Supermarkets are some of the biggest retail businesses in the world, so it’s no surprise they are at the forefront of industry trends and innovation. Brad Banducci, CEO of Australian supermarket giant Woolworths for the past seven years, is a big proponent of using technology to improve operations. Here, he shares the new tech that has caught his eye, and how changing consumer behaviour is affecting the business.Inside Retail: Earlier this year, at Retail’s Big Show in New York City, you spoke about creating a data-driven culture of innovation at Woolworths Group. Can you walk me through some of the key technologies the company is investing in at the moment, and why they’re important?Brad Banducci: The most important thing is having a culture that embraces data and uses it to make better decisions. A lot of retail [decision-making] is ‘having done it before’, it’s experience-based. We want to make it more data-based, primarily because the world is getting more complex and we’ve found we’re able to make better decisions when we use data. There are a number of technologies that we are leaning into and rolling out across the group – and we need to do it. We’ve been getting asked whether we’re passing enough value on to customers, or whether we’re passing enough value on to shareholders, but this is a highly competitive sector and we need to lean forward into how we use technology to improve the customer’s experience and productivity. A big issue that has been on everyone’s mind in Australia lately is theft. We’ve rolled out, across 550 stores, a computer vision front end that looks at how customers are scanning products, or how our team scans products, to make sure we’re scanning all the products that we’re selling. It looks at hand movements and what people are doing. If a product hasn’t been scanned, it will stop the process and a team member will help the customer. That’s a key technology. It uses what’s known as ‘edge computing’, which [employs] big servers that we have in the back of stores. That’s a massive initiative – it’s close to $107 million of investment for us – and it can provide a better customer and team experience. It’s our highest priority roll-out right now. The other one we have talked about forever, but that now actually works, is electronic shelf labels (ESL). We change about 6000 to 7000 prices each week, and our staff have got to print those tickets out and change them manually. It’s kind of crazy. The issue with electronic shelf labels is that everyone has always said we should use it, but we’ve always looked at it as not being economic enough. The big change now is that you can now get a 10- to 11-year battery life in that ESL. It’s always been about battery life. When it was only a one- to two-year battery life, you’ve got to replace every shelf label’s batteries once a year. They’ve also become ‘smart’ – they’ll flash if there’s an online picker or a personal shopper looking for a product – which cuts down on that picking time. The economics of the electronic shelf label have really changed.When you look at the macro-trend, we’re trying to create computer-vision stores. The average store manager or team member walks on average 25,000 steps a day – how hard-working is that? We want to use computer vision to help tell them what they need to do, and when they need to do it. We send alerts to our team when we think a particular product is going to be out of stock, for example, so they can refill the shelf; they don’t have to go and look for gaps. We’ve got a new product called ‘Quick Assist’. It basically analyses all of the data in a store and gives the store manager a list of things they can focus on and work on that day, in a prioritised list of things to do. And that rolls up the chain all the way to me. I can get to work and see where I need to focus. We’re also testing some static cameras in certain stores – photo-based technology, rather than video-based – to create digital twins of stores. Firstly, that can tell you where you’re out of stock, and it also helps us make sure our planograms are right. That’s a really exciting technology, and it’s basically ready to go. It’s cloud-based – the photos are updated every five minutes.The one we’re still battling with, and which we saw a lot at NRF, is the war of the smart trolley. There are at least 15 smart trolley companies out there. Everyone wants to reduce complexity at the front end of stores, and ultimately the best way to do that would be to turn trolleys into a point of sale (POS). What’s interesting now is that you can tether your rewards app to your trolley, and that trolley will become your personal shopper and a POS. There are many companies that are already working on this tech, and we’re testing three of them right now. I think it’ll be a big thing in around 24 months. I’m pumped, everything’s almost there, but not quite. The key thing with these technologies isn’t whether they work, it’s whether they’re ready to scale. You can get very caught up and misty eyed, but you have to be realistic. Drone delivery is scaling in some interesting ways, and I think will be in pilot next year. There are lots of pilots all over the world already, and it just seems to work. We’ll use it for fire and flood relief, and from there we’ll move [into other areas]. The