Eye on AI - December 6th, 2019
Welcome to Aigora's "Eye on AI" series, where we round up exciting news at the intersection of consumer science and artificial intelligence!
This week, we take a closer look at the impact of tech on retail, with a particular focus on Starbucks’ recent double down on AI tech and the evolution of the kitchen in the age of delivery apps.
Starbucks Partners with Microsoft
We begin with an article out of NASDAQ titled “Can Investing in Artificial Intelligence Increase Starbucks Sales?,” in which Jennifer Saibil, contributing reporter, describes how Starbucks hopes its new partnership with Microsoft will advance its AI tech and keep it atop the coffee industry.
“When customers use the mobile app, the company collects data about their preferences,” writes Saibil. “Combining this with knowledge of Starbucks shops in the area, local popular drinks, the weather, and other factors, it can offer recommendations for both products and pairings.”
The partnership comes as Starbucks sales continue to increase 7% year to year and its annual profits exceed those of its nearest competitor by over 13x. A position of power is not typically one in which large companies traditionally refocus their strategy. So why now? Starbucks knows the top is shaky ground when new technology is at play. The Chinese coffee chain Luckin Coffee, for example, already has plans to exceed Starbucks storefronts in China within the next year. Others look to technology as a means to recapture the market. To stay on top, Starbucks believes it must remain technologically ahead of its competitors. The partnership with Microsoft is a step in that direction.
“We’re meeting our customers where they are … using machine learning and artificial intelligence to understand and anticipate their personal preferences,” said Starbucks senior vice president Jon Francis. “Machine learning also plays a role in how we think about store design, engage with our partners, optimize inventory and create barista schedules. This capability will eventually touch all facets of how we run our business.”
Supplement the NASDAQ article with this on from ETF Trends to get a better sense of the new kinds of ways Starbucks is utilizing Microsoft to adapt its AI.
Home-Cooking Might Become the Exception
We continue with an article out of NPR, titled “Delivery Only: The Rise of Restaurants With No Diners As Apps Take Over,” in which reporter Shannon Bond describes how delivery apps like DoorDash are investing in a future without traditional brick and mortar restaurants.
“Rather than having to build a physical brick-and-mortar store, we do that on [a company’s] behalf,’ said Faud Hannon, who leads DoorDash’s ghost kitchen project. “And then they move into our DoorDash kitchen and then overnight they're live on the DoorDash platform."
Ghost kitchens, virtual kitchens, dark kitchens – whatever you might call a delivery-only kitchen – are already seeing large investments for delivery app companies like Uber Eats. And those companies are recommending new markets to clients and encouraging then to offer delivery-specific menus on their app.
“Uber advises some restaurants to use their existing kitchens to offer a whole new menu, under a different name — and only available through the app,” writes Bond. “That could mean a bakery that starts making burgers for delivery ‘because that neighborhood didn't have enough burger restaurants,’ said Janelle Sallenave, head of Uber Eats in North America.”
The delivery movement is still growing. U.S. diners spent $27 billion on phone app deliveries last year, with over $800 billion spent on restaurants as a whole. But with deliveries increasing, ghost kitchens allow restaurant chains to ramp up sales with new locations without the traditional overhead of purchasing and developing a new space. One key barrier to entry: high service fees.
"For restaurants, it's tough to give away that 30%. A lot of these guys — the Ubers, the Postmates, the Grubhubs — they've essentially built an amazing business, but they built it off the back of the restaurateur," says Ken Ray, owner of the now closed Alacarte Delivery in Miami.
Time will tell how this all plays out, but big changes are clearly coming.
Additional News on Tech and Retail
If you're interested in the growing intersection between tech and retail, you might also like to read about this AI-based beauty app. And for more on the growing tech trends in retail, check out Bernard Marr’s Top 10 Retail Technology Trends.
Amazon's world’s first machine-learning USB musical keyboard (DeepComposer, for which the early reviews were not good.
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