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Bloomberg yesterday broke the story of how Kroger and Microsoft, driven in part by a shared antipathy for Amazon and in pat of a common desire to find technological solutions that will enliven the “often-tedious ritual of food shopping,” have embarked on an extended partnership “to bring the ease of online shopping to brick-and-mortar grocery stores.”

Using two stores as their laboratories - one in Washington State, near Microsoft's headquarters, and the other near Cincinnati, kroger’s home base - the two companies are testing out new features that “include ‘digital shelves’ that can show ads and change prices on the fly along with a network of sensors that keep track of products and help speed shoppers through the aisles … customers using Kroger’s self-checkout app will be guided through the store to items on their shopping list. When they enter an aisle, the digital shelf will display a personalized icon chosen by the shopper—a  banana, say, or a pumpkin—below the relevant product.”

The digitization of the experience isn’t just there to help customers. According to the Bloomberg story, “The smart shelves light up to help store employees pick orders for Kroger’s curbside grocery pickup service, where customers order online and then later in the day have their bags brought out to their car in the parking lot. The companies say this ‘pick-to-light’ system can cut in half the time required to pick each order, a possible advantage as rivals such as Walmart and Target perfect their own curbside pickup services.” In addition, “in a refrigerated meat case, temperature sensors appear every few feet, automatically flagging workers if the case warms up too much, helping prevent  the roughly $10,000 worth of meat inside from spoiling.”

Furthermore, the consumer information being gleaned through the system also could be used by Kroger - and sold to outside vendors - so that shoppers can be targeted with specific and relevant promotions keyed to previous behavior and purchases.

Kroger CEO Rodney McMullen explains the partnership this way: “Together we can create something that, separately, we could not.”

And Microsoft CEO Satya Nadella adds that “the technology will help shoppers find food in the ‘most seamless way’ and hopefully inspire other grocery chains to adopt it in their own stores .”

Which leads to another important point - that this technology will not be proprietary to Kroger; the chain hopes to be able to sell it to other retailers, which also are seeking ways to compete more effectively with Amazon.

Bloomberg goes on to point out that “Kroger isn’t the first big retailer to entrust valuable data and tasks to Microsoft’s Azure cloud service. Microsoft has also signed up the likes of Macy’s, Walmart and European grocer Ahold Delhaize, which would prefer not to pay Amazon for critical technology.” And, “Kroger’s plan to commercialize its futuristic shopping experience could provide a lift to Microsoft’s Azure cloud business, which is critical to Nadella’s ongoing efforts to reinvent the software pioneer. The Kroger pilot makes use of several types of Microsoft cloud technology, including the ability to analyze data generated by a host of sensors spread through the store. The two companies are also working on a Virtual Store Manager, which would alert the human store manager when, say, there aren’t enough shopping carts for customers at the front of the store.”
KC's View:
This all has the feel of an arms race, doesn’t it? Major powers are jockeying back and forth, each seeking this or that advantage, looking for any possible edge that will provide the key to some level of supremacy or, failing that, survival.

If you’re not in the game, you’re losing … because these days, to not be making the right kind of progress is to actually be going backwards.