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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.

white and blue magnetic card

Photo by Avery Evans on Unsplash

Most companies attempting to drive customer loyalty fail miserably—and few so-called customer-centric companies generate sustainable customer loyalty that drives measurable business results. Why? Because they get three key principles completely wrong, right from the start:

  1. Loyalty is about the company acting loyally to its customers, not vice versa.
  2. It is about a loyalty approach, not a loyalty program.
  3. Loyalty is about the store, not only about the CRM.

1. Loyal to Customers

We start to act loyally to customers when we understand them to a level of detail that ensures that we remain responsive to changes in their behavior, relevant to ever-changing customer needs and rewarding in the way we treat customers.

Acting loyally is about adopting a loyalty mind set of managing customer segments as strategic business units (aligning with how we think about a category management strategy as managing categories as strategic business units). This context demands change that is both incremental and transformational—evolution, but with a bit of manageable revolution.

What customer loyalty is, and is not:

  • Acting loyally (responsive, relevant, rewarding) to our customers; not about customers being loyal to us
  • An overall approach throughout our business; not a proposition or program
  • Earning customer loyalty; not thinking that customers should become loyal
  • Collaborative partnerships to win customers together; not tolerant of internal conflict between areas of the business or with suppliers
  • Transparent; not opaque
  • Driving sales and cash margin; not customers being responsible for percent margin

2. Loyalty Approach vs. Loyalty Program

We demonstrate loyalty to our customers by taking a loyalty approach wherein we commit to rewarding and delighting our customers with products and experiences that meet their wants and needs.

  • We call this putting customers first—when we decide on priorities and actions based on insights from our customer data.
  • By doing so, a retailer becomes an even more prominent choice in the customer's consideration set. This is not a tactic; it is a long-term strategy that makes the customer the focal point of our business decisions and objectives.

The loyalty program is an important element within a loyalty approach, as the key source of the data that enables customer intelligence, and as the channel that enables us to talk to our customers personally. I call the loyalty program the "little l" in loyalty, with the loyalty approach as the "big L."

But a loyalty program is not required to act in a loyal way to customers. Here's how to think of "big L" loyalty:

A loyalty approach, simply put, embeds customer insight throughout the retail organization to enable better, faster decisions and thereby increase sales and profit sustainably. Best-in-class practitioners have seen an incremental sales uplift in the early stages of a loyalty approach of between 1% and 2% and later stages between 3% and 4%, quarter over quarter and year over year.

3. Loyalty Is About the Store, Not Just the CRM

As I used to say to my retail colleagues, "If the store is lousy but we deliver brilliant targeted CRM, the store will still be lousy."

Even if the personalized CRM is perfect, customers need to perceive that tangible changes have been made in the store itself before they will respond by giving more of their custom. We must put customer insights into action within the "hardwiring" of retail practices—pricing, promotion, assortment, adjacencies, new products, the checkout experience and so on.

In a previous article, I shared several examples of being loyal to customers in store by simply making the shopping experience easier—setting the yogurt section by customer need rather than by brand blocks, for example, and by setting product adjacencies according to how customers shop, rather than by how items are sourced in the supply chain.

3 Ways to Activate a True Loyalty Approach

  1. Make better business decision by putting the customer first. Everything is better when you start with the customer. Start with the data you hold on customers—understanding how they shop and behave, what is important to them and how they engage with your business. This insight will identify a number of opportunities for better decisions using the data.
  2. Improve the customer experience by using data-driven insights to improve your retail offering, such as assortment, pricing and promotions. Use insights to connect you to your customer through the store. Think of the mantra "data to insights to actions"—this is how improved like-for-like sales growth and customer loyalty is delivered.
  3. Transform the organization using customer-driven insight to help you better understand, anticipate, measure and continually respond to your customers. This is realized through empowering, aligning and equipping your people with relevant insights, values, goals, strategies and actions.

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[This is the fourth in a series of articles advocating the voice of the Customer in the highly competitive food-retail industry. David Ciancio is Global Customer Strategist for dunnhumby, a pioneer in Customer data science, serving the world's most Customer-centric brands in a number of industries, including retail. David has 48 years experience in retail, 25 of which were in Store Management. He can be reached at].

Treating Customers differently based on their 'profitability' is counter-productive to building loyalty and toward creating a healthy retail Customer Experience.

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Better understand and activate your Shoppers to grow sales.

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