Tech Industry

"Smart" carts on a roll at Safeway

Think flashy banner and pop-up ads are limited to the Web? The grocery retailer experiments with new shopping cart technology to hone marketing and boost profits.

Think flashy banner and pop-up ads are limited to the Web? Think again.

Grocery retailer Safeway is testing new in-store shopping cart technology that traces shoppers' steps through its stores and flashes personalized ads at them while they're shopping.

The move underscores a growing trend. As more technology permeates the brick-and-mortar retail world, the kind of sophisticated--some may say intrusive--marketing that's common in the online world could become the norm in supermarkets and other stores.

The test sites for the system, which incorporates data on shoppers' spending habits, are two stores in northern California--one in Moraga and the other in Cameron Park. The company, which is headquartered in Pleasanton, Calif., began the tests over the summer.

Shopping carts in those stores have been equipped with a touch screen and scanner, where shoppers are invited to swipe their Safeway Club Cards--"loyalty" cards that keep track of everything their holders buy in exchange for discounts on merchandise.

As customers stroll the aisles of the store, the screen flashes promotions based on their purchasing histories. For instance, if a shopper is passing the detergent shelves and hasn't stocked up in while, the cart could flash a coupon for his or her preferred brand.

On the surface, Safeway says it is interested in the technology as a tool for boosting convenience for customers, according to Safeway spokesman David Bowlby. "As with Club Cards, it's an added convenience for customers," said Bowlby. "We're constantly enhancing the customer shopping experience and making it more convenient for them."

Stocking up on data
But the data gathered by stores such as Safeway represents a treasure trove of consumer buying habits, which may ultimately allow retailers to boost profits by better tailoring their inventories to customers' desires. The data can also help retailers squeeze more efficiency out of their supply chain by ensuring that they are stocking up on inventory that consumers want to buy.

Such targeted marketing may help grocery chains boost their notoriously slim profit margins, analysts said.

"You may feel like you're saving money, but they're really trying to get more into your basket," said Chris Boone, retail technology analyst at IDC. "If you typically spend $80, they want you to spend $100."

Retailers in general don't make the most effective use the customer-specific data they've collected with frequent-shopper cards, according to analysts. The specialized data-warehousing and data-mining systems needed to sift through that data are expensive and complex.

And many retailers are reluctant to monitor purchases more closely since they don't want to raise privacy fears among consumers.

"Consumers don't want to be targeted as an individuals," said Don Gilbert, senior vice president of information technology at the National Retail Federation. "You don't want the stores to know that you buy a case of beer every night."

Safeway's pilot test, however, may signal that retailers are quietly moving to make more use of such data. Analysts said other large chains are experimenting with similar technology.

"I think they're getting more blatant about tracking people," said Katherine Albrecht, founder of Consumers Against Supermarket Privacy Invasion and Numbering, a grassroots organization opposed to shopper cards.

Safeway has no plans yet to introduce the high-tech shopping carts to any of its other 1,650 stores in North America, Bowlby said. He added that it's Safeway's policy not to share any data it collects about customers with anyone outside the company.

Traditional grocery chains like Safeway also may be experimenting with such programs in response to rising competitive threats, namely a multiplying number of Target and Wal-Mart superstores with grocery sections, say analysts.

"When you have Wal-Mart dropping supercenters all over the country with huge grocery stores, these grocery chains realize, 'Okay, there is new competition in town. We need to differentiate,'" said Boone. "Anything perceived as customer service may help them hold onto customers."

Marketing tools like "smart" shopping carts could backfire, however, if people aren't given the choice not to use them, said Boone. Customers could get annoyed, for instance, if the cart beeped at them until they swiped their card.

"I think the average shopper would be creeped out by being tracked around the store. It's a disturbing thought--being treated like a lab rat," said Albrecht.