Kroger allows tech R&D to be sold and used by rivals

Kroger allows tech R&D to be sold and used by rivals

US-based supermarket operator Kroger is unusual in the grocery world in developing its own hardware IT solutions. The firm is now using its technological expertise to create a ground-breaking system for managing on-shelf availability. Glynn Davis reports.

An unwillingness to wait for IT firms to build innovative technology has prompted Kroger to create cutting-edge systems that it is able to not only utilise to its own advantage but to also sell to other companies.

The deployment of such innovations has helped Kroger save nearly US$7bn since 1996, when it set up a research and development department. Notable creations have included the award-winning Advantage Checkout Scan Tunnel.

Speaking at a Wincor Nixdorf breakfast briefing held in New York to coincide with the National Retail Federation (NRF) Annual Convention and Expo, Brett Bonner, managing director and vice president of Kroger, suggests: "Kroger has a history of delivering innovations and applying new technologies and processes."

Bonner, who was a founding member of the R&D team, adds: "How many retailers substantially contribute to creating a product that is later commercialised? We are creating products that become commercial, and which then fund our continued research."

The R&D team is split into two divisions, with an electrical engineering group (dealing with hardware) consisting of seven core employees and up to 30 contractors. "We design and build electrical equipment and from this we've been doing a lot of patenting," says Bonner. Kroger holds 14 US patents and has numerous patents pending, he reveals.

The second grouping, which handles operations research, are described by Bonner as "math nerds whose skills are event simulation that deliver optimisation routines" for improving the back-end processes such as warehouse management.

Working with key strategic partners, including German-based IT firm Wincor Nixdorf, to fully develop the solutions and help bring to market, Bonner says the company is able to "monetise" the intellectual property it has created.

He is not worried about the business potentially losing some of the competitive advantage it gains from its developments when they are sold into the hands of rivals, instead believing it is better that the revenues they earn can then be used to fuel the next innovation at Kroger. "We'll let them be sold because it is a fast-paced world [in grocery retailing]," he says.

One of the current areas of focus is improving on-shelf availability in stores, for which it is building custom hardware that incorporates highly-precise cameras located on the store's ceilings that will monitor the level of goods on each shelf.

This is an extension of the work Kroger has been doing with Zooter/cameras that are fixed to the ceiling and encased within a dark dome-shaped glass covering, which are used to garner a wide variety of data for analysis - including video images and radio frequency signals from various devices located around its stores.

"We have a very rich RF (radio frequency) environment in the ceilings of our grocery stores. We radio track [customer] movements via intelligent shopping carts, temperature monitors, and our own hand-held devices that are carried by all employees," he explains.

It is not uncommon for a new store to have 130 Zooters fitted with cameras that Bonner says gather data for analysis. This data is then used to build intelligent store systems - including potentially its advanced on-shelf availability solution that, the retailer hopes, will dramatically improve inventory management.

Current intelligent store applications include a high performance video surveillance solution - utilising the high specification cameras - which is used for fraud management. But as well as acting as a deterrent against shrinkage the data that is picked up by the devices also enables in-depth analysis to be undertaken that encompasses the monitoring of customer behaviour in-store.

This technology is used to determine a variety of useful statistics such as how many people are in certain areas of the store at specific times, how long individuals stay there, and how many people pass through certain areas of the store.

"We can measure waiting times and predict the future presence of customers. We can then forecast the hours of service [of the employees]. Most companies use a [people] counter but that fails badly as it affects service because it results in the cutting of hours of employees," explains Bonner.

Such a solution is being used at its store's pharmacy counters and Bonner reveals that he is looking at extending its use to the meat and deli areas. The objective of these activities is to create a "continuous cycle of improvement that leads to dramatically improved service but for no increase in cost".

Contributing to the improvement of the management of people in-store is the deployment of kiosks that can be used to move people away from potential areas of congestion. However, such is the innovative bent of Bonner that he does not believe these devices are sufficiently high-tech to justify the attention of his R&D team.

"We've deployed large format kiosks with video and touch-screens but we don't feel they are an R&D project because they are already well understood. But their usage, that is a research project," he says.

They represent yet another tool that can be used in-store to change the behaviour of customers and to generate data for analysis. Bonner can then feed this information into Kroger's analytics engines, which deliver the necessary insight that can contribute to his ongoing objective of improving the environment in-store, thereby better serving the company's millions of shoppers.