Eye on eCommerce: Neil Stewart, CEO, Salmon

Consumers are becoming increasingly dependent on their mobile devices, and more money is being spent via mobile devices than ever before. Last month, research from IMRG reported smartphone sales surging at the expense of tablets – smartphone sales grew 83%, while tablets grew on 3% year-on-year. 

From making a purchase with a single click, boarding a plane with a QR code or hailing a cab, smartphones are remaining firmly in the hands of their owners.

But the next step in commerce may remove the need for consumers to tap or swipe their smartphones. Programmatic commerce is where consumers allow technology to purchase replenishable items on their behalf.

It is affecting the grocery industry first, mainly due to the high percentage of goods which are regularly replenished.

Neil Stewart, CEO of eCommerce consultancy, Salmon, describes how the grocery shopping journey – both on and offline – is different from any other sector. "Grocery has a lot of list-driven behaviour, rather than browsing," he points out, saying how 80% of grocery shopping is replenishment. "Once you shop at a grocer five times, it can work out what you're likely to buy next, because what you've bought before becomes prevalent."

This repetitive behaviour allows customers to take up subscription delivery services, with coffee brands like Illy, Nespresso and Pact, hoping to capture customers into a regular purchasing habit.

But programmatic commerce takes this one step further, using Internet of Things (IoT) technologies, smart coffee machines can monitor how much coffee has been consumed, before automatically ordering more from your chosen grocer.

The smart fridge is another example of how IoT could change consumer shopping habits, with manufacturers like Samsung developing products which can monitor fresh produce and order more once they pass their best-before-date or are consumed. The dream of not having to pop out for a pint of milk ever again, may soon be a reality now the back-end technology is beginning to standardise.

Stewart says for a smart fridge to communicate with Tesco, there must be open APIs in place which are becoming more common as the key players want this trend to take off. "Unlike Apple, lots of the bigger electronic companies are more open," he says.

Stewart also describes how this technology can also be used in the car industry, pointing to Audi which is experimenting in the world of the connected car. "The connected car can communicate to the tyre replacement company that it is a week away from needing new tyres, and that constant communication, should be able to help businesses manage stock much better."

He says stock management is currently a challenge to predict and in grocery is usually down to weather and trend forecasts. But with the proliferation of smart devices, retailers should be able to better manage the needs of the consumer.

Amazon's Prime Now one-hour delivery service claims to be using prediction analysis to ensure stock is closer to the consumer in order to fulfil on its one-hour promise. But smart devices provide knowledge (milk is going off in two days), rather than predictions (usually the customer drinks one pint of milk per day).

Amazon is the dominant player in the programmatic commerce market at the moment – having control over its ecosystem with its Dash buttons and voice-controlled Echo products available in the US. The first allows customers to purchase branded buttons which can be stuck to appliances, such as Illy coffee or Tide washing powder. When customers are down to their last few capsules of coffee or the washing powder is looking a little low, they can manually press the button and an Amazon order is placed. Meanwhile, Echo is a smart speaker system which allows customers to talk to Alexa and connect to the Amazon ecosystem through voice commands.

Stewart noted how customers are becoming increasingly trusting of this type of technology and will happily share data with retailers. "People are being more trusting in areas they're less excited about purchasing, like nappies or coffee," he says. "The consumer is lazy and they like anything which makes it easier, quicker and more cost efficient."

In order to compete, grocers are looking at alternatives to smart appliances, such as utilising the camera, so customers can scan a product barcode as they run out, which then automatically goes into their online baskets. "But it still feels a bit cumbersome and the ability to shout at [Alexa] when you have two kids is much easier."

But he says there is a great deal of change needed in the B2B market for traditional brands to catch up with Amazon's advantage and gain independence from the eCommerce giant.

"FMCG brands are used to paying grocers to place their products in certain spaces, this is an established route to market, but in the new world, for instance if Illy lock me into their coffee, I'm not going to walk into a supermarket and look for coffee again and the other brands will find it difficult to flip me," explains Stewart.

He goes on to say brands need to think of alternative partners to the grocers, such as coffee machine manufacturers for Illy, or a detergent partnering with a washing machine brand so when it is installed customers are offered the smart replenishment service from the very beginning.

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