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08/01/2013

Gaining Essential Information

Technology has become omnipresent in grocery retail, and in the past year retailers have benefited from an array of advances that allow them to better serve customers by gaining information quickly.

"More than ever before, technology is on the rise in the grocery retailing market," says Mark Chaffin, chief information officer of Acosta Sales & Marketing, a Jacksonville, Fla.-based company that provides sales, marketing and merchandising services to CPG companies.

Technology is reshaping countless facets of the food retailing and CPG industries, from using e-commerce and social media posts to gain insight into consumers' shopping habits to relying on better information for inventory management and on-shelf availability.

Social Media/ E-Commerce

Much of the technological advancement over the past year has come in areas outside of the brick-and-mortar stores, namely in social media marketing and online grocery shopping.

The concept of the "omnichannel" business, which allows shoppers to locate, research and buy goods online, in stores or however they want, continues to grow. A recent study by SD Retail Consulting found just 18 percent of big retailers have implemented mobile POS systems widely. Among those, most are using mobile POS for one or two applications, such as product search. At the same time, retailers want to serve customers wherever they are, and that means a digital sales channel is essential.

The U.S. Commerce Department pegged total online retail sales at $226 billion in 2012, up 15.8 percent from $194 billion in 2011, says Dexter Manning, national food and beverage practice leader for Grant Thornton LLP in Chicago. "If you exclude categories that aren't normally associated with e-commerce, such as automobiles, fuel and foodservice, this represents approximately 7.6 percent of total retail sales during the year," he says.

Online Expansion

Brick-and-mortar grocery retailers continue to improve their online offerings, but the biggest news in online grocery shopping recently has been Amazon's expansion of AmazonFresh. This online grocery retailer has existed since 2007 in certain Seattle neighborhoods, but AmazonFresh expanded to Los Angeles in June and will grow to San Francisco later this year. If all goes well, the company plans to be in 20 markets by the end of 2014.

 


"Amazon is clearly the 800-pound gorilla in the online retail space....Amazon is so far ahead of other retailers in their front-end web design and their back-end logistics that most retailers can't compete with them online."

– Dexter Manning,

Grant Thornton

 

"Amazon is clearly the 800-pound gorilla in the online retail space," Manning says. "Amazon is so far ahead of other retailers in their front-end web design and their back-end logistics that most retailers can't compete with them online."

In contrast, Walmart, which has an online grocery business in the United Kingdom and in test markets in San Francisco and San Jose, Calif., hasn't revealed any further expansion plans. "We are not making any announcements about other markets for grocery delivery in the U.S. right now," said Neil Ashe, president and CEO of Walmart Global e-commerce, according to a June 6 Reuters report. The tests in San Francisco and San Jose have shown that Walmart can execute an online grocery business, but customer demand has not been strong enough to warrant expansion, Ashe said.

Online grocery shopping has lagged behind many other types of online commerce because of deliverability issues, and Amazon is still grappling with the logistics involved with perishable foods. However, consumers are familiar with Amazon and might be comfortable ordering groceries from the online retailer, Manning says

"Consumers have for the most part been satisfied with Amazon's performance and continue to reward them with more and more sales," Manning says. "Amazon can generally deliver next day anywhere in the world through their logistics operations. That's why traditional retailers should be very scared."

But delivering perishables in great volume could be another matter. Some traditional grocers, such as Harris Teeter, have avoided the logistical problems of delivering perishable items by encouraging consumers to pick up their online orders at the store. The retailer has established a designated pick-up area outside its stores and charges $4.95 for the service. Peapod also has been testing the pick-up option during certain hours in select communities in the Chicago area.

Naturally, actual grocery stores still have enormous advantages over any online retailer–such as convenience, personal service and the ability for the consumer to inspect items before buying. But those advantages may erode over time, Manning says. "As traditional grocery stores have lost sales to megastores such as Walmart and Target, there has also been a loss of personalized service that was traditionally associated with the neighborhood grocer. If buying groceries continues to become more impersonal, why not buy nonperishables online?"

Paying for the groceries also has become a high-tech adventure. Shoppers have been able to use their smartphones to connect to loyalty programs and pay for their purchases at select stores using Google Wallet and other services for the past couple of years. The Merchant Customer Exchange (MCX) also is gaining partners for its collaborative mobile wallet, which is still in development. MCX is working with 7-Eleven, Wawa, Hy-Vee, Meijer, Publix Super Markets, Shop Rite and others.

