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IBM Pushes the Grocery Store Into the Future

NEW YORK (TheStreet) -- Despite the arrival of big data and cloud capabilities, and continued improvement in self-checkout system efficiency, grocery stores have been slow to change. IBM (IBM - Get Report), however, has ideas on pushing supermarkets forward. 

Bill Gillispie, IBM's retail consulting team leader-grocery, in an interview talks about what the grocery store of the future might look like.

Brian Sozzi: IBM has always struck me as a company that is way out in front of imagining grocery stores of the future. So, in that regard, what does a grocery store of 2020 look like compared to one in 2014?

Gillispie: The grocery store of 2020 is a store that's totally connected, 24/7 to the customer from a mobile perspective to completely simplifying the shopping trip and making it personalized for each individual customer. In the connected grocery store of 2020, a store will recognize the shopper as he or she walks into it. As they move throughout the store, it will give the shopper personalized promotions based on what he or she likes. We will see the physical size of stores start to get smaller, with 10% of sales completed over a mobile channel by 2020.

  • Also, there will be more opportunities for shoppers. For example, if something is out of stock, a shopper can go on their phone, order the item and have it delivered.
  • The shopper will be able to check out of a store using their smartphone or other mobile device.
  • Customers will have the ability to develop a shopping list on his or her mobile phone, tablet or PC with the option to adjust it anywhere, anytime.
  • Once a shopper develops a grocery list, they can "click and collect" via their devices to have items ready in store or have products delivered to their home.

Through this new model, shoppers will have access to thousands of more items than they do in today's stores since they will be able to buy online and won't need to be in the physical stores.

Sozzi: When talking with grocery store partners, what are they seeking to implement at the store level within the next year to improve sales and profits? My sense is that all of this new technology is available to grocery store operators, but due to financial considerations the companies are adopting it slower than expected.

Gillispie: We don't see the grocery stores adopting new technologies at a lower rate than expected because of financial considerations. It's more that no one believed omni-channel experiences would come to grocery stores especially because in the late 1990s stores who were working toward an omni-channel experience were halted by the tech bubble bursting. Right now, we see all grocery stores adopting new technologies quickly because it's working, and because customers really want to use these new technologies.

At the physical store level, it's not necessarily the store itself but how do you bring together the entire shopping trip for the customer through mobile technologies with a main focus on making a personalized experience. For example, how do you help customers make a grocery list no matter what tool they have and provide them the option to have items shipped home or picked up in store?

Sozzi: IBM's grocery store technology helps to amass a serious amount of data, from where people are shopping in the store to whether they respond to a digitally sent promotion. I am interested in some of the big trends you and your partners are seeing from inside a grocery store, and how grocery store owners and packaged goods companies are trying to adapt.

Gillispie: These days, grocery stores are moving away from paper ads and toward delivering personalized ads through electronic media, using data. Stores can track a customer as they go throughout the store using the Wi-Fi connections available, allowing the store to deliver a personalized experience by using the data available on how the customer shops in the store and what departments they are shopping in.

We also see a bigger use of data from the checkout process to help stores better estimate needs for production in deli, meat, seafood, as well as how much bread to bake based this checkout data. Grocery stores' use of data has allowed them to move from gut-based to fact-based decision-making.

Another aspect is the focus of stores making the store manager and team mobile by getting them on devices so they are on the floor 90% of the time to better serve customers.

Sozzi: How is IBM positioning itself to tap into the same-day delivery for groceries movement?

Gillispie: IBM is one of the leaders in omni-channel solutions, whether its services, software or hardware. We work with leading retailers including grocery stores to allow them to do same-day delivery. It's not really about the technology, but helping grocery stores get up and running so they can support same day delivery to develop a competitive advantage.

At the end of the day, it's not necessarily about same-day delivery but about what the customer wants. If the shopper wants same-day delivery, pickup in store, or a combination, we want to enable our clients to be able to provide these options based on customer needs.

Sozzi: Security of sensitive customer information has been a high level focus within retail teams since Target's (TGT) data breach. Are there any new safeguards being built into IBM software and hardware to protect customers from hackers?

Gillispie: IBM is committed to helping our clients use their customers' data in appropriate ways. We are talking about the use of publicly available data from social media like Twitter or data that is provided on an opt-in basis. For example, IBM Presence Zones is a new opt-in technology designed to help retailers transform the in-store customer experience by using intelligent, location-based technology to engage shoppers in real-time, contextual dialogue around offers, deals and promotions as they move through the store. According to recent research from IBM, consumers are willing to share their data, provided they get good value in return. Trust is a huge factor here. Enterprises must enact a big data and analytics strategy that ensures they use consumer information wisely, gaining their customers' trust and loyalty by providing value in exchange.

Sozzi: Self-checkout adoption seems to have slowed amongt merchants. What is the roadblock with these machines, and how does IBM see them evolving?

Gillispie: The fact is that the customer is evolving and as this happens, the self-checkout machine is becoming more obsolete. Today's customer wants more control and that includes being able to check out on a tablet or smartphone. Traditionally, the self-checkout was designed for small orders but these days many grocery stores are allowing their loyal customers to do this via their mobile devices. This is where the future is going.

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-- By Brian Sozzi CEO of Belus Capital Advisors, analyst to TheStreet. This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff. As of this publication, Belus Capital Advisors rated shares of Walmart and Target at sell. Brian Sozzi is the CEO and Chief Equities Strategist of Belus Capital Advisors. He is responsible for developing and managing an equities portfolio of mid- and large-cap positions, in addition to leading the firm's digital content initiatives. He is also a personal finance columnist for Men's Health magazine.

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