Challenge Amazon in the race to transform the $11 trillion retail grocery market
When Amazon opened its first cashier-less convenience store to the public in 2018, digital transformation has reached another corner of our previously analog lives. With its expanding chain of Amazon Go and Amazon Fresh stores, Amazon has once again created a new consumer experience and a new catalyst for innovation in an established market.
As has happened in other areas, Amazon reshaped, reinvigorated and shook, entrepreneurs and venture capitalists rushed in quickly, rushing to take a share of the new global market share of 11 .3 trillion. Grocery retail technology raised a record $19 billion in 2021, up 115% from the prior year, according to CB Insights.
Israeli startup Trigo is one of many new companies around the world aiming to outsmart Amazon by improving our grocery shopping experience. According to Michael Gabay, co-founder and CEO of Trigo, the top three complaints about grocery shopping are “lineups, out-of-stock items, and not knowing where the product you want is.” .
With these requirements in mind, Trigo has developed a retail operating system, combining AI, smart sensors and computer vision into a single platform running various store management applications, inventory and customers.
The first application developed by Trigo, currently deployed by major grocery chains in the UK (Tesco), Germany (REWE and Netto), the Netherlands (ALDI Nord), the United States (Wakefern Food Corp. ) and in Israel (Shufersal), transforms traditional grocery stores into frictionless supermarkets where shoppers can walk in, select their items and exit without having to queue at the checkout or scan items.
Trigo’s technology does not use facial recognition, capture biometric data, or hold direct customer identifiers. The system recognizes the movement of shoppers when they are in the store, but does not know who they are at any time. Trigo’s privacy-by-design technology complies with even the most stringent German data protection legislation.
Trigo’s second app, which currently tracks live inventory status across multiple stores in Europe and the US, provides full real-time visibility of store inventory status, improves inventory replenishment processes and provides out-of-stock alerts that reduce customer dissatisfaction and increase efficiency and sales. “It’s a level and type of real-time information that retailers simply don’t have today,” says Gabay, anticipating the future development of a third Trigo app that will tell buyers the location in the store of specific products.
The technology used by Trigo is very complex, the algorithms very sophisticated, and a large part of the 200 employees of the startup are involved in long-term R&D. “It took us a few years to be able to say ‘we support all products in the store’ and achieve 99% accuracy,” says Gabay.
In addition to its heavy investment in R&D and top-notch talent, Trigo’s go-to-market approach stands in stark contrast to Amazon’s original strategy: Trigo collaborates with rather than competes with established food retailers. It promises to modernize existing stores of all sizes in weeks and integrate its technology with the retailer’s existing apps and payment options. The collaboration is wide and deep, with Tesco and REWE contributing to the $100 million in funding Trigo has raised to date.
There is no doubt that the rapid increase in online grocery sales in recent years has accelerated the digital transformation of the industry, prompting established grocery retailers to seek solutions to improve customer satisfaction, better inventory management and innovative “omnichannel” strategies, seamlessly merging their physical and online operations.
The U.S. online grocery market accounted for 9.5% of overall grocery sales in 2021, up from 3.4% in 2019. By 2026, it is expected to account for 20% of U.S. grocery sales . 57% of online grocery shoppers say they stay loyal to the retailers they buy from in-store, providing new opportunities to build customer loyalty, experiment with store layouts, offer discounts and help shoppers discover new products.
With new sales opportunities in this new business environment come many challenges, which retailers – and the startups that sell new solutions to them – must overcome. Many consumers are reluctant to change their shopping habits and/or embrace new technologies, even with the promise of greater convenience.
Retailers responded to new opportunities and challenges by experimenting with alternative solutions. For example, Shufersal, Israel’s largest supermarket chain, has tested a smart cart developed by Shopic, an Israeli startup, and plans to roll it out to around 200 of its largest branches. Meanwhile, Shufersal last week opened a new convenience store in Tel Aviv equipped with Trigo’s scan-and-go technology.
Perhaps the hardest thing for established retailers and for retail tech startups is the constant experimentation with the elephant in the room, this day 1 venture. Late last year, Amazon again revised its build-from-scratch strategy when Sainsbury’s became the first international third-party retailer to use Amazon’s ‘Just Walk Out’ cashierless technology, the first time Amazon had retrofitted an existing store.
A few months ago, Amazon launched Store Analytics, offering CPG companies “aggregated, anonymized information about the performance of their products, promotions, and ad campaigns,” based on data it collects (courtesy Shoppers ) in Amazon Go and Amazon Fresh stores in the United States Will Amazon in the future offer retailers this information as a consulting service so that they can “enhance the customer experience by making it easier to put together the store for customers to find their favorite items and discover new ones, improving product selection and availability, and delivering great value through relevant promotions and advertising”?
This is the key promise of the digital transformation of the shopping experience: no more customers leave the store without buying 1 in 5 items they were considering buying. It’s the promise of a borderless shopping experience, which Gabay described here as “a customer-centric approach to retail that seamlessly connects the digital and physical worlds with the aim of offering interactive experiences unique to consumers”.