We had a great time at Groceryshop 2022 in Las Vegas last week, hearing from and meeting with dozens of leaders in the food retail and CPG sectors, entrepreneurs and other investors to discuss the future of grocery. While there were many exciting ideas and trends, one overarching theme from the talks, panels and workshops was the continued focus on building unique and lasting relationships with consumers by layering in technology and data unique in-person experiences, and new business models.
Addressing Evolving Consumer Journeys
COVID-19 accelerated the shift in the customer journey moving a significant portion of food shopping online. We are now seeing customers demand robust omnichannel options that offer substantial flexibility in how they purchase food. As Sanjiv Karani from Kroger shared, “We need to think holistically about the customer journey and celebrate your customer milestones. Know my preferences. Give me something special. Check in on how I am doing.”
Companies continue to innovate on the customer journey to make it feel less transactional yet still predictable enough to warrant the customer acquisition cost. For example, many companies are switching from a more traditional subscription model to a replenishment model. A replenishment model focuses on checking-in with consumers and leaving control in their hands but with ease and curation. Retailers are also offering more control to the consumer in terms of when they receive the product, making the replenishment experience as customizable as possible.
Many companies spoke to the fact that the data show that customers are seamlessly navigating between pickup, delivery and in-store trips to meet their changing needs. In-person retail continues to be very important to consumers. Consumers want to engage with brands before making a purchase, so having both an online and in-store presence is critical for retailers to holistically connect with consumers. While automation and micro-fulfillment will be a critical part of meeting consumer demand, physical stores are expected to be more important than ever and offer an opportunity to provide an engaging in-person experience. Paul Tepfenhart, Director of Grocery Retail at Google Cloud, highlighted that there will be more of a focus on the “theater of the store” directed by employees who have extensive training and experience in showcasing different foods. For example, if you visit the cheese counter at Whole Foods, employees have gone through a training program so they are able to guide you through the various cheeses to ensure a purchase meets your tastes or the needs of your event.
Yael Cosset, Chief Information Officer at Kroger, talked about how the company understands that customers have different needs but the challenge is identifying the “what when and how.” Kroger is working on optimizing this experience with a mix of stores and fulfillment centers that offer an opportunity to reach more customers in a variety of different formats. New physical stores can drive density by increasing engagement with existing customers whereas fulfillment centers can reach new geographies and new customers without opening stores. For example, Kroger does not have a physical retail presence in Florida, but by opening a Florida distribution center, is able to access 20 million new customers without the expense and risk of establishing a brick-and-mortar store.
Matt Van Gilder, SpartanNash’s Director of E-commerce and Digital Experience, addressed the need to keep a pulse on the fast-growing pool of options in the e-commerce space. The company’s strategy has been to let third-party marketplaces fulfill faster deliveries that require more labor while SpartanNash focuses on orders that have a longer lead time (two hours or more) with better margins. By looking at where it is profitable to invest in its own brand experience with consumers versus where it is most beneficial to use the marketplace, SpartanNash can optimize for costs and outcomes.
Partners are stepping up to the challenge. Fidji Simo, CEO of Instacart, talked about the company’s efforts to develop the backbone of technology for retailers and bridge the omnichannel experience through connected store offerings and other services. As various stakeholders lean into the deployment of data and technology, we are excited to see the evolution of the customer journey.
Using Data and Analytics to Drive Personalization
“We have an insatiable demand for technology at our organization,” a remark made by Tim Simmons of Sam’s Club, summed up the general sentiment across Groceryshop. As CPGs and grocery retailers continue to invest in their technology platforms, there is an opportunity to better leverage data to drive business decisions. This is done by having integrated team structures, making deliberate infrastructure investments and working collaboratively with a robust set of partners.
Unique consumer data is increasingly being used to understand customer segments and build offerings and bundles around those insights. The more data a company collects, the more the company can guide its product mix and marketing strategy and streamline buyer journeys. To provide a sense of scale - Kroger generated 2 trillion personalized touchpoints with customers last year and gave out 750 million digital coupons.
For CPG brands, connecting directly to consumers can be a daunting task. This is particularly true for larger CPGs whose products are already well distributed and available at most grocery retailers. Francesca Hahn, Vice President of Digital Commerce at Mondelez, shared how the company was looking for personalization opportunities and identified a gap in gifting. The company used consumer research to understand the interests and buying habits of its brand followers and created programs to give customers the ability to personalize their products. For example, Mondelez launched OREOiD, which enables consumers to customize Oreos with pictures and text to celebrate milestones or to create unique gifts. While delightful, the added expense can make this product price prohibitive, highlighting the tradeoff between personalization and cost.
Not all brands are looking to sell directly to consumers. Carolyn Brown shared the partnership approach Anheuser-Busch has taken. The organization leverages a digital scorecard to evaluate the quality of the online experience and consider who to work with most closely. They look at the digital shelf and benchmark various channels. This allows for a more calibrated approach to touching consumers digitally and ensures the customer experience is aligned with their expectations so they can “win with the winners.”
Contextual data is also driving offerings. Natalie Knight shared an example from Ahold Delhaize’s operations in Europe where the company offers delivery options based on projected carbon footprint. This offering, enabled by better management of data, can drive profitability for the grocery retailer and deliver better customer experiences that align with their values.
As the importance of data continues to grow, we expect to see the war on talent heat up. For many of these emerging opportunities to be implemented, companies will need to determine how to attract top talent to get best-in-class capabilities for their data and analytics or find partners that can deliver these capabilities.
Another critical aspect of personalization that many companies spoke to is the importance of staying current and connecting to customers through social media. Keeping a close eye on social platforms such as TikTok and Instagram can enable retailers to have the right inventory and product mix to cater to evolving trends. One creative idea offered was hiring a Chief Listening Officer to keep a pulse on the online conversations that grocers should have on their radar.
Authenticity and audience engagement are essential for retailers and CPGs when using these platforms. Emphasizing brand value beyond prices such as social and environmental benefits are great examples of brands that align with lifestyles and customer values. Lastly, as Carle Stenmark from VMG Partners highlighted, product evangelists continue to be a powerful force in connecting brands with consumers and building brand loyalty.
We were encouraged by the energy and ideas that we were immersed in at Groceryshop, and we hope to continue the conversation with investors, executives, and entrepreneurs working on innovations in the space. We look forward to more opportunities to connect and collaborate to help retail brands and grocery retailers meet and exceed consumer expectations.