Tesco eyes Clubcard shift amid 'seismic' GenAI shake-up

Tesco is considering major changes to its Clubcard loyalty programme by tapping into generative AI in an effort to help customers make more informed health choices, identify better value and reduce food waste.

In a presentation at this week’s FT Live Future of Retail conference, the supermarket giant’s chief executive Ken Murphy predicted how GenAI would “revolutionise” how all retailers serve their customers, by improving personalisation and removing mundane tasks in store, and making it easier for staff to serve customers.

Murphy argued that we are already on the fourth or fifth generation of AI, starting in the late 2000s and moving into machine learning applications during the last decade to improve supply chains, promotions in retail and so on.

“AI has already had a huge impact,” he commented. “But we’re now into the generative AI era with ChatGPT and the like, which is even more powerful. AI will revolutionise how customers interact with retailers. It will be seismic.

“You still need to be careful and have good oversight when introducing it. But it is developing so fast you do need to embrace it. Allow yourself to make mistakes in a controlled environment.”

One major benefit could be its integration within supermarket loyalty schemes, to transform elements customers “don’t really give a lot of thought to”, Murphy said.

He cited an example of how GenAI could help bring customers’ bills down by analysing their past shopping habits to inform them when specific items could be coming on to promotion at a cheaper price.

It could also help them to cut food waste by substituting specific lines, or telling them to buy less if they have not been using everything they have previously bought.

Murphy added: “For example, GenAI can work out who you are buying for and if it works out you’re buying for kids it could suggest you wait a week until that product is on offer. AI can also cut waste by identifying if you’re buying two of something that will soon be out-of-date. Longer-term it can suggest healthier alternatives. Very simple stuff, but stuff that we would never do independently that could really improve people’s daily lives.”

Murphy said that over recent years, Tesco has taken the approach of building its own tech stack rather than buying it in and has been investing heavily in growing its own tech team. He added: “We’ve got 5,000 people in technology roles and add 300 per year. This works for us because it ensures seamless technology deployment but there are drawbacks in that it is slower to implement new innovations. But it is more integrated. We have to find a hybrid model for the future.”

The supermarket also recently signed a new deal with martech firm EagleEye, founded in 2003 with backing from former Tesco CEO Terry Leahy, with one-time Tesco marketing chief Tim Mason as CEO.

In January, it launched its EagleAI tool designed for the grocery and retail sectors, and aimed at helping brands better meet their customers’ wants and needs individually, optimise promotional spending, increase ROI, and enable true one-to-one engagement.

Earlier this year, Tesco used the tool to devise the Clubcard Challenges campaign, which invited 3 million loyalty club members to take part and offered them a chance to collect £50 in points by taking part in 20 personalised challenges.

However, while Murphy said “the GenAI revolution is upon us”, he insists retail basics will remain the most important reason behind a customer’s decision to shop with Tesco in the future.

He concluded: “Great prices, great product quality and great shopping experience will be the constants, no matter what technology disruption comes. We don’t see AI as a replacement for people, we see AI as an enhancer of what people do for the business and what people do for the customers. We want to make everything that they do that bit more powerful, and that bit more valuable.”

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