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Let's consider what we've learned and imagine the perfect grocery retailer for Covid. It would be a retailer that wouldn't have a building so shoppers could avoid lining up to get in, navigating one-way aisles and meeting potentially infectious crowds. It would be a retailer where shoppers could save time and avoid a slow, laborious trip to the store, a trip during which they might even find the items they were looking for are out of stock. It would be a retailer where shoppers could avoid encountering the Coronavirus by buying groceries from the safety of their own homes. As a bonus, this retailer would have great price perception, because why not save money as well as stay safe and save time?

Turns out we don't have to imagine this retailer. We just have to look in our pockets and touch an app on our phones to find it. Or reside in one of the cities with Amazon Go or Amazon Fresh stores with smart baskets and walk-out and pay technology for speedy check-out.


Covid created a perfect storm that played right into the unique strengths of Amazon's customer value proposition. Amazon easily blew every other retailer out of the water on our Covid Momentum Metric and customer Safety ratings. The distance between Amazon and second place on these measures is much wider than the distance between second place and the rest of the pack.

Edge Ascential estimates that Amazon will grow grocery market share easily more than any other retailer in the U.S., picking up +0.731% of the U.S. grocery share (this increase is just for Amazon.com). This increase – about 3x higher than 2nd placer retailer Target on the Covid Momentum Metric – equates to $5.8B, compared to if Amazon had just held market share steady. And Edge Ascential may be underselling Amazon's potential 2020 performance, since they predict a year-over-year grocery sales growth rate of only ~33%. In Q2 of 2020, Amazon reportedly tripled their online grocery sales. In Q3, only online sales in total were stated, but this rose 49% for Amazon, and online grocery has been growing faster than general eCommerce.

For retailers who aren't Amazon, does this mean they should rush even faster than they already are to expand their click and collect and delivery capabilities? Not necessarily. Online grocery shopping is still a hard place to make profits for most, and from the ability to subsidize their grocery business with profits made in other business units like Amazon can. Additionally, we've covered in previous versions of the RPI what prerequisites are for a great eCommerce platform to also deliver great overall top line growth. Many regional grocers struggle with these prerequisites, namely great Price perception and a product category DNA that is strong in center store, non-perishable items. Lastly, eCommerce's share of grocery sales was ~5.0% in 2019 according to Edge Ascential, and even though it is set to grow ~50% for 2020, that still puts eCommerce's share of grocery sales. So, if you're a legacy brick and mortar retailer, your customers, even after the Covid eCommerce bump, will be getting most of their groceries from your physical stores. If you do invest in eCommerce to chase top line growth and provide a competitive response to Amazon, there must not be any drop-off in the Quality of the store experience or an increase in Prices – two things which would harm a retailer's Value Core and hinder their chances of long-term success with customers.

FOR BRANDS

In the first episode of Customer First Radio, Dave Clements, Global Head of Retail for dunnhumby and David Ciancio, Global Head of Grocery for dunnhumby kick off the series by discussing what it means to be a truly Customer First business, share which retailers and brands today embody a Customer First mindset, and examine how Customer First materialized during the pandemic with retailers.

black and silver headphones on black and silver microphone
Photo by Will Francis on Unsplash

The 2021 Retailer Preference Index: Who's winning and why. David Ciancio, Global Head of Grocery discusses the 2021 U.S Retailer Preference Index (RPI): Grocery Edition with the lead author of the RPI, Erich Kahner. They unveil key insights and discuss who is winning and who is best positioned for the future.

dunnhumby’s 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.


In my last post, I posed five questions to retailers to help them determine whether they're ready for a customer-first mindset. Now, I'd like to challenge the retail basics that seasoned retailers were trained on, and suggest instead a new customer data science approach.

"Retail is detail" is common industry wisdom, and it means that achieving success is subtle and difficult. Success in any field demands practice and experience, and so it is little wonder that many senior retail and brand leaders and managers have vast years of involvement, and that most have grown up through the business in progressive steps.

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