The role of digital personalization

Grocery stores and hotels might at first glance seem to have little in common. But for Ryan Draude, the similarities are crystal clear.

Just as hotels offer rewards to people who regularly stay with them and take steps to recognize guests when they walk in, Draude, head of loyalty and digital for Giant Food, thinks one of the most effective ways food retailers can build ties with their customers is by turning grocery shopping into a personalized experience built around their needs and preferences.

To accomplish this for the Ahold Delhaize-owned grocery chain, Draude is looking for inspiration to his former role overseeing the frequent-guest program operated by lodging chain Choice Hotels International. Among his key takeaways from that job is that customers want to feel that a merchant appreciates them and is committed to helping them get what they want — and won't hesitate to leave if they spot a better option, Draude said.

For now, Draude is focused on using Giant Food's e-commerce program, Giant Flexible Rewards, to deliver personalized pricing, product recommendations and rewards to customers that also relate to their experience in the chain's stores. Later, the company may add technology to its locations that gives customers the ability to signal their presence in stores using a smartphone and then receive location-based promotions, he said.

"My biggest fear is if a grocery store opened up half a mile closer to my member's home than a Giant was, what are we doing [that is] so differentiated that would continue to make them drive that extra half a mile to go to our store?" Draude said

Giant Food is focusing on personalizing the shopping experience at a time when grocers are looking for strategies to maintain the momentum they have made connecting consumers with essential goods during the pandemic. 

Findings from a poll of 1,000 consumers Grocery Dive recently conducted with market research firm Inmar Intelligence suggest that the grocery industry faces obstacles as it looks to convert customer relationships built in stores to online — especially where the center store sales that are key to grocers' bottom lines are concerned.

Three-quarters of participants in the survey said the center store is "absolutely" or "mostly" relevant to their shopping habits. But just 9% of respondents said they use their local grocery store's e-commerce service to shop this department, while more than nearly 70% indicated they turn to Amazon, Walmart, Sam's Club or Costco for their favorite center store staples.

Customization strategies built atop loyalty programs like the one Giant Food operates may hold at least part of the answer for grocers as they look to hold onto customers smitten by e-commerce, experts said. Grocers now have access to a variety of personalization tools, including customized coupons and promotions, shoppable recipes based on a customer's nutritional preferences and spending-related discounts. But retailers need to carefully test options and prioritize those that make it easy for shoppers to find their preferred products and also discover new items amid what can be an overwhelming center store assortment, sources noted.

Serving shoppers a selection of center store goods that they are likely to be interested in is critical to retaining their allegiance online and alleviating the "click and scroll fatigue" shoppers run into while online shopping, said Spencer Price, co-founder and CEO of Halla, a startup that specializes in grocery personalization technology. 

"A process of elimination to some extent is one of the most important parts of personalization because you don't want to be inundated with tons and tons of products that you know you're never going to try or buy," said Price.

Using analytics to offer smart substitutions when items are out of stock is also essential to building relationships with consumers, said Sean Turner, co-founder and chief technology officer of Swiftly, a startup focused on digital loyalty technology. Earlier this year, Walmart introduced online shopping substitutions powered by artificial intelligence, boosting customer acceptance of those items above 95% as a result.

"It used to be personalization was just about 'how can I get shoppers products that they're interested in at a good price?'" but that has changed as retailers look to build deeper relationships with customers, said Turner. Now, he said, grocers face the tougher challenge of convincing people they understand their needs and are ready to meet them — without making them feel like just another customer.

Another factor behind the growing interest among grocers in developing personalized customer relationships is that shoppers themselves have an unprecedented ability to track prices, putting pressure on retailers to closely follow their competitors to ensure their customization strategies remain relevant, experts said.

"Whatever response you're going to take — whether it's a price change, whether it's an assortment shift, whether it's a new promotional cadence or approach — it all demands tracking your competition with much more granularity because that's what ultimately the shopper is able to do now," said Ben Reich, founder and CEO of Datasembly, a California-based company that gathers information from e-commerce sites for clients, including grocers, through a process known as web scraping.

Building a grocery store for every customer

While brick-and-mortar grocers have added shortcuts that help shoppers find relevant products in center store and other departments, they're only beginning to scratch the surface of what a truly personalized shopping experience can be, according to online grocers that specialize in this approach. 

Because they don't have storied brands and physical locations to build awareness, e-grocers are focused on offering new customized shopping platforms built around advanced technology like machine learning.

"Based on what I know about you, based on what I know you'll buy [and] what you won't buy, I can build a specific grocery store" for every customer, said Abhi Ramesh, founder and CEO of e-grocer Misfits Market. "That power exists in the digital universe in a way that can never exist in person."

