CSA Exclusive: Raley’s takes on 2020 with omnichannel innovation

A California-based regional grocer is leveraging dark stores, e-commerce, and personalized customer service to thrive during COVID-19.

Headquartered in Sacramento, Raley’s Supermarkets operates 126 stores in northern California and Nevada. Deirdre Zimmermann, chief customer experience officer of Raley’s, recently sat down with Chain Store Age to discuss how the chain is using innovative technology and strategy to meet challenges such as larger competitors, the upcoming holidays, and the ongoing pandemic.

“We are trying to do everything with e-commerce that the big guys are trying to do,” stated Zimmermann. “Pre-COVID-19, we knew there were barriers to grocery e-commerce. For example, ‘I don’t trust my husband to go to the grocery store, why would I trust a stranger.’ Also, people like to select their own fresh produce and beef, and consumers like going to the grocery stores as a ‘third place.’”

Having been involved in e-commerce since 2003, Raley’s knew that inevitably a sizable share of its sales volume would shift online. Although partnering with a third-party online delivery service would have been the easiest way to set up a scalable e-commerce infrastructure, Raley’s instead chose to develop a platform in-house (the company does also partner with Instacart and DoorDash).

“Because curbside pickup and home delivery from our stores is mostly proprietary, we can measure the pre-pandemic impact of online customer behavior,” explained Zimmermann. “Before COVID-19, omnichannel customers spent twice the dollars and gave us a bigger wallet share than single-channel customers. Online sales represented 3-5% of in-store sales.”

According to Zimmermann, online sales now represent 20-30% of total sales at some stores. Raley’s fulfills curbside pickup and delivery orders within two hours of being placed by the customer.

“The barrier has been broken down; customers don’t want to leave home and the shoppers picking their order are often store associates they know and trust,” she said.

Raley’s provides an omnichannel shopping experience based on a white label Unata digital grocery platform. Order pickup and fulfillment is performed in stores using in-house-developed software. Since the major U.S. outbreak of COVID-19 in March, the retailer has also added a couple of new features to its e-commerce infrastructure.

“We have opened a new e-commerce fulfillment center at a former store in Sacramento,” said Zimmermann. “All Sacramento delivery orders go through that hub.”

In addition to expanding online delivery capacity in Sacramento, Raley’s dark store strategy has also increased the number of time slots available for curbside pickup at stores in the metro area by 200%. Furthermore, Raley’s also routes Instacart orders in Sacramento through its dark store, reducing store congestion and increasing shelf availability of products.

“We are in the learning phase with dark stores,” commented Zimmermann. “We want to maximize picking capability and do it more broadly. Long-term, we plan to open three to four more dark stores.”

In June, Raley’s rolled out handheld devices in stores to assist associates with picking online orders. The device informs associates of what products to pick in which aisles. Associates scan the UPC code of items as they pick them to receive automatic confirmation they are the correct products. This implementation followed the hiring of 2,000 new store associates in March to help keep up with the new demand for omnichannel shopping.

“Increased demand for e-commerce will continue past holidays,” said Zimmermann. “As the weather gets colder and we get rain and snow in the Reno and Tahoe markets, before the virus we would get a two-to-three-time increase in online orders. The customer sees it as a huge convenience; and we put no markup on prices and offer the same loyalty points and discounts as we do in-store.”

Raley’s has also been leveraging predictive replenishment technology from Itasca Retail to help keep order fulfillment running smoothly since before the start of the pandemic. Other competitive supply chain activities include working with manufacturers to increase its assortment of private-label goods. By combining technology and strategy with some built-in advantages, Zimmermann is confident Raley’s can remain successful in a vertical with some major competition.

“It’s hard when players like Albertson’s and Kroger have e-commerce departments with 200 to 300 people,” said Zimmermann. “We’re lucky to have four on any given day. But strategic partnerships help us compete, and we have an advantage that Amazon lacks. People are buying center store items in Amazon, but there is a real barrier to buying products like seafood from them. We’re a local store and people know us for providing quality produce and service. We’re getting over the hump of ordering online.”