“The grocery business truly is at a digital tipping point, where every aspect of the shopper’s journey will soon be influenced by digital, and increasingly enabled by digital platforms.” — Chris Morley, President of U.S. CPG & Retail, Nielsen, January 2017
The summer of 2017 has seen retailers making moves to add new digital capabilities at a frenzied pace. Albertsons is revamping its e-commerce systems. Publix has declared that it will offer home delivery at all locations by 2020. Kroger is piloting “digital shelf-edge” technology that it hopes will enhance efficiencies in pricing and data collection. And that’s just to name a few.
Spurred by Amazon’s surprise announcement that it would acquire Whole Foods in June, grocers and mass retailers in the food and beverage space have been racing to get a leg up on the competition by investing in technology that can capture data, create enhanced customer experiences, and activate new processes such as delivery and in-store online ordering. Amazon is a real threat to existing grocery chains, but it’s not the only one: Target is expanding its commitment to food and beverage, and the nation’s biggest retailer, Walmart, is gaining market share in the space at an “accelerating rate.”
With so much at stake in what amounts to a technology arms race, grocers must be strategic in the experiences they craft and the processes they enable. On the other hand, an overly cautious approach may also prove costly: as digital-first consumers are increasingly influenced by technologically sophisticated industry giants, retailers who fail to act decisively risk losing hard-fought market share in this ultra-competitive industry.
As the grocery world braces for increasing demands for e-commerce capabilities, grocers would be well served to consider enhancing those in tandem with their in-store digital offerings.
The online challenge
To date, online ordering only accounts for roughly 3% of grocery sales in the US, according to the Shelby Report, although that number is expected to grow significantly in the coming years. While the last-mile logistical hurdles continue to be problematic, the one big edge that e-commerce gives retailers comes in the realm of data collection.
Every digital transaction provides a wealth of sortable data about shopping habits such as purchase history and frequency. It also provides an array of opportunities for personalizing the interaction. For instance, digital platforms offer numerous options for delivering product recommendations based on past purchases or to pair with products already in the virtual shopping cart.
In addition to creating a more pleasant shopping experience, these are proven ways to drive revenue: a recent Mckinsey report indicated that cross-selling can increase sales by 20% and profits by 30%. Similarly, Amazon admitted way back in 2006 that 35% of its revenues come from its cross-sales and upselling efforts.
While simple apps can provide automated cross-selling capabilities online, grocers must find ways to bring these and other revenue-generating opportunities into their brick-and-mortar locations.
A seamless buying experience, online and in-store
With 97% of the reported $600 billion in grocery transactions each year taking place in physical locations, it is imperative that grocers provide a seamless experience across all shopping channels. Brick-and-mortar stores must be able to deliver the same capabilities that customers are increasingly expecting when they order online — ever smoother and more efficient transactions, as well as product recommendations, loyalty rewards and discounts, and enhanced brand interactions.
The future of grocery will be built upon an in-store digital infrastructure made up of a series of connected devices capable of bringing the convenience and personalization of the digital world into the supermarket aisle. This infrastructure can solve discrete problems for consumers — wayfinding, detailed product information, line-busting, product recommendations, couponing, and more. At the same time, it will serve more broadly as a platform for innovation for retailers, to experiment with exciting new brand experiences and digital efficiencies.
The traditional, bulky, custom-built legacy hardware systems simply don’t have the versatility to keep up. Furthermore, in an industry in the midst of transformational changes, investing in expensive, single-purpose devices risks locking companies into operational workflows that might soon be obsolete. Instead, the infrastructure of the future will likely be built upon powerful consumer-oriented mobile devices. Today’s tablets and smartphones possess the features and functionality to enable solutions that solve current needs, such as in-store price checking kiosks, ordering stations, and POS systems, while also providing the hardware capabilities and flexibility to enable a nearly limitless array of future experiences and use cases.
Retail stores today must act as a showroom, warehouse, and fulfillment center, providing both product and information wherever and however their customers need it. To enable this, retailers will be well suited to have the following components in place:
- A digital infrastructure (from price checkers to point-of-sale terminals to associate handheld tools) that delivers a seamless digital experience throughout the store, while also tracking data for analysis and optimization of the customer experience, inventory management, store layout, product location, and more.
- Smart handheld devices that empower associates with full access to product information and customer needs, improving efficiency and productivity.
- In-store kiosks that offer a branded, user-friendly interface that will make the in-store experience as convenient as shopping online, maximizing next-gen technologies.
These tools are available now, and the grocery tech race is already well underway. To maintain the status quo or move slowly is to sink into obsolescence. Bold, decisive action to infuse brick-and-mortar supermarkets with the best elements of the digital experience will be critical to surviving grocery’s ongoing transformation.
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