How Albertsons Is Overcoming the E-Commerce Profitability Problem

With data science and AI as its allies, Albertsons Cos. sees the potential for e-commerce to become a more profitable shopping trip than traditional brick-and-mortar, said Colleen Qiu, VP and head of data science for the retailer.

Qiu's remarks came as part of a panel discussion at the recent Data AI Summit, that also included commentary from executives at Shell Retail, H&M, Mars and Gousto, and was hosted by the software company Databricks.

Seventy-three percent of organizations struggle with big data and AI initiatives, said Rob Saker, global industry leader, retail and manufacturing, for Databricks, in opening remarks. He pointed to a recent survey from McKinsey & Co. that found only 50% of companies had adopted AI in at least one aspect of their businesses.

While Saker predicts a continued investment in personalization and AI-enabled changes in all aspects of retail operations from automated warehouses to product line authorization to drone delivery and more, he also foresees profitability becoming an increasing challenge given slowed retail growth in the next year. Among all of retail, Saker sees grocery as the most impacted industry segment from a profitability perspective with regard to e-commerce investments and cost to serve.

How is Albertsons using data science and AI to increase profitability? Qiu and her team at the Boise, Idaho-based grocer are focusing on three areas: Better forecasting and projections that help e-commerce scale; automation; and the optimization of e-commerce fulfillment.

The problem with e-commerce, said Qiu, is that it’s costly because “e-commerce in grocery is still single-digit as a total of the omnichannel experience. As we grow and have more volume, AI can create more efficiency in end-to-end operations for e-commerce. When e-commerce is to scale, there is the possibility it can be less costly than running a traditional brick-and-mortar store,” she added.

In terms of automation, Albertsons is exploring where human efforts can be saved by leveraging machine learning, continued Qiu. “Where do we use a computer instead of a human? I see a huge opportunity there.”

Albertsons is also working to optimize and drive down the costs of its e-commerce fulfillment and operations through the application of algorithms.

“How do we better sequence our orders? Our pickers are picking. How do we figure out the best picking order when multiple orders are coming in?” said Qiu, adding that Albertsons has designed a simulator for testing its sequencing that considers a variety of parameters, including whether or not the products are perishable.

As the future of grocery and technology, Qiu predicts even greater choices for the consumer. “When I look out 10 years … there will be so many options for customers to place orders that’s different from today [where] you’re solely placing your order online or with a mobile app,” she said.

Qiu sees consumers talking to their fridges to place their next grocery delivery, ordering groceries while playing a virtual game or visiting a human-less store.

“There will be traditional stores, but there’s likely to be more human-less stores where AI and data will play an essential role to enable that capability,” said Qiu. “To me, the future is very exciting in retail and grocery and what we do today is setting the foundation for what will happen in the future.”

Albertsons is also actively exploring how to personalize every aspect of the shopping experience from marketing campaigns to loyalty incentives to leveraging AI and machine learning to making its e-commerce and fulfillment more efficient and effective, Qiu revealed.

“Outside of that if you think about traditional retail, it’s a huge playground for data scientists,” she added.

Qiu’s data science team at Albertsons works with a multitude of other teams, including those in supply, merchandising, pricing and promotion, operations and human resources, “to apply AI and solve different problems for different use cases,” she noted.

“There’s a lot of innovation ahead of us,” said Qiu, adding that data and AI will be crucial in the future of grocery. AI like the robotics companies with which Albertsons is already partnering on robot delivery and other tech companies on microfulfillment centers.

“It’s exciting that’s happening currently,” said Qiu, who believes drone grocery delivery will outpace self-driving delivery. “Drone delivery in my mind could happen in the next 18 months or so,” she asserted.