The Prophets of Aisle Six is the first online reality series focusing on innovation in the food retail industry. Join Jose Gomes, dunnhumby's North America Managing Director, in this season premiere as he travels to Sacramento to visit with executives from Raley's Supermarkets, a prominent grocery chain with more than 120 locations in California and Nevada, and learns more about the company's unique mission to help customers make more healthy eating decisions. Jose is joined by Raley's CEO Michael Teel, COO Keith Knopf, and Wellness Evangelist, Emmie Satrazemis, as they discuss how they're leveraging customer data science to make the company's mission come alive in a way that's both effective and sustainable.
In this series, dunnhumby tours North America 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. Check back next time as we head to Cleveland to see what the Heinen's team is up to.
To learn how to use customer data to grow your business, download a free copy of our report: Retailing in the Age of Me-Commerce: Using Customer Data Science for Competitive Advantage.
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.
Article originally appeared on Forbes.
My company recently produced a report on the state of the food retail industry, and in studying that sector, we discovered something that we hope will make food retailers stand up and listen. We learned that the nation's top grocery chains have found a way to focus on both short-term financial performance and investment in long-term consumer engagement. The latter is considered an insurance policy for the future — a sobering thought in the new year.
Insurance for the future may be one of the most difficult things to buy if you are overly concerned about present-day financial performance. As a consultant and provider of technology services to food retailers all over the world, I understand why they are concerned. Despite positive projections for the industry in 2019, there are signs that the economy is slowing, and that could very well soften consumer spending.
There's also the continuing threat from digital disruptors like Amazon that might coerce retailers into taking actions, such as blindly lowering prices, that further erode margins that are already razor thin. Another threat, well known to the industry but perhaps less so to the general public, is the new generation of discount chains that have figured out the magic of balancing short and long-term strategy and planning.
But here's the biggest challenge facing food retailers: falling prey to fear itself. I'll admit that fear can sometimes be a helpful motivator to monitor and manage your business. A recent article reported the one photo that the CEO of Walmart keeps on his phone. It lists the top 10 retailers per decade over more than sixty years, and it serves as a reminder for how many companies come and go. But McMillon is managing fear, not falling prey to it. Retailers can manage their fear, rather than fall prey to it, by leaning on three tools that can alter their standing in the industry.
Recent years have brought with them the dawning realization that retailers possess abundant consumer data. Gathered and culled from direct interactions between stores and their customers, data of this quality helps retailers price and promote their products more intelligently. It helps them with product assortment, store design and managing the new kinds of services they offer. This can include things like in-store pickup and options for self-service, depending on what makes sense for their customers. More profoundly, data can help retailers think about how they can monetize that data to help their vendors connect more meaningfully with customers. The reality is that all grocery retailers potentially are media companies, with access to online and offline media properties. It's a lesson learned from Amazon, but a small number of retailers around the world are helping to raise their profit margins by taking a page from the playbook. The place to start is with first-party customer data, which is what retailers uniquely possess.
For food retailers especially, we learned that there is an enormous number of inefficiencies with how food retailers engage with vendors, beginning with how they collaborate on pricing and promotions. Some retailers are struggling to move beyond spreadsheets to other systems that help automate exceedingly detailed work. We are living in a time where inefficiencies can make or break a business. But still, many food retailers are ready to concede that times have changed. Beyond providing technology that moves beyond spreadsheets, retailers would benefit from interviewing their vendors to discover what would make life easier for them in this highly competitive industry.
Change may be painful, but inertia will be lethal.
As the celebrated business scholar Clay Christensen has written, it is very difficult for any business to change course on a strategy that had made it successful in the past. He calls this the innovator's dilemma because, at almost any time in the evolution of any industry, leaders must understand that a decision regarding the future must be made.
To that end, the future is not served by signing a partnership with a third-party fulfillment provider to launch an e-commerce service. It's about making better decisions that impact the core of your business and operating more efficiently to better serve your customers across all of your channels.
But here's where food retailers have a unique opportunity, at the beginning of 2019, to ignore fear and take a small leap into becoming more viable by making decisions based on what they know about their customers. There is no business that knows more about people than retail, because they actually meet and greet them every day.
Take heart, and fear not. This is only the beginning of a story that's mostly yet untold.
At a recent customer conference — a gathering of dozens of executives of the nation's top food retailers — I opened my keynote by paraphrasing the opening line of "A Tale Of Two Cities": "It's the best of times, it's the worst of times."
I was talking, of course, not about the French Revolution, but the revolution that's afoot in my industry. And unlike Dickens, I was looking at what's happening not in the past but in the present.
