Grocery: Digital Transformation
Since the early market days, even before formal retail shops, grocers have always prospered by knowing their customers' requirements and their customers' names together with many personal details, such as family members and special life events. By doing so, grocers and indeed, retailers in other sub-sectors, have been able to present a range of produce that meets their customers' needs on a day-by-day basis. For those of you who have followed my articles on Omnichannel Retailing, CRM and Customer Loyalty, you will be well-aware of the importance of collecting, analysing and acting upon this wealth of information.
Since the advent of the "world-wide web" now just termed "the internet" retailers have struggled to make progress with their digital transformation investments. Many have invested to a far greater extent than that which is required, in building up a large I.T. team of analysts, programmers and others, together with another associated team dealing with the vast amount of data from "social media." Trying to do all of this "in house" has turned their focus away from basic retailing - "getting the right stock, in the right place, at the right time and at the right price" (Gordon Selfridge) and "at the right margin ensuring that the money goes into the till." (David Sheldon)!
Much has already been written about all the various technologies that can be employed. These have covered analytics, digital marketing, artificial intelligence (AI), augmented and virtual reality, face recognition, voice activation, omnichannel retailing and cloud services. All these technologies and more, are part of the digital journey that face today's grocery retailer. They are a "far cry" from the grocer on his market stall shouting out about his/her wares to the passing trade as well as enticing his customers to buy that little bit extra. It is, therefore, no surprise that so many retailers, particularly those in the very highly competitive grocery market, are struggling with the innovation and strategy that is needed.
What is the answer? Should the retailer continue to build up their own I.T. department to cover all of these emerging technologies in order to keep everything in house? Or to outsource to various consulting and/or I.T. companies who have the technology expertise? The key questions that need to be answered include, will the retailer's data be secure and what about the intellectual property of very specific technology developed for the individual retailer? Furthermore, does the outside agency, whether it be a consulting firm, I.T. company or even individual contractors, have the retail operational expertise to fully understand how such technologies should be employed for specific retailers within each sub-sector of the industry? To fully understand the implication and outcome of these questions, let me give you the example of an I.T. firm hiring a retail salesperson. Does that person have or is capable of selling the company's products and services? Just as importantly, does the person really understand the retailer's operation? To be able to answer "yes" to the first question can be tested with a series of tasks and previous achievements of revenue generated. However, the answer to the second question can only really be answered by a "yes" if that person has actually worked for retailers in operational roles over a number of years. That experience, together with the ability to sell products and services, would indicate that this person would be a good candidate. The same principle should be applied by the retailer looking to partner with outside agencies who provide the technologies required.
Therefore, any consulting or I.T. company that the grocer decides would be able to provide the technology required for their digital transformation, it is essential that only such a company which employs an ex-operational retailer as their key point of contact, should be considered as a suitable business partner.
Once these questions have been answered and various business alliances set up, the grocer has to have a number of further issues to consider. One of these issues which is, I believe, key to the success of embarking on a digital transformation programme, is the retailer's ability to manage change which has to be driven from the top down as well as from the customer upwards. When working on strategic assignments with retailers, I have often discussed how their organisation chart is upside down, as the customer should always be at the top and the board of directors at the bottom to support the whole organisation. Whenever I have met a barrier to this thinking, I know that the retailer will not be able to implement change without a lot of support and persuasion of the financial benefits over time. Throughout the journey of digital transformation, the grocery retailer has to always remember "What is my USP (unique selling proposition) and why do my customers still buy from us as opposed to my competitors? Does our customers’ buying and after sales experience always meet and even delight them or is their experience mundane or even poor? Failure to always have these questions at the forefront of any programme will undoubtedly result in failure.
Let us look briefly at an example of such failure. No names here, but you will know companies which fit this "bill." Strategy: close many of our shops, use the buildings for rental as offices/flats, move our products and services to digital online only....then go out of business (that stage will happen later this decade)! Once a company employs this digital transformation strategy with only an online presence, where is the USP? Why would a customer continue to shop with this retailer? Better service, products or price? Too much competition to survive is often the outcome - think of all the large companies that no longer exist.
In the title of this article is the word Grocery and the reason to focus on this sub-sector is due to the very nature of the products sold which are, in the main, the same products as their competitors. Questions that grocers have to answer are, where do my customers live and work, are they loyal, why would they continue to shop with me, should I offer them delivery services, what is my USP, am I going to survive against the competition of online only services, are my prices in line with the quality of my products?
As the very heart of these questions harks back to the grocer on the market stall who had to have the right products for their local customers whose names, personal likes and dislikes were known and acted up. Today, customer engagement must help the grocer to deliver value at every interaction, transforming the relationships they have with customers in order to drive business transformation. One may argue that technology is designed to help grocers capture the possibilities of emerging technology by creating tailored solutions for the retailer whilst retaining any intellectual property rights of the individual grocer. After all, if grocer A spends time and resources to develop, for example, a loyalty programme, only for grocer B to have access to this technology, then where is the USP in this outcome?
Certainly, with all the added volume of data that the grocer is now able to collect, including social media data which can allow grocers the insight to be able utilise advanced data analytics, AI and automation technologies in order to drive financial excellence as well as enable strategic and real-time business decision-making. It could also allow operational departments, as well as I.T, help to "reinvent" their supply chain, asset management and operational processes which could, ultimately, increase productivity and therefore reduce time to market.
Finally, what is he key ingredient to make all of this happen? The people and the way in which the grocer's organisation has been set up. Following the digital transformation process, the grocer must continue to develop the company's culture and the employees' skills in line with the ever-changing consumers’ expectations, which are the key for holistic business success in the digital age.
I cannot stress enough the importance for any grocer, in today's highly competitive market, to ensure that they combine external market-leading expertise in the retail grocery sector by ensuring that any technology company with which they work, employs consultants and sales people, who would effectively act as their strategic advisor, have the strategic vision, technology and operational retail skills and experience, to be able to help the grocer to respond to the consumer’s changing need proactively in the future.
In summary, grocers must benefit from their digital transformation investment which has been made to reflect the dramatic shift in customer behaviours as well as raised satisfaction expectations. As I have written in a previous article "A Sheldon Retail Guide© Omni-Channel Retailing," digital and physical channels must merge as shoppers expect a connected experience across all touch points to give a "single view of the customer." Therefore, the grocer's omnichannel strategy must be underpinned by data, with technology and business processes that support a flexible, agile distribution and fulfilment network, in order to deliver on the expectations of today's demanding customer. Failure to deliver on this strategy will, ultimately, result in the grocer's demise to their more aggressive and technology-aware competitor.