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As Sainsbury’s preps for an Argos takeover, what's the digital future of retail?

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In January Sainsbury’s revealed it had been pursuing the acquisition of Home Retail, owner of Argos, for the previous three months while doubling the number of digital and technology employees to help improve its online offer.

Now, Home Retail Group has come out and backed Sainsbury’s £1.4bn takeover bid and Sainsbury’s is hiring a further 150 software developers and engineers.

It looks like the high-street grocer has finally secured the deal, and is laying down digital foundations, which will help it take on the likes of Amazon and diversify away from the ultra-competitive food market.

Digital is already a key battleground in retail, not only in terms of e-commerce but also in terms of how technology can improve the overall customer experience and how the offline and online world should interact in the future.

With its lamented catalogues and under-sized pencils, Argos isn’t an obvious poster-child for a digital revolution in retail but its potential clearly caught Sainsbury’s eye after it ploughed millions into a same-day delivery service, to compete against Amazon’s Prime Same Day when they both went live in November last year.

If Sainsbury’s can instill digital change into the Argos shopping model with new combined stores in out-of-town retail parks, it can use technology to power a shared distribution network that would improve efficiencies and completely re-write the delivery rules of online ordering.

As part of the sale, Sainsbury’s will also be buying a sea of big data and granular customer insights, which can be mined for deeper intelligence that will drive improvements to the overall retail experience.

To truly compete with a digital disruptor brand such as Amazon or Netflix, Sainsbury’s would also need to improve its digital ability for accurate product recommendations. Over a third of Amazon sales are driven by accurate recommendations, while three quarters of what we watch on Netflix is driven by what is recommended to us. 

More complex and multiple data sources will allow Sainsbury’s to really understand, not only what customers shop for online, but also to better analyse in-store purchasing patterns for better stock management.

Data driven intelligence combined with machine learning and artificial intelligence would give Sainsbury’s a competitive edge across its expanded product range and allow it to factor in external data sources such as weather patterns and economic drivers to predict product demand and sales.

Finally, Sainsbury’s will also be looking to compete in the mobile battleground so as not to follow in the omni-channel failures of the likes of Next and BHS.

Innovation in retail mobile will include shopping via Facebook Messenger as well as improving the in-app / in-store experience.

For an example of the latter, look at US retailer Hointer and how it’s using its app to allow customers to select clothing in-store, which is then delivered to a fitting room within 30 seconds.

A specific dressing room number on the app directs the shopper to his clothes. If the clothes don’t fit, the shopper can place the clothes in a particular section and request a different pair on their phone. The clothes that don’t fit are simultaneously removed from the shoppers’ virtual shopping cart. The apparel can even be purchased while the shopper is still in the fitting room by swiping a credit/debit card on a tablet card reader.

There’s no question that digital innovation, combined with big data and machine learning will drive the retail revolution. The industry will be watching the role that Sainsbury’s plays with interest.

Syzygy Client Partner Matt Wills is the former Head of Platform, Content and UX, Morrisons 

Published on Thursday 28 April by Matt Wills

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