When bots do the buying where is the value in shopping?
Supermarket shopping is not something that most of us do for entertainment. It takes time out of our day to battle for car spaces, dodge trolleys, swerve around tantrumming toddlers and queue at the cashier. All that to pick up the same old washing powder and muesli.
In no time, artificial intelligence will be doing it for us. The “weekly shop” may be consigned to retail history, as staples and pantry items are delivered to us whenever we need them, possibly before we even know we need them.
While we are at the beach or sleeping in, the robots will scan the contents of our refrigerators and pantries and search for replacement products that offer the best value, quality and, perhaps, sustainability – whatever our preferences may be.
These robots won’t be swayed by brand and marketing. This means that the $15.4 billion now spent on advertising in Australia each year won’t have much impact on algorithms, so manufacturers and retailers will need to find other ways to get an edge on the competition.
For consumers, this may mean we make better, healthier and more rational choices about the food and household products we buy. The robots will keep us to our resolutions to eat less sugar or buy cheaper moisturiser.
The bots are sure to change the way we engage and obtain products, but also transform the way retailers interact with customers. Five developments to consider are:
New things: Manufacturers are likely to divert marketing spending into new and better products, so they are not left to compete on price alone. They will benefit from having access to a greater depth of information about customers, but may need to find ways to deal directly with the online marketplaces without “burning” the retailers that stock their products now. Suppliers of branded products, accustomed to appealing to customers’ emotions, may struggle with the disruption to their business model.
Marketing to bots: Instead of doing deals for supermarket placement, suppliers may pay sales platforms for higher exposure to bots. This may involve buying the right to be a substitute product if another is out of stock or offering free samples. Retailers are likely to increase their push into developing private label products and their business models may have to adapt to the loss of revenue from rebates paid by suppliers.
Smaller stores: Consumer products companies may try to deal directly with the “bots” and sales platforms, leaving more traditional retailers out of the loop. This would mean a further rationalisation of the big retailers, who will be questioning whether they will need as much real estate in the future. Retailers that adapt to the “bot shop” may need to invest in more warehouse facilities and logistics to become more efficient at picking, packing and delivering.
Shopping for pleasure: When people buy non-staple products – such as fashion, homewares and electronics – they do it in search of a more interesting experience. Retailers will stand out with spectacular service standards, offering fun, expertise and innovation. There should be good career progression for shop assistants with great customer service skills.
New ways to deliver: If the bots are shopping in real time, they will also need to deliver at all times of the day or night and often, when there is no-one home. Some of the options already underway are lockers at service stations and train stations that allow people to pick up their goods on the way home. In the UK, a supermarket chain is working with a manufacturer to offer refrigerators that open from outside the home so they can be restocked securely.
The impact of bots on the future of retail depends largely on trust. If we are to allow them to become our personal shoppers, we will first have to get comfortable with the idea that companies behind the bots will have unprecedented access to our homes and our lives and will control our buying decisions.
Glenn Carmody is Ernest & Young’s oceania market segment leader – consumer & industrial products.