nice thing about drones is that you don’t have to integrate them into your base platform. It’s just like using an Uber, except instead of a car, it’s a drone. But most of these are store-based technologies, and we also have a lot happening in our analytics to manage our internal supply chain – getting the right forecasting, doing cross-stocking, things that aren’t as exciting as some of the other technologies but will make the business more efficient. One of the interesting [technologies] coming out of Tel Aviv is using the geothermal activity of the Earth to map stores to a high degree of accuracy. That sounds unnecessary, but what it means is that if a customer is in our store, we could deliver a personal recommendation or offer to them based on what shelves they are near. We can know exactly where they are without them logging into our wi-fi system. As long as they’ve got location services on, and they’ve downloaded our app, we could offer people very timely notifications. A lot of customer-targeting tech in-store requires the use of general packet radio services, which in a store with a lot of steel is very inaccurate. IR: We’ve seen consumer behaviour change a lot recently, between the pandemic and the current cost-of-living crisis. What are the major consumer trends that are on your radar, and how is Woolworths preparing for those?BB: It’s hard to be predictive about what consumers are going to do. We can be predictive on how they like to shop, but we can’t predict what they’re going to buy, because the economic context drives that. Right now, it’s about own brands and dining in. But we can see how they like to shop. They’re shopping more frequently, with a smaller basket size, and e-commerce is fitting into the same place as top-up shops throughout the week. It all fits together. It’s not different channels in the customer’s mind. So that part’s easy. In terms of the trends, though, that’s driven materially right now by inflation. And it’s an interesting phenomenon where [grocery] is not the biggest cost to families, but it’s the biggest cost that they perceive they can manage and control. So they’re highly focused on that. What’s interesting is that we’re seeing customers use digital more and more to plan their shop, and are trying to take the impulse out of what they do. They’re trying to be more disciplined, and that’s a profound trend. In terms of what they’re buying, they’re moving to own-brand and high-value items. Vegetables are in deflation, so people are buying a lot of fresh vegetables, but frozen is key. The reason it’s key is that it’s easier to portion control, you don’t have to throw anything away, and the technology has improved so the frozen ingredients are a lot healthier now. It used to be seen as relatively unhealthy, which is now untrue. In the meat and protein section, what I find interesting is that people are rotating out of ready-to-eat chicken. We’ve become a roast chicken nation, the number-one meal eaten in Australia now is roast chicken and vegetables. People used to do roast legs of lamb and such, but those are seen as luxuries now. One that I’m less on top of is that a lot of faux-meat alternatives are proving to be a bit faddish. People are going back to more traditional non-meat alternatives, whether that’s lentils or beans or whatever. Faux meat has been completely fine, but it’s certainly not growing, and it’s becoming a smaller part of our mix. So I think that fad is over.Something else we’ve observed is that people are dining in more often. And while it’s not ready-made meals, people also aren’t cooking from scratch. With that, you end up with a version of a meal kit. They call it a meal deal in the UK; we haven’t got a name for it yet, but it’s essentially a box that has everything you need in it. So we’re fascinated by what’s going on there, and how that’s changing. We think dining in is going to be a big thing for the next two years.And I think that’s the power of supermarkets. When you order take away, you might end up with a pizza, garlic bread, sparkling mineral water, etc. It adds up, and while we might not be the cheapest at everything, we’re going to be cheaper at the checkout.Another one that is not a new trend, but maybe we’re just getting better at it, is that outside of Vancouver or Toronto, Sydney is one of the most ethnically diverse cities on the planet. Australia is pretty diverse, and we’re getting much better at selling more varied ethnic foods.One megatrend that we’ve seen is that the only meal type that has joined the Australian lexicon as a staple is Mexican. Whether that’s tacos or burritos, Australians now have Mexican food in some form once a week on average. I find that interesting. You feel like you’re cooking something healthy, and it’s something that brings the family together. In the longer term, sustainability is still big, and health is getting bigger. Customers are saying, ‘If you’re not going to charge me more, I’ll pick the more sustainable product, and I’ll pick the healthy product.’ That trend is very clear.In terms of beauty, we’re seeing a lot of moderation. People are making their products go further. There are a lot of other trends right now, but everything is just fulfilling that customer prophecy of ‘looking for value’ and ‘affordable luxuries’.