Ramesh's company, which started three years ago selling cosmetically defective produce, has since raised hundreds of millions of dollars to feed its ambition of becoming a full-fledged grocer. Every customer who opens Misfits Market's app sees a personalized assortment of foods determined by the company's in-house machine learning technology, and Ramesh wants to take that personalization to an even higher level.

The company's goal, Ramesh said, is to only show customers items that might interest them and cut out all the products they're not likely to purchase. In addition to providing a "less mentally fatiguing" grocery-shopping experience, such a high degree of personalization can also help prevent food waste by enabling Misfits Market to precisely determine what it needs to keep in stock and when to bring it to its facilities, he said.

"Every off-the-shelf piece of technology and software that exists today is all designed for kind of the old-school model of buy from distributors, bring the same standard product into your warehouse, send it from the warehouse to the grocery store," said Ramesh. "There's very little machine learning, very little predictive algorithms built on top."

Given that an online shopping trip can take just a few minutes, California-based e-grocer Farmstead places a premium on only showing customers products they are likely to be interested in, said Pradeep Elankumaran, the company's co-founder and CEO.

"You're taking an amount of time that this customer is willing to spend on your site and you are maximizing the relevance of the product shown to that customer to maximize the possible basket that they will shop with you," Elankumaran said.

Farmstead, which also offers technology and dark store services to grocers, accomplishes this in part by encouraging customers to subscribe to the staple goods they always buy so they can use their time spent on the company's website or app to discover new items, he said.

"You can't have a high basket just by showing people the same things over and over," said Elankumaran. "It becomes especially important that you're showing people the right things that really resonate with them while also surfacing the things that they probably won't [otherwise] get to see, but surfacing it to them in a more relevant way to capture the thrill of the hunt, which is a very real thing."

High-touch doesn't have to be high-tech

Gary Hawkins, CEO of the Center for Advancing Retail & Technology, pointed out that personalization strategies don't have to be high-tech. 

For example, a retailer could invite their best customers to bring knives to the meat department to be sharpened, Hawkins said. Another option would be to offer a customer who signs up for a loyalty program a tour of the store with a manager, he said.

"I've worked with retailers all over the world … and one of the things I found no matter what country I was in, no matter what culture I was in, [is that] we as human beings like to be recognized," Hawkins said.

Bob LaBonne Jr., president and CEO of LaBonne's Markets, a chain of four supermarkets in Connecticut, said one of the most effective ways to build bonds with customers is to give them a selection of treats — complete with a personalized letter from a store director — as a tangible show of gratitude. LaBonne's runs a points-based loyalty program that automatically sends customers coupons when they reach spending thresholds, but has discovered that giving people something they might not have bought is especially effective, LaBonne said.

LaBonne said he has found that distributing holiday gift baskets filled with items like nuts, snacks, olive oil and balsamic vinegar to especially loyal shoppers can go a long way toward making them feel special.

"Customers felt like we gave them a trip to Hawaii," he said.

Walmart has launched an online and in-app experience based on a platform from nutrition technology company Sifter that includes a "Shop-by-Diet" scanning tool allowing customers to determine if products meet certain health preferences like diets, allergens, interactions with medications and medical conditions, Sifter announced earlier this week. 

After scanning a product's barcode, shoppers select health filters and the tool will let the shopper know if the product fits all, some or none of the chosen attributes. Shoppers can also examine the nutrition panel on the product page to see if it meets their needs and set up a "diet profile" that saves wellness goals, allergens,  ingredients to avoid, health and lifestyle diets, and medications.

The partnership between Walmart and Sifter aims to make it easier for people to factor in health preferences when shopping online and in-store. It's the latest move by Walmart to connect health and wellness with its grocery offerings as retailers look to tap into the food-as-medicine trend. 

The MyDiet Profile lets shoppers select from more than 100 health attributes under areas like lifestyle and health diets, allergens and medications, and allows them to build a list of ingredients they want to avoid. Customers who set up a "MyDiet Profile" can paste a recipe link into a tool that determines how the recipe fits into the saved health preferences. When using the scanning tool, shoppers can toggle the filters on and off.

Other features include buildable shopping lists, a "Health Hub" with wellness content and explanations of different diets. Shoppers can select a specific Walmart store to browse and buy items, which have product pages with nutrition information, health attributes and preparation instructions.

Sifter was created by Andrew and Thomas Parkinson, founders of Peapod and ItemMaster, a product content platform for brands, retailers and consumers. The company claims its proprietary technology is "science-based" and uses input from registered dietitians, health and wellness organizations, major retailers, brands and data providers. 

