Nourishing food retailers with profitable growth
The recipe for success in food retail is changing at breakneck speed. Economic drivers, such as commodity deflation, make revenue growth difficult. At the same time, demographic trends – including the rise of both millennials and centennials – undermine tried-and-tested business models. And now they are faced with the game changing move by Amazon with its planned acquisition of Whole Foods.
Above all, digital disruption is transforming the marketplace. Retailers with outdated IT platforms are struggling to serve digitally engaged customers, the amount of data is exploding across the sector, customer expectations are higher than ever, and new entrants are using technology to take on established brands.
None of these challenges are straightforward. Yet forward-looking food retailers understand that the ingredients for profitable growth are to be found in a relentless focus on the customer. In today’s world, this may mean using data and analytics to anticipate market trends, rethink the business model and explore new opportunities on a “hyper-local” basis.
Anticipating and responding to trends
Leading food retailers are using analytics tools to identify and capitalize on trends not yet on their peers’ radar screens. This could involve identifying new “eater types” to better understand which customers prioritize healthy ingredients or good value. Or it might mean developing a granular view of when and how often customers shop, as well as what they buy.
Much of the data that retailers need will come from stores’ interactions with customers, including their purchasing histories. But capturing data from outside the brand or location is important, too. Brands may work with food manufacturers and distributors to develop a more complete picture of customers, while harnessing social media for the same purpose.
Once they identify trends in the data, food retailers can use a variety of channels to seize new market share. Mobile apps, for example, offer a golden opportunity to deliver calibrated offers at exactly the right moment to win new customers. In-store, such insights can drive product location strategies – by placing prepared meal options in prominent locations, for example, retailers can attract the time-poor parents and workers who are buying these products in large volume.
Rethinking the business model
Another important strategy is using data-driven consumer understanding to create radical initiatives and rethink business models. We are seeing an increasing number of brands offering in-store dining, for example: Whole Foods and Wegman’s were leaders in providing cafes in their stores, but many others have since followed their lead. Similarly, the meal-kit market represents an attractive opportunity – supermarket chain GIANT has begun offering kits with pre-measured ingredients and step-by-step preparation instructions.
Consider, too, the opportunity for retailers to help customers make decisions. One in two people decide what dinner they will have on the day itself, rather than in advance, so leading brands are helping them choose, with dinner suggestions delivered on mobile and digital platforms.
Zooming in on the detail
Some retailers are using their data to build a nation-wide picture of an average customer, to help them target their marketing. Unfortunately, this idealized customer probably doesn’t actually exist in any local market. Those who are getting more out of their data by drilling into the detail.
Localizing data can be seen as key to maximizing impact, with the response triangulated with the realities of the local marketplace, from demographic mix to the presence of competitors. Digital channels then make it possible to act on local insights with personalized marketing. Customer-facing apps enable businesses to drive traffic, while social media is often a great vehicle for capturing the attention of a local audience. This works for smaller chains and independents, as well as for the biggest retailers. For example, the Iowa-based grocer Hy-Vee used its localized social media accounts to capitalize on New Year’s resolutions, promoting healthy eating through a new health-oriented magazine with healthy recipes posted by different Hy-Vee locations.
A greater share of the basket
In the end it is only those retailers that combine deep customer insights with agile and scalable programs and platforms, retailers that are constantly rethinking and refreshing the customer experience, focusing on personalization with strategies that weigh the customer, category and environmental factors of each location that will be positioned to secure a greater share of the shopper’s basket and achieve lasting success.