Prophets of Aisle Six, Episode 2: Heinen’s Fine Foods
The Prophets of Aisle Six is the first online reality series focusing on innovation in the food retail industry. In this episode, Jose Gomes, dunnhumby's North America Managing Director, travels to the downtown Cleveland store of Heinen's Fine Foods. Jose meets with Tom and Jeff Heinen, co-owners and brothers, and learns how they are evolving their grandfather's mission of delivering excellent customer service. With 23 stores in Northeast Ohio and the greater Chicago area, and a 90-year legacy, Heinen's is proving that being a small retailer can be an advantage when it comes to data.
In this series, dunnhumby tours the globe and speaks with some of the world's greatest brands, exploring their biggest challenges and how they are using customer data science to meet those challenges.
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The dunnhumby Consumer Pulse Survey is a multi-phased, worldwide study of the impact of COVID-19 on customer attitudes and behavior. We surveyed more than 27,000 respondents online in 22 countries, with interviews conducted for Wave one from March 29 – April 1, for Wave two from April 11 – 14, and for Wave three from May 27 – 31. Due to the rapidly unfolding crisis in North America, dunnhumby conducted Wave four from July 9 – 12 in the U.S., Canada and Mexico only. Here are highlights from the study:
Big data is no longer an advantage for only the big guys. Just ask Heinen's.
As I wrote in my previous article, being truly loyal to customers is, above all else, about creating a better store experience. Naturally then, the role of big data analytics (customer science) must be to improve the traditional '4 P's of marketing – so that customers better find the right products, at prices that shout better value for money, and in promotions that more clearly deliver exciting value.
Typically, the costs and complexities of harvesting insights from big data to improve the 4 P's have shut out smaller retailers. But today's cheaper cloud computing and open source technologies can now enable big data advantages to small companies. Data has been 'democratized' in a way that size of retailer no longer matters. To wit: leading the application of big insights in small spaces is Heinen's, a 23-store chain headquartered in Cleveland, Ohio.
If you want to see an amazing store experience born from inspired retail art together with applied customer science, you've got to see the Heinen's store in downtown Cleveland. You are sure to notice that Heinen's have transcended the traditional 4 P's to add 3 new P's of Customer Engagement – People, Place, and Personal – and have thereby become even more loyal to their customers. There's a link to a special video feature about this incredible store at the end of this article.
In the age of Amazon, it pays to think big when you’re small
These are dangerous times of disruption and of tectonic shifts in structures, formats, and channels for both retailers and brands. A new epoch of retail has arrived, wherein, once again, only those most agile / most adaptable to change will survive. The challenge is even more acute for smaller retailers.
"The brick and mortar solution won't survive very well unless we up our game and create an even better experience for customers than we have in the past." – Tom Heinen
And the way to create an even better experience? Use Customer Data Science to understand customers better than in the past, and apply insights to improve the store itself. I contend that deeper, truer loyalty can be better earned by responsive regional and smaller operators because they have a natural head start as 'local' puts them inherently closer to their customers.
The paradox of disrupted retail is that the big companies must think small, and the small must think big. Those bigger to become more local and personal, and those smaller to embrace the advantages of big data.
Speedboats vs. cruise ships
As the saying goes, it's about the size of the fight in the dog (and not the size of the dog in the fight). In Tom's words, "Being small when you deal with data is actually an advantage. Big companies are like driving a cruise ship; we're a speedboat. What levels the playing field for smaller companies is, in fact, good data-driven decisions."
The principles around using customer data to better engage customers are applicable regardless the size of your business, and no matter the channel – convenience, traditional offline, online, e-m-or v-commerce. These are the universal customer principles of retail:
- Loyalty = Trust + Value. Customers define what 'trust' and 'value' mean to them, personally. This loyalty is a thing earned, not expected
- Relevance is everything
- Customers leave for a reason – they are usually pushed, not pulled away
- Those most adaptable to change are those most likely to survive
To Chris Foltz, Heinen's Director of Operations, survival today is about investing in data science, and the benefits thereof are simple; "…to find insights that enable us to engage customers differently. We need to better change to meet their changing needs and find new ways to delight them".
3 P's of Customer Engagement
Chris and Heinen's understand – and practice perhaps better than anyone – that engaging and delighting customers goes far beyond executing on only 4 P's. I see three more P's in their brilliant operating model; the human P's, if you will – People, Place (in the sense of Ray Oldenburg's Third Places) and Personal.
People: Heinen's have energised and empowered staff by giving them ownership of the customer and the superpower of trust to satisfy customers using their own best judgement. Upskilling is not only about how to do a task, but also about the applications of good judgement and warm behaviours of empathy, dignity, and respect for shoppers. One store, one person can make a big difference for customers.
Personal: Treating all employees with dignity and remembering that each employee is an individual with different needs and aspirations teaches employees that all customers deserve to be treated with respect and individuality (what I call true 'personalisation'). Heinen's employees, following the example of their leaders, learn how to build up relational bank accounts with customers – earning credits for giving recognition, appreciation, thanks, kindness, dignity and respect to shoppers as individuals. When it comes to empathy and respect, the apple doesn't fall far from the tree at Heinen's.
Place: Oldenburg describes spaces at the heart of a community's social vitality a "third place". In contrast to first places (home) and second places (work), third places allow people to put aside their concerns and simply enjoy other people and the space around them. Heinen's downtown Cleveland store stands as a model for grocers to create this very human and psychologically important third space, and demonstrates again how Tom and Jeff Heinen are loyal to their customers and to their community.