I do not subscribe to the view that we are in the middle of a retail apocalypse; rather, I believe this is a retail revolution where the winners and the losers are yet to be determined. While the headlines continue to spook retailers inside and outside the food sector (Sears filed for Chapter 11, while Toys R Us is plotting a comeback), it seems like we are only focused on the worst-of-times/doomsday scenario. The truth: success stories have been obscured in the toss and tumult, and a rulebook for success is emerging. In a nod to another writer about revolutions — Saul Alinsky, author of the infamous Rules For Radicals — I offer seven principles that the best and the brightest retailers are following to weather the storm.
1. Put The Customer First
In my first column for Forbes, I made the point that "putting the customer first" — what seems like a timeworn cliché — is good for business. In the food retail sector, the main theater of battle in the retail revolution, the virtue of being customer-first is most apparent. This is a revolution where the customer is the victor, and the pressure is on retailers to compete for her. According to our research, she shops on average at four grocery stores each month and regularly buys groceries from at least three other channels. Most important: She has clear opinions about what each store represents in terms of value. Ignore what she thinks and wants at your peril. If you are a food retailer today, you need to start with a data-driven customer strategy.
2.Don’t Think Just About Price — Think About Value
All great revolutions result in the destruction not just of institutions but old credos as well. Here's one: E-commerce will lead to an inevitable race to the bottom for retailers because they need to compete more and more on price. We recently unveiled research that shows customers are more driven to make decisions as to where they shop based on perceived value, not price, per se. We have a formula: divide quality by price, and that gives you a better idea of what your customer wants, and how to put the customer first. For example, customers happily exchange the time it takes to shop at Costco and Walmart for lower prices — a choice driven by a subconscious cost/benefit analysis of each retailer's value proposition. A recent report by Forrester concludes that price, convenience, assortment and experience are all important to the modern consumer.
3.Know Your Particular Value-Driven Customer And Adapt Accordingly
Which is not to say that you cannot differentiate more around quality or price to win customer preference. Retailers that are focused more on "fresh" or "organic" might focus more on quality, while big box brands might focus more on price. It's important to note that a study by Business Insider found that discount stores are surging. But the battle for shoppers today mandates you think about both price and quality. By analyzing first customer data — which retailers have access to — retailers can get a better sense of what matters to their customers.
4.Target Your Investments
In another study, we found that brands with a more homogenous customer and store footprint perform better. Why? Because they deliver a value proposition that is more consistent with their customer's expectations. They opened the most stores in the last 30 years, and as a such, their customers are more homogenous, and they understand their customers — their habits, their biases, and, ultimately, their preferences — better. Again, the best place to start is with tools for analyzing customer data.
5.Think Intelligently About Private Labels
A growing corpus of research shows that food retailers with their own private label product lines are benefitting not just from brand lift but margins as well. An intelligent private label strategy can significantly improve overall margins. But there should be an emphasis on "intelligent." To make this happen requires more than strategy; it takes a little something called customer data science.
6.Incorporate Customer Data Science
By that, I mean the data, tools and practitioners that are now available not just to the Amazons of the world but to practically every retailer on the planet. Along with the revolution that is empowering consumers to shop more intelligently, there's the democratization of the science that was limited to just a few businesses visible at the start of the revolution. But to enter the battle you need to equip.
7.Join The Revolution Now — The Best Of Times
As I said at the start, this is not just the worst of times but the best of times as well. In addition to the democratization of best practices and tools, the relative strength of the economy plays in the favor of large incumbents and new market entrants poised to enter the fray. They may have more cash and other resources to commit today than when the inevitable dip in the economy makes competition for the choice-rich shopper even tougher.
When that time comes, we may actually have a tale of two retailers, not cities: the one that planned for the revolution and the other that did not.
The "new normal" isn't really normal at all. Life amid COVID-19 has forced U.S. consumers to adopt new behaviors, dramatically impacting how they shop, work and go about their daily lives. Trips to the grocery store are now once weekly trips to buy essentials and stock the pantry for home cooking. And, vulnerable consumers now rely on online ordering and delivery services they were once reluctant to try.
On average, it takes 66 days for new behaviors to become automatic. The majority of U.S. consumers will cross that milestone under pandemic restrictions very soon. Retailers should prepare now to successfully serve their customers after the "COVID curve."
Join dunnhumby's Jose Gomes, President for North America, and Eric Karlson, Head of Strategy for North America, as they discuss:
- dunnhumby's model of the three phases of the COVID-19 pandemic
- Insights and learnings from retailers around the globe
- How retailers should prepare to adapt their customer strategy for the "new normal" of customer behaviors and expectations
This webinar originally took place on Tuesday, May 5, 2020 as part of an exclusive four-part webinar series with Retail Leader and Progressive Grocer about how to adapt your Customer Strategy now for life after the curve, and possible implications for Customer Engagement, Category Management, and Price & Promotions.