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The Future of Grocery: Bringing Digital Experiences to the Store

Amazon is expanding further into the grocery market -- and enhancing its brick-and-mortar presence. What can traditional grocers do to compete?

In February 2020, the e-commerce giant gave journalists a sneak peek of the inside of their first grocery concept location in Woodland Hills, California. The store rivals a conventional supermarket layout, with investments in staple items like soda and snacks that differ from its specialty foods counterpart, Whole Foods.

Amazon’s latest move is another challenge for legacy grocers. According to Andy Halliwell, senior client partner, Publicis Sapient, London, Amazon is uniquely positioned to continue to disrupt because of early investments in digital infrastructure like supply chain, and more capital to spare.

“People buy from Amazon because Amazon is the place you go when you want something in two hours, when you want to guarantee you’ll get something next day,” Halliwell said. “It’s not the website -- it's the service proposition behind the website that makes them massively successful.”

Unlike digital-first brands, legacy grocers must compete by adapting long-standing processes. Neil Hubbard, director of customer experience and innovation, Publicis Sapient, cautions that while grocers are thinking about implementing digital solutions, they often overlook smaller details that matter to the customer – nuanced elements of the shopping experience, like offering paper bags instead of plastic, or thoughtful, personalized recommendations.

“There’s basic things that customers want to do -- fundamental things that we often take for granted in the physical experience -- that completely fall apart in the digital experience,” Hubbard said. “They’ve taken their eye off the most important thing, and that’s the customer.”

Author

Amy Onorato

Groceries: Where Digital Meets Virtual

New generations of digitally native shoppers are entering the grocery market. The global grocery market is projected to reap $1.9 trillion in new sales by 2023, a 28 percent increase since 2018. 

Shopper at the grocery store

Unlike other retailers, grocers face unique inventory issues – the freshness and availability of produce, online and on store shelves. An increase in-store pickup or curbside/home delivery poses supply-chain challenges, as well as designing the in-store experience to accommodate more pickers dedicated to these services, without overcrowding the physical store experience.

Image a keyboard command for a digital delivery of groceries

More physical and DTC delivery options give the customer choice and flexibility. Examples include improved home delivery, curbside pickup, spoke (locker or kiosk) pickup, subscription services, BOPIS processes, click-and-collect and delivery option-based pricing.

Image of a drone

An increased demand for speed and convenience puts pressure on grocers to develop a more agile approach to demand planning cycles in order to reduce cost and maximize experience. A de-siloed approach that unites analytics and operational data within a singular cloud-based platform reduces friction between planning and execution, allowing for better resource planning, inventory optimization, seasonality and location-based insights. 

Representation of the digital cloud

Designing experiences with the customer in mind

According to recent Publicis Sapient/Adobe research on data maturity in retail, only 40 percent of respondents said they were leveraging data across channels to create a 360-view of the customer. By eliminating information silos and creating a more holistic view of the shopper journey, grocers can invest in developing the right technologies needed to provide more than just convenience.

“Once you begin to get visibility into shopping behaviors, patterns and preferences, you can do a lot of things right,” Hubbard said. “You can begin to proactively anticipate what goes on the shopping list and begin to simplify that experience. You can begin to recommend subscribe-and-save options for items bought frequently, or start recommending recipes that would inspire creative cooking and reduce waste because you’re not throwing things out.”

Leading in grocery by reducing complexity

Millennial and Gen Z shoppers are dominating the grocery market – and doing so more digitally. Statista research shows that around 45 percent of Gen Z and Millennial shoppers primarily used online grocery services in 2019 – up from 43 percent in 2018. Integrating online and offline channels requires meeting a growing need for convenience that makes shopping more enjoyable.

Successful customer-obsessed grocery experiences follow the four LEAD principles of design -- light, ethical, accessible and dataful. When combined, these four principles help grocers think about the customer experience from all angles. For modern grocers, this means focusing on reducing complexity, with innovations like:

  • Clean, easy-to-navigate e-commerce experiences, with the ability for customers to set preferences and receive personalized suggestions, curated offers, loyalty programs perks and discounts based on needs and shopping history.
  • Integrated mobile experiences within the physical store, allowing shoppers to better navigate physical locations, learn about new products on the store shelves and customize checkout experiences at point-of-sale.
  • More transparency into the supply chain, with education around pickers and services aimed to build consumer trust.