Airtag, with offices in Paris and New York, has rolled out a mobile wallet system for Carrefour stores in Europe that not only allows shoppers to pay via smartphone, but also allows them to dodge the lines at checkout. "The Carrefour City mobile wallet…enables shoppers to place an order anytime from anywhere that is convenient to the customer," says Jeremie Leroyer, CEO of Airtag. "The solution has proven to nearly double the average basket."

 


"The [Carrefour City mobile wallet] solution has proven to nearly double the average basket."

– Jeremie Leroyer,

Airtag

 

Customers using the mobile wallet can order and pay for their groceries from their smartphones, and pick up the items at a special checkout in the store. They also can add items that they would rather choose themselves, such as produce, and still use the special lane.

Digital coupons–delivered through social media, email or smartphones–continue to grow in popularity. "In 2012, digital grew to represent 7 percent of all coupons redeemed, while newspaper coupons' redemption rate continued to decline," says Steven Boal, CEO of Coupons.com. Boal said retailers representing more than 52,000 locations use his company's service.

Social Media

Of course, there's more to the relationship between grocery shopping and the Internet than just shopping. Social media also plays a giant and growing role. Chaffin's firm recently released a report, "The Why? Behind the Buy," that found seven of 10 shoppers use Facebook and 45 percent of them visit brand pages at least monthly.

 


"Because [social media] feedback is firsthand, unsolicited and unbiased, it tells stores what's actually important to customers, not just what they think is important."

– Susan Ganeshan,

newBrandAnalytics

 

Some grocers and CPGs are mining social media for more information about their customers. By digging through social media mentions of a company, retailers and CPGs can come away with information that hasn't been influenced by marketers. "Because this feedback is firsthand, unsolicited and unbiased, it tells stores what's actually important to customers, not just what they think is important," says Susan Ganeshan, chief marketing officer of newBrandAnalytics, a Washington D.C.-based company that analyzes social media responses for retailers and others. "Beyond that, the insights tell you about real consumer experiences, which provide insight way beyond what you can get from just a receipt. Basically, your bottom line tells you if you're profitable, but your social intelligence tells you why."

Ganeshan's firm analyzes online reviews, customer forums, social chats, and other data sources to see what customers are thinking. For example, in a recent study the firm conducted for a large wholesale grocery retailer, it sifted through information on Yelp, Twitter, Foursquare and Facebook to determine that the retailer scored 62 out of a possible 100 points in areas such as facilities, price and service.

On-Shelf Availability

Of course, all of the advancements in online sales and social media data-mining are useless if the product isn't on the shelf when the customer wants it there. "Industry research supports that the consumer is becoming less and less tolerant of not getting the product they want," says Dave Shuman, co-founder and vice president of product strategy at Orchestro, a McLean, Va., firm that helps CPGs use data from retailers to improve the supply chain.

When consumers confront out-of-stocks, about 50 percent will buy an alternative product, Shuman says. But 20 percent will delay purchase, and the remaining 30 percent will go to a different store to buy the product. Each case ultimately affects the retailer and CPG company.

Properly using data is the key to improving on-shelf availability, and big data management software firms are constantly upgrading their abilities to do that. Orchestro's ShelfSense software incorporates various data sources to determine if a stocking problem exists and what the root cause of it is, allowing stores to quickly make accommodations.

Dannon announced in May that it is using IBM's strategic trade planning solutions to improve the on-shelf availability of its yogurt, which is particularly challenging considering its short shelf life and the large number of varieties now on the market.

"Our goal was to eliminate the time our sales team was spending on forecasting and instead focus their attention on executing their promotional plans, allowing them to work more closely with our retailer customers," says Timothy Weaver, Dannon's chief information officer, in a press release. "We not only streamlined the forecasting process for our sales team, but we increased our planning accuracy from 75 percent to 98 percent."

Technology touched nearly every aspect of grocery retailing in the past year, from engaging new customers to making sure products were available where, when and how they wanted them. And those trends show no sign of slowing in 2014.

Ed Avis is a freelance writer and editor in Chicago who has written for Crain's Chicago Business, the Chicago Tribune, Specialty Coffee Retailer, Tea Magazine and many other consumer and trade publications.