Sifter noted in the announcement that 200 million consumers are following a diet or health-related program and 85 million have allergies or food intolerances. NielsenIQ said last summer that more than 70% of shoppers look for specific product attributes when picking out brands and gave "heart-healthy" as an example of an important attribute among a majority of surveyed consumers. 

Last year, Walmart added an online shopping destination called Built for Better to help customers find products aligned with their healthy food, clean living or sustainability goals. Digital icons identify products that meet independent standards like EWG Verified, Energy Star Certified or Rainforest Alliance Certified and are split under two labels: "For You” for nutrition and products made without specific materials or ingredients and "For the Planet” for products made in a way to reduce environmental impacts.

Competitors have also taken steps to make health-related products easier to find. Last summer, Amazon added certifications from health, organic and animal welfare organizations under its sustainable labeling program, while Target has added in-store and online "wellness icons," including identifiers like organic, "simple ingredients," "nutritious" and vegan.

Both Amazon and Walmart have linked labeling of health-related products to their sustainability efforts. 

As grocers look to improve their online shopping experiences, many are looking at ways to further personalize the digital journey. 

To be more specific, they’re looking for ways to boost product discovery, and to hone the experience so that instead of combing through thousands of product listings — something that is nearly impossible to do on a screen, unlike in-store shopping — shoppers only view those products most relevant to them.

A recent study from the University of Minnesota School of Public Health promotes the idea of personalizing shopping for a subset of consumers — in this case, those who are trying to lose weight.

Researchers from the University of Minnesota developed three tools that could effectively reach these shoppers: A “healthy shopping” preference setting, a healthy meal planning tool, and a calculator that tallies up the nutritional quality of their shopping carts.

Lead researcher Lisa Harnack said in an interview that surveys show that around half of obese individuals in the U.S. are trying to lose weight. Many others, she noted, are simply looking to eat healthier than they currently do.

Through in-depth interviews with research subjects — 25 in all — Harnack found that a major frustration with in-store shopping is that it offers too many temptations for those looking to shed pounds, like aisles filled with treats and the aroma of fresh-baked goods. Online shopping, on the other hand, can be curated to only include items that incorporate claims, ratings and other attributes specified by shoppers.

Many retailers currently offer tabs like “gluten free” and “low sodium,” but Harnack’s research found that grocers can go further by allowing shoppers to set preferences or create individual profiles that would essentially customize the shopping experience and maximize product listings that fall in line with their health goals and minimize those items that don’t.

“The online platform can allow retailers to do things that are not feasible to do in the store, like creating this tailored shopping experience,” Harnack said.

The team also found subjects were enthusiastic about a menu-planning tool that suggests healthy meal ideas in line with their preferences, and a calculator tool that indicates the overall healthfulness of their order along with tips for improving, like buying lightly salted nuts instead of the regular kind.

After conducting the 25 initial interviews, Harnack and her team sat down to develop their list of hypothetical tools. They then ran those proposals by 25 new subjects to determine the top choices. All test subjects were individuals over the age of 18 who were actively looking to lose weight.

Although the study’s sample size seems relatively small, Harnack said this was all the team felt they needed to get a sense of the core challenges these consumers face.

“After around the 20th interview, we weren't getting a whole lot of new insights,” she said. 

Grocers are used to offering shoppers as much choice as possible, so the idea of limiting those choices or lightly chiding people over purchase decisions may be a hard pill to swallow. But the very nature of digital shopping, which only allows consumers to scroll through one page at a time, seems to necessitate a pared-down experience. It’s also in grocers’ interest to help shoppers find new products they’ll like, since reordering products is an easy, ingrained habit for so many consumers.

Harnack said she hasn’t yet encountered a digital grocery experience that offers the depth of personalization her team outlined. She noted Shipt's new feature allowing shoppers to sort products according to dietary labels like low sodium, organic and vegetarian, and save their preferences under a profile.

Most online platforms already use machine learning to push product recommendations to consumers, and that technology promises to keep advancing in the years ahead. E-grocer Hungryroot requires new customers to fill out a questionnaire and then uses machine learning and predictive modeling technologies to build shopping carts in line with their health preferences. Halla, a “taste intelligence” startup that uses artificial intelligence and data drawn from a wide range of sources, including restaurant menus, to offer product recommendations, just raised $4.5 million.

Harnack said she'd like to replicate the study with a more diverse lineup of subjects, since most of those involved were white women who were well-educated. She also said her team is looking to partner with a grocer to further develop and test online health tools.

