What happens when you look at old commerce formats like newspapers, grocery stores, or department stores and see something else? Like a Commerce Logistics Center?
That’s how Amazon looked at Whole Foods two years ago. Today, Whole Foods remains a top-tier grocer, but it is also on the cutting edge of new trends like Amazon Prime loyalty extensions, Amazon in-store display and delivery. The sale also shook up a nearly $1 Trillion grocery segment in the US/Canada that had previously been focused on incremental improvements.
In the wake of Amazon/Whole Foods, industry leaders have taken aggressive steps to evolve to a next generation of services propelled by omnichannel shopping and delivery, restructured store formats, take out prepared foods, subscription/relationship commerce, millennial lifestyle preferences, smart homes and voice search.
Grocery giants like Albertsons and Kroger are all over the new landscape, working closely with their consumer-packaged goods partners. But here’s the thing: the stores and CPGs are also openly acting as “frenemies.
CPG leaders are just as ready to sell direct to consumers online or via their own stores, or through alternative channel such as the major ecommerce players and warehouses. Groceries, for their part, have limited faith in the ability of CPGs to sell digitally.
According to research by Deloitte Touche, 89 percent of retailers have limited confidence in CPG digital capabilities. At the same time, the grocers are looking to build up their own relationships with consumers and focus on higher margin and better quality private brands. Other parts of the grocery ecosystem are also scrambling to assure their place in the future. These include delivery, warehouse, automation, payment, loyalty and media/content players.
Last week in Las Vegas at Groceryshop, a comprehensive new event dubbed “the leading conference for Grocery and CPG Innovation,” the scramble was in full evidence. Speakers gave credit to the grocery chains for investing in innovation by automating, adding delivery options and adding new services, such as food prep and instore restaurants. But Boxed CEO Chieh Huang joked that the stores were basically zombies who may already be dead, even as they roll out new activities (it was just before Halloween.)
What would actually save the grocery chains and keep them as “the backbone” of grocery shopping and keep them as engaged as today, when consumers visit them 1.6x a week? Most speakers focused on the stores’ physical proximity to most shoppers; their ability to leverage traditional relationships; and opportunity to deepen their relationship via AI and online and mobile tools.
Albertsons is all over it. Group VP, Product Management and User Experience Karl Varsanyi says it is all about creating an enabling platform. This means leveraging “experience, sellers, data efficiency, sales, buyers, a 3D marketplace, category concept shops (wine, wellness, pets) and direct/subscription services.
“The omnichannel growth opportunities are fantastic,” said Varsanyi. Our job is “to Identify specialty trends; merchandise synergies; and integrate loyalty program.
Loyalty, and “relationship commerce” are playing a big part in the equation. Albertsons GVP of Loyalty, Personalization and Analytics Vivek Kalpande said the company is using as a base the 52 percent of customers that use its digital tools for pre-planning. Those customers can receive “personalized prices and offers; rewards for discounts on gas or grocer; surprise and delight offers; personalized offers and prices in stores or online. “We want to understand people’s lifestyle ambitions and reward them for it,” said Kalpande.
The challenge is to do it right. To Chicory CEO Yuni Sameshima, who runs an online recipe service, the keys to success are “shopper intimacy, omnichannel adeptness, crafty upselling, earned message generators and the addition of delivery channels with a strong presence on low friction platforms.”
The problem with grocers and their CPG partners is they became addicted to discounting. They’d pay $3-4 Billion a year to bribe you to go online,” noted Dialogic Group Chairman Thom Blischok.” The key is to “build loyalty through true relationships,” not by coupons and promotions.”
Raley’s Supermarkets is in the middle of developing such a program. The chain is oriented around making transactions proactive and rewarded via points and cash back; ongoing via subscriptions for wine and other items; and hopefully, more predictable. The company, for instance, sends out text messages to inspire customers on different days, such as a recipe for Cajun-rubbed Salmon on Monday.