For a look at this amazing place and the loyal application of the 4 P's to enhance the customer experience, please watch the below video.
Implications for retail leaders
- You don't have to be big to benefit from big data
- The principles of earning loyalty from your customers apply regardless of the number of stores, or of format
- Retail art must be informed by customer science if you want to win in the age of Amazon
- In the age of artificial intelligence, it's the human intelligence that wins customer engagement
his blog was co-authored by Jeremy Neren, Founder & CEO of GrocerKey, part of the dunnhumby Ventures' investment portfolio.
In the past few months the shift to online sales in grocery has been significant, increasing across all geographies. We now expect to see online grow to 5-7% of sales in most grocers and up to 15% for those retailers who have the ability to capitalise on that demand.
With this growing demand from consumers and heightened importance of the online channel, it's important for retailers to both maximise the customer experience while at same time drive efficiency and profitability of their service.
It's not without challenges, but there are some key strengths retailers can focus on.
Online satisfaction and adoption
Whilst satisfaction with online is higher than stores during the Covid-19 crisis, getting customers to fully adopt this new way of shopping can be massively influenced by delivering on what matters most:
1. Amplify your offline strengths – shoppers tend to use their preferred offline grocers for online if they can, so reflect your brand strengths fully be it key categories, private label, your loyalty programme. Most customers will be using both offline and online channels going forward and expect a seamless experience
2. Make the first few shops easy and quick to do – baskets are bigger online, typically 60+ items, so quick and easy basket building is essential. Instant favourites – where Shoppers can see all their normal items they've brought previously in-store when they register can save significant time and frustration.
Simplicity is the key in eCommerce grocery. It's a convenience-oriented experience, so you can ultimately drive the greatest convenience by providing customers with the quickest path to locating items of interest, allowing them to easily build their basket, and check out quickly.
3. Go big on Fresh. Shoppers are keen to do their full weekly shop, so fresh is the key category. It needs special care and attention in terms of picking and delivery routines, as well as the right shopping cues for Shoppers such as date codes, provenance, seasonality, and ease of choosing the right quantities and weights.
4. Focus on reliability – late deliveries, missing items, poor substitutes are the most common reason for leaving or switching service. Set outstanding operational metrics on these and improve functionalities such as integrating substitutability science into picking and ordering routines. Services such as reminders for forgotten items and amending your order before delivery also make a big difference to service satisfaction.
With out-of-stock challenges retailers need to be proactive with easy options for Shoppers to pre-select preferred substitutes and have a reactive approach to substitutes with great data supplied to personal shoppers for when the Shopper hasn't selected their preferred substitute.
5. Personalising the shopping experience – online enables many things that just aren't possible in-store. Relevant product recommendations, personalised merchandising of associated products or specific ingredients, displaying the most relevant promotions, help improve the experience and the basket size by 10-20%.
Improving the customer economics
Making the online service drive incremental value to the business is key to success.
Many retailers make the mistake of treating eCommerce like an IT project. Simply standing up a nice looking front-end eCommerce experience, while simultaneously ignoring all of the major operational considerations and many nuances of eCommerce grocery, will lead to failure. Collectively, these considerations can make or break the success of an eCommerce grocery business. Just like grocery retailers obsess over the details in their physical stores, they must do the same with their eCommerce business in order to drive profitability and ultimately sustainability.
This requires continued choiceful investment and focus in the following 4 areas:
1. Track customer value not just channel performance.
Having a cross channel view of shopper impact is key for right investment decisions. In most cases online sales at 70% incremental driven by existing shoppers spending more and attracting brand new shoppers to the business.
It's important for retailers to cultivate multichannel shoppers by augmenting an integrated digital experience with promotions that drive in-store customers to shop online and online shoppers to shop in-store. This ultimately will lead to increased visits, improved loyalty, and greater share of wallet.
2. Maximise basket size and frequency.
Whilst already 3-4 times higher than the store continuously growing average Shopping basket is essential for bottom line profitability. Dynamic product recommendations, forgotten item reminders, and delivery subscriptions are a few examples of activities to have in place.
Making "sale items" immediately accessible as a distinct category with filtering options (i.e.; past purchases, dietary preference, brand preference, etc) is helping drive basket size. This is an area where eCommerce is simply 10x more efficient than the store as you can essentially browse all promotional items of interest in a matter of a few clicks vs. traveling to the store and walking each aisle.
3. Drive operational efficiency.
Expanding current capacity is clearly important but equally reviewing ways to maximise pick per hour rates and delivery rates is key. Systematic reviews of picking by zone, planogram mapping, labour scheduling, dynamic routing of delivery orders are necessary.
One way GrocerKey is driving efficiency is by creating incremental staging capacity via temperature controlled totes. This is far less expensive than adding freezers / coolers – so there's major capex savings, more efficient from a space allocation standpoint, growth can be handled in a modular fashion, and the retailer can then promote never breaking the chill chain because the product is kept at the appropriate temperature from the time it's picked until it's in the customers hands.
4. Provide suppliers a combined data asset across offline and online.
Multichannel insights and activation that enable brands to grow the channel with you through highly personalised digital onsite and offsite media will be very beneficial to the economics of and profitability of your service.
The tipping point for online grocery is underway and retailers need to be ready to make the most of this opportunity.