“We know that Americans have struggled to eat healthy during the pandemic and people put on some weight that they don't want to be putting on," she said. "So now, more than ever, people are interested in healthy eating.”

Shipt launched a new tool in August that allows consumers to designate their favorite personal shoppers, who will then get prioritized to handle future orders.

The tool, which at launch is only available to Shipt members, lets them designate any personal shopper they give a five-star rating to as a “preferred shopper.” If the shopper accepts, they are then added to that members’ preferred list and prioritized to handle future orders. 

With its new Preferred Shopper tool, Shipt is once again leaning into customer service and its personal shoppers as distinguishing features in a rapidly evolving e-grocery landscape. Further personalizing the relationship between shoppers and members also helps Shipt differentiate against online grocer competitors like Instacart, DoorDash and Uber.

The company said customers had long expressed a desire to get paired up more often with their favorite shoppers. When it recently tested the Preferred Shopper tool, Shipt found that customers who used it ordered more often, had fewer issues with their orders and reported a better experience overall. Customers using the Preferred Shopper feature are also tipping more, which Shipt attributes to "a high level of individualized service."

Roughly 95% percent of people who have tried the service began using it immediately, Shipt said in its announcement.

Giving consumers more control over who handles their orders could help assuage longstanding concerns that have kept people from shopping for groceries online, like selecting perishable items and making substitutions. Letting members pick their most valuable shoppers could also incentivize Shipt workers to deliver a positive experience. Boutique personal shopping services like Dumpling have long emphasized the connection between members and individual shoppers.

“The more often a shopper shops for a customer, the more they learn about that customer’s wants and needs and are able to deliver a tailored shopping experience,” said Karl Varsanyi, chief experience and product officer at Shipt, in a statement.

The new tool continues a string of announcements from Shipt as it fights for relevance in an increasingly competitive online shopping landscape. Although the company has helped fuel parent company Target’s rapid e-commerce growth, its overall market penetration is much smaller than Instacart's and it is facing more competition from rapidly growing — and well-capitalized — players Uber and DoorDash.

Also last summer, Shipt launched a feature that lets customers set dietary filters under their online profiles. It’s also expanding its retailer partnerships beyond grocery, linking up with Rite Aid and healthcare service CaringBridge.

Walmart has seen shopper acceptance of substitutions increase to more than 95% since it started using deep learning artificial intelligence for online grocery orders, Srini Venkatesan, executive vice president of Walmart Global Tech, wrote in a blog post last summer.

Deep learning is a function of AI that imitates how brains process data and can learn without human supervision. Walmart is using the technology to consider hundreds of factors, like size, type, brand and price, to make substitution recommendations, according to the post.

Walmart has switched from relying on a manual process for identifying substitutions to employing deep learning AI to improve customer satisfaction and streamline order picking, Venkatesan said.

Product out-of-stocks and inaccurate substitutions are significant headaches for online shoppers. Walmart previously relied on its personal shoppers to judge the right replacement products, but this was an imprecise and inefficient process, according to Venkatesan.

"There are nearly 100 different factors that can go into that decision. Trying to account for all of these would not only be too difficult, but it would also be incredibly time consuming," he wrote.

Deep learning AI allows Walmart to continually improve its substitution recommendations on the individual level as it looks to improve how it handles out-of-stock situations. Information on whether a customer approves or declines a recommendation for an out-of-stock item feeds back into the technology’s learning algorithms to boost the system's accuracy in the future. 

“The decision on how to substitute is complex and highly personal to each customer,” Venkatesan said. “If the wrong choice is made, it can negatively impact customer satisfaction and increase costs.”

Deep learning AI not only addresses shopper dissatisfaction with substitutions, but also improves the order-picking process, Venkatesan said. In addition to identifying and getting customer approval for substitutions, the technology shows personal shoppers where items are located in the store.

The technology is the latest effort by Walmart to enhance its on-the-job resources and make its workplace more efficient. Earlier in June, the retailer announced it is giving smartphones to more than 740,000 workers so they can use Walmart’s new workplace app, which will eventually help associates replenish products more quickly.

In 2020, Walmart turned to AI for resource optimization and vehicle routing for its two-hour Express Delivery service. 

Giant Eagle recently partnered with Vous Vitamin and medical technology company Higi to create a virtual vitamin aisle, according to an emailed press release. 

Higi digital stations at nearly 220 of the grocer’s stores allow shoppers to take Vous Vitamin’s five-minute health and lifestyle quiz for suggested product offerings and place orders for home delivery. The offering comes at a time when grocers are boosting awareness and accessibility to vitamins and supplements as the coronavirus pandemic heightens people's focus on health and wellness. 

