Supermarkets Exploring Smartphones' Potential

Ahold USA piloting app that lets customers scan, pay for, bag items as they shop

QUINCY, Mass. -- Supermarkets, recognizing that many customers use their mobile phones to compare prices and check lists as they shop, have begun to experiment with smartphone technology, reported the Wall Street Journal. The stores hope to use apps, high-tech bar codes called quick response codes (QRCs) and other technologies to drive sales and lower costs just as millennials, who grew up using electronic devices, are becoming a bigger percentage of their shopping base.

Building programs around smartphones will allow supermarkets to break into the space without investing a lot of money, said the report.

Agata Kaczanowska, an industry analyst with IBISWorld, told the newspaper that making the shopping experience easier will help the grocers to boost customer loyalty.

In July, Modiv Media, a mobile-shopping marketing company, paired up with Ahold USA, the parent company of supermarkets such as Giant and Stop & Shop. Ahold has started a pilot program at three Stop & Shops in Massachusetts that enables customers who download an iPhone app to scan the bar codes of each item they're buying and bag the items as they continue to shop.

The app is linked to the shopper's customer-rewards card, so that customers can receive targeted specials and coupons related to items they like as they shop.

The app has been well received by Stop & Shop customers, Rebecca Kane, vice president of brand and customer-specific marketing for Quincy, Mass.-based Ahold USA, told the Journal. Over the next few months, the company plans to roll it out to 18 Stop & Shop stores, with an eye to making it chain-wide.

Before smartphones, Modiv offered scanning devices that supermarkets had to buy for customers. Having customers use their own smartphones has eliminated a huge hurdle in terms of cost, says Paul Schaut, Modiv's chairman. The company already has commitments from two other major supermarket chains to roll out programs for them, he told the paper.

Initiatives like Stop & Shop's could also help reduce labor costs, which are between 12% and 15% of grocers' total expenses, Neil Stern, senior partner at McMillanDoolittle LLP, a Chicago-based retail consultancy, told the paper.

While analysts say the business case for high-tech grocers exists--it allows real-time marketing, geolocation within aisles and instant coupon delivery--customer behavior hasn't caught up yet. Many shoppers aren't accustomed to using their phones in a shopping setting, and when they do, it's most often to locate stores, said Forrester Research analyst Sucharita Mulpuru.

"There are a lot of experiments in grocery," she told the Journal. "But the challenge here is there are more experiments than there are success stories."