Competitive Grocery Retail

March 13, 2019 | Post by Tom Besselman | 0 Comments
retail-grocery-blog

Revolutionary change is hitting grocery retail.

Online sales in the U.S are predicted to reach $100 billion by the year 2025, capturing 20 percent of the grocery market. Households are expected to spend $850 per year on food and beverage purchases online.

Beyond shifting sales online, technology is changing the landscape of consumer purchasing by modifying the kinds of interactions which are shaping customer priorities and expectations. Business models must reflect these desires and remain adaptable to them.

Staying on the cutting edge of grocery retail means reflecting the modern consumers’ needs by strategically implementing technology. Here are some areas of focus to consider for strategic change.

Convenience on Demand, Profitable Delivery Services

Delivery is convenient – freeing up customers’ time and effort – and this is of considerable value to the modern consumer. The challenge in providing delivery services is making them affordable enough to implement, due to the added labor costs of collecting and transporting the goods from store to home.

However, a recent survey found that 25 percent of consumers said they were willing to pay considerable fees for same day delivery, making an investment in these services potentially quite profitable for grocery retailers.

The future of delivery looks bright, automated and cost-effective. Autonomous vehicles and drones are predicted to be common methods used to deliver grocery purchases in the not-so-far future. This potentially means a reduction in labor and transportation costs, making delivery more affordable.

Grocery retailers are also using fewer drop times to concentrate deliveries and maximize efficiency, making their delivery service more affordable and competitive. Another approach is to work in partnership with existing delivery service companies. One major grocery retailer has teamed up with an existing transport service provider to capitalize on their existing physical and IT infrastructure, and to maximize efficiency.

Balancing Freshness and Cost Considerations

Discounters are continuing to acquire more of the grocery market from traditional grocers, as consumers are growing more skeptical of justifications for higher priced products. Discounters and general merchandise retailers are also focusing on carrying higher quality products and improving the shopping experience, creating a very competitive marketplace and adding pressure to cut costs.

Low prices, however, are outweighed by quality when it comes to customer satisfaction. Predictable, reliable food freshness does not only encourage loyalty, but, as a recent survey has shown, encourages the customer to visit more often and spend more money each time they visit. The quality of the fresh food, in fact, was found to be more relevant than price in terms of overall satisfaction. Food freshness is a viable justification for higher prices, that consumers can literally see, feel and taste. As this research suggests, reducing price is only one of the many ways grocery retailers can stay competitive, and certainly is not the deciding factor for customers.

There are many kinds of technological solutions which can boost food freshness while cutting costs. For example, electronic labeling provides opportunities to both reduce labor costs associated with checking price accuracy and to ensure excellence of product with digital tracking labels. This kind of technology provides potential for transparent tracking of product from across the entire food chain and produces an intimate, personalized experience between the consumer and product. Several companies have created technologies designed to integrate different forms of data so that a cohesive timeline can be created, accessed and shared.  

Poorly Used Data is Just as Bad as Unused Data

With customers using multiple platforms when buying groceries, the need to integrate customer behavior data across these many touch points creates a challenge as well as a potentially huge opportunity. A comprehensive McKinsey survey found investing in big data can create upwards of 10 percent growth in sales, and up to five percent higher returns on sales.

Technology creates greater opportunities to examine the customer in more effective and intimate ways. Gone are the days of customer surveys, notorious for misrepresenting actual behavior. Survey bias can be totally avoided with computerized, direct recording across a wider, more representative section of customers to collect more accurate and detailed information.

Of course, with potentially large sets of data comes the problem of analyzing it all in coherent ways, and integrating different forms of data into a single view. Technology, however, also provides solutions to those problems it creates, and analytics software is an equally important investment as the equipment used to collect it.

Data is also crucial in determining the most effective methods of marketing. According to a study by Neilson, as much as 72 percent of digital marketing ads were not delivering expected return. Because of the multiple consumer touch points created with an online presence, the opportunities for placement of effective ads requires targeting of specific customers at specific times.

Technology which allows for correct collection of data can determine the most effective ad placements, reducing loss in investment and creating the best ROIs. One major grocery retailer attributes one-third of its sales to cross-selling by utilizing data to place its ads strategically.

Seeking Informed Advice

As technological innovation creates opportunities for growth, it also creates challenges to overcome in order to access potential profit. The modern approach to investment requires a strategic, forward thinking and detailed understanding of the effects of implementation. According to a recent study, only seven percent of retailers surveyed believed they had the skills required to succeed in this digital, technology-based market. However, the solution is easy. Rely on those with specialized knowledge who are equipped to look at the situation with all the relevant information at hand, and who can help you make the best investment decisions.

The content and opinions posted on this blog and any corresponding comments are the personal opinions of the original authors, not those of CompuCom.

  • Tom Besselman's picture

    Tom Besselman

    Tom is the Vice President of the Retail Vertical for CompuCom. He has responsibility for Sales, Strategy and Account Management for all of CompuCom’s retail clients. He has over 25 years of successful executive-level leadership experience in the IT industry.

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