Transformation in action: Walmart Canada recently reimagined their physical presence while reducing complexity with its Supercentre concept. The store features a dedicated Fast Lane option, which allows shoppers to seamlessly scan items on store shelves and process items at checkout using their My Walmart mobile app.

Walmart’s mobile app also allows shoppers to tap into personalized discounts, build shopping lists and personalize delivery pick up times –connecting the shopping experience across channels, while reducing time and friction with in-store. In 2016, Walmart saw a 98 percent increase in mobile orders and a 20 percent increase in conversions with this improved mobile experience.

Leading in grocery by creating end-to-end experiences

Unlike other retailers, grocers face unique inventory issues, like the freshness and availability of produce online and on store shelves. An increase in in-store pickup or curbside/home delivery poses supply-chain challenges, as well as designing the in-store experience to accommodate more pickers dedicated to these services without overcrowding the physical store experience.

“Grocery is a very low-margin business,” Vivek Puri, group vice president, growth and strategy lead, Publicis Sapient, said. “If you look at the old paradigm and how they reconfigure their supply chain to the digital customer, there are a lot of challenges, which is highly competitive when compared to Amazon.”

According to Halliwell, Amazon’s choice to differentiate its grocery concept from Whole Foods allows it to provide experiences tailored to different customer preferences.

“There's a need for Amazon to differentiate their picking solution and their ability to fulfill orders from the people that still want the in-store experience,” Halliwell said. “The Amazon grocery concept store is a way of separating out the pickers and the delivery operators from individuals who still want a premium grocery experience.”

For modern grocers, emerging supply chain trends play a critical role in shaping the overall customer experience. Grocers should leverage data to weigh the benefits of these shifts in order to determine the best approach.

  • More physical and direct-to-consumer delivery options give the customer choice and flexibility. Examples include improved home delivery, curbside pickup, spoke (locker or kiosk) pickup, subscription services, BOPIS processes, click-and-collect and delivery option-based pricing.
  • Omnichannel optimization. Insights on shopper preference, inventory, order fill rates, and last-mile fulfillment give an end-to-end view of the customer journey. Grocers can leverage data to create services that meet customer demand, while minimizing cost across the entire distribution chain.
  • Improved shipping and logistics. New delivery models means changes and investments in transport, with grocers exploring new ways to optimize delivery routes for speed and efficiency. Examples include working with third-party carriers for last-mile fulfillment, developing or acquiring a delivery partner (i.e. Target’s acquisition of Shipt in 2017), or creating localized pickup centers. In-store, shelf management, processing, and staffing to accommodate increase picking need is a focus when improving efficiencies.
  • Better demand forecasting. An increased demand for speed and convenience puts pressure on grocers to develop a more agile approach to demand planning cycles in order to reduce cost and maximize experience. A de-siloed approach that unites analytics and operational data within a singular cloud-based platform reduces friction between planning and execution, allowing for better resource planning, inventory optimization, seasonality, and location-based insights.

Transformation in action: When Loblaw -- a retailer with more than 100 years of legacy brand recognition -- wanted to transform its processes into a leading digital organization, the company took a “continuous improvement” approach, with focus on iterative innovation. Loblaw became one of the first companies to offer grocery delivery and pickup across Canada. Its PC Express Online service allows customers to order online with pickup and delivery options across 700+ store locations and 13 banners. Loblaw also introduced PC Express pickup locations for easy order pickup. With 670 sites, this allows 75 percent of Canadian shoppers to be 10 minutes or less from a pickup location.

The new grocery experience

The global grocery market is projected to reap $1.9 trillion in new sales by 2023, a 28 percent increase since 2018. At the same time, new generations of digitally native shoppers are entering the market – shifting expectations and demand from retailers. While technology and data play a role in driving these innovations, the ability for a retailer to keep the needs of the customer at the core is paramount for success.

 “Once grocers begin to really leverage data effectively, they can enable experiences that are truly relevant…that’s going to be a real shift,” Hubbard said.

Dwight Hill
Dwight Hill
Executive Client Partner, Global Delivery, Client Engagement