The grocery business is changing—well, it may be a bit more accurate to say it has changed. To remain relevant and succeed in a hyperconnected era, change is inevitable. There is no silver bullet in terms of which technology or tactics grocers should capitalize on, as it will depend upon each customer’s preference—some may prefer in-store shopping, others primarily order online, and some look for mobile apps. The key, however, lies in the business’s ability to be agile enough to cater to each individual customer, and that requires placing a digital core at the heart of the business.
Going digital, however, is not quite that simple. For years, grocers have been delaying investment in the technology needed to become a truly digital company. They’ve been masters at solving business problems with great people and optimizing at the siloed process level. They’ve not been able to see their way to the larger benefit of a connected enterprise. For example, great supply chains are very good at managing the metrics for success in their process, but are not necessarily great at ensuring the ultimate scorecard, shopper satisfaction, retention and loyalty. Great category managers are skilled in gross margin, sales and assortment—but not so much concerned about the effect of their strategies on supply chain costs. Store operations has to deal with the culmination of all these myopic processes landing in their backrooms and on their shelves.
But the digital world has little patience for this disconnected business model. Digital is fast, it’s demanding, and it’s easy for the digital shopper to move on from those that do not deliver. And it’s coming at the grocery industry whether it’s prepared for it or not. Digital revenue is predicted to spike from 3%-6% today to 30%-75% in five to 10 years. Whatever the number is, it will be substantially greater than it currently is. One thing is for sure: It’s a pretty extensive change, and taking the first step toward establishing a digital core is necessary.
The Case for Change
Yes, change can be hard, but there are some very compelling reasons to drive for that total digital transformation, get out of manual mode and get to a connected digital enterprise. Here are a few areas of implementation, along with compelling reasons to make the change:
- Store operations. Technology allows for automation of repetitive tasks, enabling the store associates to change their focus from sales-enabling tasks, such as price checks, out-of-stock management and stocking shelves at night to sales-generation tasks such as individual customer service, meal solution management and fresh production management. In addition, digital customer knowledge increases the ability to “know” the shopper, moving store associates away from administrative tasks and toward enhancing the shoppers’ experience. Innovative technologies are also transforming consumer engagement with applications such as smart shelves that connect to your phone, smart shopping carts and in-store assistant robots.
- Supply chain. If you know your shoppers’ needs (and you do at 30% to 50% digital orders), you can drive inventory efficiencies across all aspects of the supply chain, including safety stock reductions (both store and warehouse), stocking labor reductions, increased service levels and increased accuracy in supplier collaboration.
- Merchandising. Digital shopper knowledge leads to appropriate personalized assortment, personalized offers, effective meal planning and enhanced customer experience metrics.
- Marketing. A digital core allows grocers to be connected to the merchant with a joint focus on the digital shopper, as well as more effective campaigns and access to supplier offers to connect the dots between merchandise and marketing.
- Back office. Through the adoption of artificial intelligence and machine learning platforms, retailers are reshaping both front- and back-office processes, focusing all areas of the process on shopper satisfaction and profitability—including finance, HR, store design and real estate.
It’s a new world. The culture of grocery is changing, and the work will be hard, but it is a great opportunity for growth. What once was the definition of great is now the definition of mediocre, and it will require the entire organization’s attention—from top to bottom—to achieve greatness again. The task is to figure out not only what to do, but also how to sustain it.
Each person in the organization must become a digital advocate, embracing the transformation and leading even when it gets tough. The winners won’t just survive—they will thrive with renewed vigor and customer advocacy. They’ll be connected to their customers, be participants in their lives, provide “dinner” and do all this with increased efficiencies and a better bottom line.
We’re going to see many grocers invest in their digital transformation efforts if they haven’t already. Consumer expectations are rapidly evolving, and it’s important that retailers do what they can to stay ahead of demand and provide innovative, convenient shopping experiences.
Randy Evins is senior principal for Food, Drug and Convenience at SAP America, a developer of business software solutions for various industries.