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Physical to Digital – How the Grocery Sector is Poised for Transformation

Covid Is Accelerating Transformation of the Grocery Industry

The grocery industry is the last major retail sector to seriously address consumer shopping preferences, both in terms of item selection and mode of delivery. The emergence of Covid has propelled online order and grocery delivery into more rapid growth than was expected as of last year, since many consumers now want to reduce their in-store time.

Studies over the past few years have indicated that consumers have been relatively unhappy with their online grocery experience shopping versus shopping in-store. Until Covid hit, grocers were just starting to focus on how to be more customer-driven than stocking or fulfillment driven, and how to unify digital and physical shopping. Now grocers are juggling the need compete against the likes of Amazon and Walmart - with their capacities for quick delivery - while figuring out how to reinvent themselves.

Best bang for the buck

Online grocery shopping actually dates back three decades, to Peapod.com, which provided the first online ordering and delivery service for grocers such as Stop & Shop, Giant, and Martins. Today, Peapods’s share of the online market is small, now that Amazon and Walmart are competing. Nevertheless, Peapod was an early adopter of using data to target and message its customer base, and its practices represent a good model for use of such data.

From the grocer’s viewpoint, online ordering (as opposed to delivery) provides greater opportunity for personalized experiences because so much more usable information is available about order history and about the customer. When customers shop in a store, there is no way to communicate with the customer or influence their purchases at the time of purchase.

Food delivery service has been working to improve the personal touch. Companies like Shipt go the extra mile, hiring and training their staff to customize orders. Beyond just placing the order, customers can include details such as requesting a certain amount of marbling thickness of beef, an extra ripe avocado, and other preferences. Shipt trains its shoppers to go in-store and pick things up. The personal shopper will also call the customer if questions come up.

But is there a really digital shopping equivalent of personal touch experience? Outside of “shop by my list” and a few attempts at “shop by recipe,” grocery is still stuck on the “shop by aisle” metaphor online. Many customers appreciate the convenience of being able to search for mundane staples like trash bags and detergent online, but miss an in-store experience that allows for spontaneity. How do grocers capture that experience more effectively online? It’s got to go way beyond “customers who bought this also bought that” – you might get away with that recommendation approach in other retail sectors, but not in grocery. Meanwhile, during Covid, customers may place more emphasis on just not having to go into the store.

Long-term, being able to provide personalized services means there has to be a greater depth of knowledge and understanding of customer attributes, behavior, preferences, and other characteristics. It’s not only those explicit preferences that people declare, it’s also mining from past purchases.  It’s inferring from other signals. What are all the different signals that can be collected about a customer that will inform what they want at that moment? Signals that can be used for the associate, the personal shopper, or in the digital experience.

There’s a huge amount of mining of customer data, details, behavior, and clickstreams, etc. going on. There’s also a lot of data from product information and overall product assortments. That combination of signals will work pretty well for commodity shopping, replenishing standard items that are used up every week. Everything from laundry soap to toilet paper. 

On the other hand, there are the last-minute shoppers who are saying, “I don’t have time to cook, so I’m picking up something already prepared or a meal kit” – it’s really popular with curbside shopping that’s new with grocery stores – and recommendations might also work really well from those same signals. 

Learning from other industries

But then, there’s the third type of shopping which is much more about looking across the entire food assortment for meal planning. That’s a lot more sophisticated, and it has the greatest potential both for boosting customer experience and for driving higher average order value for the grocer.

There are corollaries to other businesses that are further along in their eCommerce development than the grocers.  It sounds completely unrelated but in some ways, meal planning is like helping a B2B customer solve a problem with configurable parts from an industrial supplier. 

A meal requires problem solving, advice, input, and judgement. How can that information be surfaced in those contexts? Planning a dinner is solving a series of problems.  The problem can be anything from “I’m in a hurry and I’m starving” or “I’m on a diet” or “I have this great event in two weeks, and I really want to have an interesting dinner. I’m planning it and want to test it out on my friends.”

This is how grocers can start to provide the personal touch in store with a concierge service as well, because the concierge needs access to that same kind of information and then can assist right there in the store, or perhaps online. Grocers are starting to get into the level of service that they can provide by knowing their customers, and by being creative in how they are applying merchandising attributes.

A great deal of creativity can be applied along with knowledge of the customer. The attitude should not be, “Oh well, Amazon’s going to beat us because they have Whole Foods and they have lockers,” It’s really about ’How well do I know my customers?” ”How creative am I in meeting those needs?” and “In what shopping mode is my customer today?”

Read my lips ... personalization

Providing the best customer experience is the area where companies are going to win or lose in this sector. It is going to be about the level of knowledge around digital merchandising for customer needs and the overall customer experience. The dynamics of brick and mortar grocery stores have been worked out for a hundred years, including sophisticated logistics and inventory control. The digital marketplace is in its infancy but is on the verge of great innovation.

Doing nothing about digital consumer shopping is not an option. And grocery stores have an opportunity to leapfrog traditional eCommerce approaches.  In this case, late in the game is a good thing. They can leverage a very intimate, high-touch knowledge of their assortment, their region, and their customers, at a time when many customers prefer to avoid in-store shopping. 

The organization that does that most effectively is going to be the winner. It will come down to those signals from the customer, and the grocer presenting the things that they want.  At some point the online grocer may infer what the customer wants even better than the customer. The 90% of the market that is still accounted for by in-store shopping represents a huge opportunity, if the grocer can get to  know the customer well enough, and provide prompt and reliable shopping and delivery services.

In order to connect the various data sources and build them into personalized experiences for customers you must have an enterprise information architecture to support it. Our information science experts can help you develop the data strategy you need to remain competitive in an increasingly demanding market. Contact us to set up a time to chat.

 

Seth Earley
Seth Earley
Seth Earley is the Founder & CEO of Earley Information Science and the author of the award winning book The AI-Powered Enterprise: Harness the Power of Ontologies to Make Your Business Smarter, Faster, and More Profitable. An expert with 20+ years experience in Knowledge Strategy, Data and Information Architecture, Search-based Applications and Information Findability solutions. He has worked with a diverse roster of Fortune 1000 companies helping them to achieve higher levels of operating performance.

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