Changing face of Retail – a threat to grocers?
It’s an amazing period that we’re in right now, that we can witness the considerable changes that are affecting massive industries in real time right in front of our eyes. See: search engines for the publishing industry; iTunes, Pandora, and YouTube for the music industry; Amazon for the retail industry. The pace at which these changes are taking place is impressive and can sometimes leave us confused as to which trends are lasting and which are not.
Three recent developments in the retail industry, we believe, are indications of what’s to come and will form the basis of considerable future change.
Best Buy on the way out?
The first was an article in Fortune magazine’s technology section entitled “Goodbye, Best Buy. Hello specialty retail?” by JP Mangalindan. In this piece the author explores Best Buy’s decreasing sales as a result of two increasing trends. The first being an increasing use of mobile and online price comparison applications to find the best deals and the second is a trend towards specialty stores where customer service and product knowledge and support is perceived to be better.
Although the author concludes that Best Buy is not on its way out, it does face considerable challenges as customers become accustomed to choice and are growing a “better idea of what tech gear they want, and a better idea of where and how they want to go about getting it.”
A complete customer engagement process? Amazon Prime:
Combined with this first trend is the general acceptance and adoption of Amazon Prime, Amazon Mom, and Amazon Price Checker Mobile Application by consumers seeking a more convenient and price conscious method of shopping. Specific, but subtle, features within these programs make the difference between them being nice to haves and potentially game changing. With Amazon prime and a small yearly fee, members receive one click purchase and 2 day free shipping on amazon items. Further convenience is added to the process by the Amazon Price Checker Mobile Application which allows shoppers to scan products in traditional brick and mortar stores and then to 1 click purchase, and again with free delivery. All of this combined with considerable discounts and the ability to schedule regular purchases to be delivered at no cost makes this package an interesting model to contend with. And that’s without considering the fact that an Amazon Prime account can be shared between 4 people, therefore covering the needs of a whole family.
Mobile for customer engagement. Wal-Mart labs:
The last development is Wal-Mart’s increasing investment in mobile resources, indicated by the latest announcement of their acquisition of companies such as Grabble and Small Society both of which add significantly to the Wal-Mart labs team. These acquisitions indicate Wal-Mart’s recognition of the potential power to differentiate through engaging with customers via mobile and online, as summarized by Paul Cousineau (VP mobile products Wal-Mart):
“Our goal is to make the shopping process easier for our customers ranging from planning a visit to a store and navigating the store shelves, to finding more about a product on a shelf and to ultimately using your phone to pay for a product. Given this transformative power, apps are of central importance to our strategy of continually finding ways to bring everyday low prices to customers.”
And this is further iterated upon by Anand Rajaraman (SVP Global e-commerce)
“Mobile isn’t just an extension of e-commerce to mobile devices, but rather a guide that will impact all of a customer’s purchases, from groceries to electronics and everything in between.”
The key here is not that Wal-Mart is investing in a mobile strategy but that they are bringing it in house giving them more control over the user engagement and probably most importantly the data surrounding user preferences and behavior. This will lead to a future of a deeper and more personalized customer engagement process, a convergence in the distribution of this process (see Amazon Prime), and an ability to provide a customer service experience rival to that of a specialty stores.
A threat for Grocers?
Most of these trends relate initially to areas outside of the grocery vertical. However, mobile applications and businesses that started out in other retail verticals such as Scanlife, Mobiletag, Shopkick, Foursquare, Shopsavvy, Redlaser etc. are increasingly being adapted to suit grocery. Presently at least 20 – 35% of mobile scans of products for generic price comparison applications are on grocery related items and that’s not considering the scans from the number of grocery dedicated applications out there.
There is no doubt that there will be a need for grocers to adapt and explore new ways to engage with customers via online and mobile vehicles. The key to the success of these programs will be data. Phase 1 will involve the integrated use of up-to-date and accurate product data and content that engages the grocery shopper in-store, on the shelf, via mobile and online. While phase 2 will require the mining of user preference and behavior data to further engage shoppers by catering to individual needs providing the grocer with the opportunity to provide a customer service process that goes beyond just the “typical customer”.
In a time when most retailers are still coming to terms with the implications of social media this new requirement poses a considerable challenge for grocers. The silver lining being that there exists significant opportunity for disruption and differentiation by those that can actively innovate in this area.
Tell us what you think: Can grocers step up to these challenges?
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