types, however, a customer’s definition of value can change too. In the convenience channel, price is the sixth most important characteristic behind things like convenience, location, and efficiency, shared Mario Mijares, VP of insights, loyalty, marketing, and monetization platforms at 7-Eleven. He warned that new revenue opportunities for grocers including retail media networks must show how a retailer can offer consumers more than simply price and product, both for convenience and for other mainstream channels.

You will lose a customer as soon as a competitor has a better price or product, he said. But if you connect with shoppers in other ways, then you can create “stickiness,” an attribute where customers are likely to stay and shop more often with a particular retailer.

There is a fine line between a customer’s stickiness and the necessary addition of friction when rolling out a product or service that boasts a unique value proposition.

Barbara Connors, VP of strategy and acceleration of 84.51°, Kroger´s data insights arm, explained that Kroger tries to make its loyalty program seamless by allowing customers to earn points without needing to download an app. Data gathering also works to create customized coupons and ads that can help drive value for both customers and retailers.

Mijares, on the other hand, noted that 7-Eleven’s program operates a bit differently. He discussed a concept called “zombie discounts” that allow customers to use their phone number to passively gain points. This process helps to push the customer from a mindset of not caring about the program, points, or app, to a consumer that hunts for points. The “hunt” rewards customers by giving them ways to save on their trips and incentivizes other touchpoints for customer interaction via email and app usage.

These value-driving methods are further complicated by the shopper’s relationship to in-store and online tendencies. For Kroger, 40 percent of loyal ecommerce shoppers’ trips are still coming from in-store purchases. When asked about the future of shopping, 70 percent of these customers agreed that they would still want to shop in stores. This signals that retailers need to work to offer engaging value-added opportunities through both channels.

Related: Retailers Discuss Targeting the Omnichannel Shopper; Industry Veterans Form Investment Fund for Small Companies.

Image: Groceryshop and Insider Images