The future of UK supermarkets is big data and personalisation

The proposed merger of two supermarket giants, Asda and Sainsbury’s, has been hailed as one of the new “forces of UK retail”.

But in a rush to point out that the combined chain would have nearly a third of the UK supermarket sector, one key factor has been ignored: Amazon.

Amazon recently launched its online grocery delivery service. Known for its speed, convenience and ease of use, we expect many shoppers to flock to the ecommerce behemoth as commonplace for their weekly shop in the near future. And who knows, maybe it won’t be long before Facebook and Google move into the supermarket space.

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When heading to a competitor’s website is as easy as an app download away, traditional supermarkets need to innovate to retain their competitive edge. The question for Sainsbury’s and Asda is how do two very different brands still keep the customer at the heart of the shopping experience, and compete with ecommerce giants that have personalisation and big data use literally coded into their business models?

Out of the UK chains, Sainsbury’s has led the way in adopting and embracing a highly consumer-centric approach, while Asda’s strategy has focused on driving costs down and passing the price benefit to the customer. Will we now see a cross-pollination of ideas resulting in a superior customer experience at an unbeatable value, or will the new venture react to the threat by the budget chains Aldi and Lidl to become a highly cost-focused organisation?

While it might be tempting to go for the latter and slash costs, the former is where the true value lies. Retaining a competitive edge today is all about understanding customer triggers, using insights and big data. Gaining a deeper understanding of customer demands, and mining data across the wave of digital channels, is imperative to delivering a personalised experience. Amazon has spent decades perfecting this, and has a substantial headstart on the big retails chains.

This isn’t just about pouring resources into websites. Physical stores will continue to drive forward a significant portion of supermarket revenue, and delivering a customised experience cannot be overlooked here either.

Earlier this year, the opening of Amazon’s first physical store demonstrated how retailers can disrupt the traditional bricks and mortar approach, enhancing rather than replacing them. In the Amazon store, smart cameras and sensors observed what customers put in their baskets and charged them directly on their accounts, with no need for checkouts.

This may seem like a gimmick, but making innovative use of emerging technologies, including artificial intelligence (AI) and the internet of things (IoT), is crucial for the retail sector. If supermarkets want to keep up with the competition, this must be a cornerstone of their approach, in order to minimise supply chain costs, and make more insightful decisions for the benefit of their customers.

AI is not something to be feared. It may lead to job replacement, but in retail it can be a real force for good in decision making and the customer journey mapping process. AI technology, combined with smart sensors and the IoT, will also play an integral role in automating the supply chain, improving store efficiencies, and reducing operating costs. It is partly down to this technology that Amazon is able to provide such a personalised service, while keeping costs so low.

The merger of Asda and Sainsbury’s spells big news for the retail sector, but we should not become fixated on whether having one fewer supermarket brand means less consumer choice. Rather, this is about the opportunity to offer customers a more personalised experience.

If the combined chain can put consumer needs first, harness technology, and focus on designing the right store experience, the merger will be a force to reckon with against the online challenger brands.

The future for UK supermarkets is bright – but the opportunities need to be grasped with open arms, now. Simply merging isn’t enough.

Read more: DEBATE: Would the Sainsbury’s-Asda merger be good for consumers?