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Line between retailers and tech companies 'will continue to blur'

The line between supermarkets and technology companies will continue to blur thanks to the influence of Amazon, Ocado and other digital innovations, according to the KPMG-Ipsos Retail Think Tank (RTT).

Amazon has the potential to lead a shift change in how the grocers utilise technology, or depending on how the eCommerce titan grows in the grocery sector, force incumbent supermarket to start adopting solutions that make shopping appealing to young people.

That was a key statement in a RTT white paper published this week, which also suggested Ocado’s recent success in operating as part retailer, part eCommerce platform for third parties represents the start of how supermarkets are looking to take advantage of improvements in technology which is changing consumer habits.

According to the RTT, Amazon has a huge challenge to gain market share in the UK grocery space, although the retail industry expert group – which comprises ten prominent analysts from various retail stakeholder groups – acknowledged its breadth of product, customer base and Prime ‘loyalty’ offering will support its success in the sector.

The big four supermarkets were advised not to directly compete with Amazon, as it is expected to offer something very different to what makes the traditional players successful today, but to learn from the internet behemoth where possible. Assuming the Sainsburys, Argos and Asda merger gets final approval, this group will have an appealing product range that can compete with Amazon, the RTT added.

Constant innovation and change is expected in the space over the coming years, the experts predicted.

RTT member and head of retail & leisure at HSBC, James Sawley, said: “Online grocery is still a minority channel for supermarkets in terms of sales, which I have no doubt will grow, but in terms of penetration, I can’t foresee it reaching the heights of non-food retailers.

“The till-less supermarket, however, is a space I see excitement, with Amazon leading the way in the US and Tesco currently testing smartphone scan/pay as you go technology in the UK – this way of shopping will possibly be a game changer in taking the customers experience to a new level.”

Sainsbury’s and Co-op Food are among the businesses also testing this type of scan and pay as you go technology behind the scenes or in isolated stores.

As well as predictions on tech advancement in the supermarket space, the RTT cited the need to remain competitive on price as a key reason for the multitude of mergers and partnerships recently announced in the grocery sector. It also suggested that the rise of the discounters is not likely to be halted any time soon.

The RTT remains relatively confident in the sector’s ability to continue to grow and thrive in what is generally a challenging time for the wider retail industry. However, James Knightley, ING chief economist and RTT member, called Brexit "from a macro point of view, the biggest threat right now to the grocery sector" due to uncertainties around supply of goods, trade deals with other nations, and the strength of the UK’s manufacturing and farming industries to step up if demand required them to do so.

Dr Tim Denison, director of retail intelligence at Ipsos Retail Performance and RTT member, said: "To my mind, future success in the UK grocery sector is about putting the customer first, getting all the basics right, embracing new technologies to achieve this and creating more innovative and rewarding store experiences – that’s the way to be in the money."

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