The Higi Smart Health Stations not only let Giant Eagle customers shop for vitamins, they also share healthy recipes from the grocer, provide educational resources and measure blood pressure, pulse, weight and body mass index. Shoppers can also self-screen for health risk factors like heart attack, stroke, type 2 diabetes, hypertension and obesity. 

“By putting vitamin information just a click away as consumers go about their regular grocery and pharmacy shopping, Giant Eagle is now providing another important resource that empowers people to take charge of their health,” Higi CEO Jeff Bennett said in the press release. 

Based in Illinois, Vous Vitamin specializes in personalized, all-in-one multivitamins and “situational supplements.” The health and lifestyle quiz on the vitamin company’s website asks respondents about what they eat and drink; how active they are; and about any health issues, in addition to asking about age, gender and which region of the U.S. they live in, to then inform the proprietary formulas used to create the vitamin blends. 

In addition to Giant Eagle, Higi’s digital stations are available at Dollar General, Giant Food, Hannaford, H-E-B, Martin’s, Publix, Rite Aid, Sam’s Club, ShopRite, Stop & Shop and Wegmans stores, with a total of more than 10,000 nationwide. Higi claims that more than 61 million people have used one of its stations for more than 372 million biometric tests. 

Giant Eagle has a number of perks to incentivize shoppers to give the digital stations a whirl. Shoppers who use them can get 5% off their first and future Vous Vitamin purchases and those who are a part of Giant Eagle’s loyalty program can get rewarded for checking their blood pressure, according to the press release.

Online grocer Hungryroot recently appointed its first chief marketing officer and a new chief digital officer as it ramps up its expansion plans following a $40 million funding round this summer.

Alex Weinstein, who was previously senior vice president of growth at Grubhub, has assumed the top digital role while Stephanie Retcho, formerly chief marketing officer at travel booking site Kayak, leads marketing for Hungryroot.

The appointments reflect Hungryroot’s drive to further hone its personalization technology and to reach more digital-savvy shoppers. And, like other companies rapidly scaling up in online grocery, Hungryroot is bringing in executives with experience at major firms to help it expand and meet growing consumer demand.

Both new executives have experience navigating sharp growth with digital brands. Weinstein helped restaurant ordering platform Grubhub grow its top line business from $500 million to $2 billion. He also spent nearly three years leading marketing technology and personalization efforts at eBay and spent seven years working in program management roles at Microsoft, according to his LinkedIn profile.

Retcho, meanwhile, helped lead Kayak’s marketing department through the company’s public offering in 2012 and sale to Booking Holdings a year later, and oversaw an international team at the company. Before Kayak, she held management positions at ad agencies like McCann and TBWA Chiat Day.

In its announcement about the appointments, Hungryroot said it aims to continue refining its proprietary technology that personalizes shopping lists for its members. Unlike the marketplace shopping model that most online grocers utilize, Hungryroot’s artificial intelligence chooses products and meals for its customers on a weekly basis. These assortments, which are based on an extensive intake survey and can be adjusted at any time, help save time, cut food waste and promote product discovery, according to the company.

In an interview, Retcho said her job will be to communicate Hungryroot's differentiated model to more people and expand the company’s marketing department. She declined to specify customer growth targets at this point, noting that she’s focused on learning more about Hungryroot’s consumer profile. In conversations with members, she said many express their appreciation for offloading the mental load of shopping and meal planning.

“Traditional grocery shopping is a lot of work,” she said. “You walk into a store and there’s 40,000 SKUs. You have to have done your meal planning and made your list, and you still can end up buying things you don’t need.”

Hungryroot plans to expand its product assortment, which currently stands at around 300 products, according to Retcho, by 60% this year. Over the next few years, the company aims to expand to around 3,000 items, she said. Hungryroot plans to open a fourth distribution center in 2022.

Hungryroot may have its eye on a public listing. In a recent LinkedIn post, Weinstein said Hungryroot brings in around $200 million in annual revenue and is “well-positioned to IPO next year.” Competitor Thrive Market is reportedly mulling an IPO, while online club store Boxed made a deal in June with a special purpose acquisition company (SPAC).

Along with its new executive appointments, Hungryroot recently elevated two current managers to C-suite level titles. Dave Kong, who has worked at the company since its founding, was promoted to chief technology officer, while Luke Vaccaro, an Amazon veteran who worked in supply chain and operations for Hungryroot beginning in 2019, according to his Linked profile, is now chief operating officer.

Last June, Hungryroot announced that it raised $40 million in a Series C funding round led by L Catterton, which has also invested in online retailer Public Goods.