Grocery Disrupted

Although the product assortment in supermarkets is always changing, the basic technology has remained pretty much the same since the invention of the bar code. But it is quickly being disrupted. The extent of that disruption is laid bare in a new study from RIS News and Carbonview, the research division of EnsembleIQ.

Carbonview surveyed 134 senior executives from national, regional and large independent grocers, with more than half the respondents representing chains with more than 51 stores.

The digital transformation these companies are experiencing is a strategic embrace of business models, processes and customer services that leverage new digital technologies. This embrace is aimed at developing new opportunities to grow sales, increase productivity and improve the shopping experience by adding new services and conveniences. Although grocery is a late arrival to online shopping, click-and-collect, mobile POS and a few other technology innovations, the study indicates grocers have begun investing in some of these technologies, while other findings uncover a need to catch up.

And catch up they must. Online competition is fierce and getting fiercer. It is coming from Amazon Fresh, Peapod, GrubMarket, Instacart and Rosie as well as Walmart and Target, both of whom continue to make major investments in new digital technologies and innovative business models.

Digital marketing: The good news is that most grocers (86 percent) say that spending on digital marketing has increased year-over-year, and none say their budgets are decreasing. For most, digital marketing means using a website (83 percent), e-mail (79 percent), social media (74 percent) and a mobile app (62 percent).

Frequency is critical for digital marketing, and too much of it can be counterproductive, which explains grocers’ preference for weekly over daily communication. This plays out through weekly e-mail (57 percent), the website (53 percent) and mobile apps (51 percent).

The three media that score the highest for daily frequency are: social media (43 percent), in-store kiosk (41 percent), and the website (40 percent). Interestingly, mobile apps scored the lowest for daily marketing messages at 31 percent, which is a missed opportunity because it is the one medium that customers are most likely to use in stores.

Taken as a whole, digital marketing in all its varieties is perceived to have a strong impact on a grocer’s online business performance and sales, according to 55 percent of respondents. The number rises to 73 percent when asked to look ahead two years. These figures validate the importance of digital marketing today and even more so in the future.

What about the store? Nearly half believe that store sales are being strongly impacted by digital marketing today, and more than three-fourths say that this will be the case in two years. It is one of the study’s major findings and justification for grocery executives who have influence over investment in digital transformation to stick with the plan.

Digital marketing is seen impacting store sales in two ways: through improved shopper returns/frequency and conversion rates. In both areas, the number of grocers who recognize the impact of digital marketing on sales increases dramatically when comparing the impact today versus in two years.

Loyalty programs and coupons: Grocers have been pioneers in the adoption of loyalty marketing, so it is not surprising that 76 percent say they currently have a loyalty program in place. Digital coupons have become standard in retail today, and grocers are staying competitive: 78 percent of grocers say they deploy them. Of these, 79 percent say they offer digital coupons via their website, and 73 percent say they offer them via text message.

Omnichannel services: Omnichannel technologies and services run the gamut of capabilities, and it is interesting to note the adoption curve among grocers. For example, a little more than half of grocers have a unique, branded native mobile app today and offer mobile payment options. Nearly three-fourths offer free Wi-Fi, and home delivery is more prevalent than click-and-collect.

Conclusions: A digital transformation is underway in grocery, including widespread adoption of digital marketing in the areas of websites, e-mail and social media. Two areas where grocers lead other retail segments are the use of loyalty programs and digital coupons. Both are having an impact on business performance today and are projected to have an even greater impact.

There is mainstream adoption of omnichannel services such as click-and-collect, home delivery and in-store Wi-Fi for customers, but there is one area where grocers have fallen behind: mobile commerce. Not many sales dollars are lost today due to a weak embrace of mobile technologies, but this will change in the future as the millennial generation (the mobile-first generation) exerts an increasingly dominant influence in the marketplace.

Looked at individually, the digital technologies and services analyzed in the Carbonview report represent a small piece of a grocer’s overall business. However, taken together as an overarching strategy, they represent a lifeline for survival and pathway to future success.

Joe Skorupa is editorial director of RIS News, a sister publication of Retail Leader.