Amazon’s business serves one master: the customer. Everything the company does is focused on securing a growing portion of each customer’s spending across a fast-growing array of product categories. That laser focus has powered Amazon to owning an estimated 44% of U.S. e-commerce sales in 2017.
By contrast, traditional supermarket operators say they are customer-focused while, in truth, the same retailers spend vast effort and resources on procurement and securing marketing funds from brand manufacturers. At best, supermarket retailers serve two masters: the customer and the brands. And that two-faced approach will not win the day.
In the digital world, every interaction is all about the individual shopper; there is no room for irrelevant ads or messaging even if the retailer is being paid for it. According to Accenture’s Global Consumer Pulse Research, 44% of U.S. consumers are frustrated when companies fail to deliver relevant, personalized shopping experiences. Poor personalization cost U.S. companies $756 billion last year as 41% of consumers switched companies.
Retailers need to control the entire digital experience provided to their customers. Everything a shopper sees on the retailer’s digital properties must reinforce the company’s branding and positioning and provide the comprehensive, cohesive, seamless and contextually relevant experience shoppers want. Amazon is giving it to them. Kroger is giving it to them. If you don’t, your shoppers will be happy to shop with a competitor who will.
Need for Complete Digital Marketing Ecosystem
Too often, retailers seek to cobble together a digital infrastructure from disparate pieces, trying to graft digital offers onto legacy merchandising and promotion planning solutions and mobile experiences provided by responsive websites rather than sophisticated apps. Website providers and e-commerce solutions have long positioned themselves as digital marketing platforms, but they fall short as a fast-growing number of shoppers want to digitally engage but not necessarily shop online, and as new capabilities extend digital experiences into the physical store.
Instead, retailers need to focus on putting in place a comprehensive digital marketing ecosystem. Such an environment should ideally encompass the entire marketing process from the creation and management of offers and promotions by vendors, a central AI-powered "brain" powering strategic campaigns and personalization across all channels, and deep integration into customer touchpoints providing real-time and seamless interaction.
Ideally, the platform can be opened to vendors—everyone from the big CPG manufacturers to regional brands to the local honey producer—to create digital content and promotions. Tied to a workflow approval process, retailers can bring into their digital ecosystem a vast array of promotions and content to be strategically directed to the right shopper.
It is only through this kind of ecosystem that retailers can provide the coordinated and cohesive user experience shoppers are getting from Amazon. Each product recommendation and promotion presented needs to be contextually relevant to the individual customer while aligned with the retailer’s strategy for growing customer engagement and share of wallet.
The grocery industry is quickly moving online: A recent FMI-Nielsen study projects 20% of industry sales will be done online by 2025, with some category sales hitting 40% of sales online. Amazon’s entry into grocery retail through its acquisition of Whole Foods is doing nothing but accelerating this trend and bringing increased focus to the importance of digital marketing.
Leading retailers, though, realize there is an even bigger game afoot: the fusing together of the digital and physical shopping experiences that goes far beyond simply online shopping. Customers are demanding a seamless and cohesive experience across all devices and touchpoints, and retailers are positioned to deliver new services and values to customers extending into the brick-and-mortar store.
Personalization and relevancy provide the foundation for world-class digital customer engagement, and new cloud-based services are leveraging big data, artificial intelligence and machine learning to provide comprehensive digital marketing platforms. These new platforms help regional retailers transform their marketing and open the door to the countless local and regional brands and vendors retailers work with, lessening dependence on the traditional big CPG brands while supporting shopper’s growing interest in local.
Strategic personalization increasingly underpins the efforts of successful retailers as they move beyond the practices of Kroger and Safeway in providing savings on each customer’s frequently purchased products. And as retailers grow digital customer engagement, it creates the opportunity to expand into personalized pricing, something coming fast to supermarket retail.
Retailers providing the seamless digital experience that customers crave are in turn rewarded with increased customer spending, shopping frequency and growing retention.
Kroger is focused on creating this seamless shopping experience, as Rodney McMullen, Kroger CEO, related in a recent earnings call. “Households that engage in our seamless offerings—engaging digitally and with our physical stores—spend more per week than households that do not,” he said. “The future looks even more promising. We’ll continue to add even more services, expand our available product selection, and more effectively use our insights to create a personalized experience that every customer will love.”
Digital customer engagement is the front line of today’s retail battle and retailers must avail themselves of new platforms to take the lead as technology-fueled innovation powers industry transformation.
Gary Hawkins is the founder and CEO of the Center for Advancing Retail & Technology (CART). He can be reached at firstname.lastname@example.org. This is the final installment of a four-part series. More information can be found in Part 1, Part 2, and Part 3.