Morrisons looks to API management as key weapon in supermarket price wars

Profile picture for user jtwentyman By Jessica Twentyman February 5, 2015
Summary:
Morrisons Match & More loyalty scheme relies on shopping list of data from wide range of back-end systems.

morons match and more
The Match and More gambit

With Christmas sales that fell 3.1%, the closure of 10 stores with the loss of over 400 jobs and the hasty sacking of chief executive Dalton Philips, it’s fair to say that 2015 hasn’t got off to a great start for Morrisons, the UK’s fourth largest supermarket chain.

Some of the problems that Morrisons faces are unique to the company; above all, the struggle to play catch-up after a dismally late entry into the growth areas of online shopping and convenience stores.

But perhaps its biggest challenge is one that Morrisons shares with its three main rivals, Tesco, Sainsbury’s and Asda: ruthless undercutting by the UK’s two main discount grocers, Lidl and Aldi.

Morrisons chairman Andrew Higginson, a former Tesco finance director, has pledged to focus in 2015 on the things that make the supermarket ‘special’. Much of its fresh produce, for example, is sourced from its own farms, abattoirs and fish processing factories. But even he admits it could take five years to restore Morrisons to “full health” and, in the meantime, there can be little doubt that the real battle will be fought on a single front: price.

With that in mind, Morrisons launched its opening salvo against the discounters in March last year, with the announcement of £1 billion in discounts over three years.

Then, in October, it launched its new loyalty scheme Match & More, a price-matching programme that compares Morrisons’ prices against Aldi and Lidl, as well as Asda, Tesco and Sainsbury’s. If a comparable grocery shop can be bought cheaper at any one of these other retailers, then the Morrisons shopper gets the difference paid back in points on a loyalty card, to the tune of 10 points for every 1 pence cheaper their shop would have been elsewhere. When 5,000 points have been collected, they get a £5 voucher they can use in-store or online.

IT challenge

Supporting Match & More is a big challenge for IT. The scheme’s success relies on a wide range of complex back-end systems being able to exchange and share data on customers, products and prices, explains Tom Foster, Morrisons’ head of platform strategy and architecture.

That data, in turn, needs to be made accessible to the customer via the Match & More mobile and web apps - a task that Foster and his team have accomplished by extending Morrisons’ use of an API management platform from Apigee. He says:

We have a huge number of back-end systems. It’s quite a complex estate with different systems holding, for example, customer data, card data, Match & More points and in-store point-of-sale data. The API platform sits in front of all that complexity, making it simpler for the team to define and manage APIs and integrate the variety of systems needed to create a seamless experience for customers.

Take the Match & More mobile app, for example: it’s stateless, meaning it holds no information. It just draws data from those back-end systems to display to the relevant customer through Apigee, when that customer logs in to check their points balance or to view their transaction history.

And it’s not just internal back-end systems that need to be able to ‘talk’ to each other. For online shopping, launched in early 2014, Morrisons relies on a partnership with online grocery delivery firm Ocado.(See Ocado turns a profit from online groceries thanks to shortcomings of Morrisons.)

This means that Apigee needs to manage the APIs that glue together Morrisons’ and Ocado’s respective technology platforms, so that Match & More can run across both in-store and online purchases, allowing customers to collect points and use money-off vouchers across both channels.

One of the major challenges Foster and his team faced was around single sign-on for the Morrisons and Ocado platforms, he says:

What we did was use Apigee to effectively federate some of the identity user management that we have in the Ocado platform and apply it to the non-Ocado platforms, so customers have a single user name and password for the whole of Morrisons.com.

Certainly, at the launch of Match & More, we wanted to make sure that, as an existing online groceries customer, you wouldn’t have to sign up separately with new credentials for the loyalty scheme. You’d simply be able to log in with your existing credentials and enrol.

New experiences

Apigee also lies at the heart of the Morrisons IT team’s work on creating new digital experiences for customers, in collaboration with their colleagues from the company’s internal marketing department as well as partners from third-party creative and digital agencies, he says:

We’re now able to expose systems and data that might not have previously been accessible to anyone outside of IT in a really secure way. In the past, if we couldn’t expose that data, we might have required by marketing to perform a daily export of data to a new back-end silo or maybe even create a disparate front-end systems for each activity, even if it was a temporary, seasonal thing.

This is really important for future innovation. As a company we have many people with bright ideas - but they all rely on access to the wealth data that’s held in our systems. If we combine bright ideas with rich data, a lot of new possibilities open up, from augmented-reality experiences to in-store ‘Street View’ type apps.

Morrisons
Trollied

The use of Apigee to support Match & More is the first time Morrisons has relied on the technology to expose data to customer-facing apps, rather than to facilitate business-to-business integrations (with third-party logistics providers, for example).

As a result, the volume of API calls has skyrocketed - from pretty much a standing start to around 120 million per month immediately after Match & More was launched, before settling at today’s rate of around 100 million API calls per month, says Foster. Because Apigee is provided as a service, managed by Apigee itself and hosted on Amazon Web Services cloud, he adds, it has the scalability to absorb these kinds of flows without Morrisons’ staff having to worry about it.

It’s a great use of technology: Morrisons is the first UK supermarket to offer direct price comparisons with Aldi and Lidl, as well as its main competitors. But, at the same time, questions remain as to whether Match & More will provide the salvation that Morrisons needs. Only around one-quarter of UK supermarket shoppers are thought to use loyalty cards, after all - and similar schemes have not helped Tesco or Sainsbury’s fend off the discounters.

API management has removed some of the complexity from this price comparison scheme, but what about the overall cost (and impact on profitability) associated with going head-to-head with aggressive discounters like Lidl and Aldi. They are, on average, around 15% cheaper than the major supermarkets, according to industry analysts. This could be a dangerous strategy - but Morrisons may not have much choice.