The New Retail: Omnichannel Strategies for Grocery Chains
The new retail is here and a sector that is definitely feeling the wave of this reality is the grocery industry. With the strong penetration of Aldi, Amazon’s move into online grocery, Wal-Mart’s purchase of Jet.com and the dreaded arrival in the U.S. of the highly competitive German grocery store Lidl, it’s no wonder grocers are fighting for survival in this ever-changing, highly saturated environment.
Long gone are the days of the brick-and-mortar grocer whose shoppers were extremely loyal and not as price sensitive, their competitors had limited visibility into their price changes and their response times were slower. With this new retail world comes price transparency and a highly price-sensitive shopper who is extremely tech savvy, expects discounts and has competitive price comparison capabilities at their fingertips. Moreover, their shopping journey can start and end in any of a variety of channels.
Traditional brick-and-mortar grocers and other chain store retailers must look beyond in-store and expand their strategy to include the digital channel. They must shift their category management processes away from a product-centric approach and more towards shopper-centric, aligning to the shoppers’ preferences and preferred path to purchase.
Online grocery industry continues rapid growth
According to Morgan Stanley Research, online grocery is one of the fastest-growing retail channels around the world. Throughout 2016, they found that more than a third of online shoppers expect to buy groceries over the Internet. In the U.S. alone, the grocery category is valued at an estimated $675 billion. Faster online grocery adoption could further accelerate e-commerce growth.
Given this growth rate, grocers who fail to adopt an omnichannel presence and have well defined strategies to support it will find themselves rapidly losing market share. Timing is of the essence as online growth continues to accelerate. In fact, according to a recent AT Kearney study, online grocery is growing at a rate five to six times greater than other conventional channels.
This growth inevitably spells out disruption as winners and losers shake out amid changing shopper expectations. It’s critical and very challenging to get the basics right in the online channel, but for those who do, the opportunities are huge – and global in scope.
Although all age groups and incomes are embracing online grocery, recent MyWebGrocer data shows that millennial consumers aged 18-34 represent nearly 30% of all online grocery visits and account for the highest proportion of new users. Millennials are one of the largest generations in history, and they’re moving into their prime spending years. Without a strong digital presence, grocery retailers risk becoming irrelevant to a critical market segment.
Adding fuel to the fire, omnichannel retailers are also forced to adopt new business practices to support buy online, pickup in-store (BOPIS) and low-cost, high-service delivery alternatives – all while maintaining attractively merchandized physical stores and providing consistent pricing across the digital and physical channels.
In addition, home-delivery grocers such as Amazon Fresh and PeaPod and meal-kit deliverers such as Blue Apron, Plated and HelloFresh are becoming more prevalent in grocery. According to IGD, 40% of Amazon grocery shoppers say they would consider buying fresh food on Amazon in 2016, up from 33% in 2014. Even non-grocery categories are becoming more and more threatened as online retailers compete for housewares, beauty, gifts, etc.
Dynamic pricing in an omnichannel world
Everyone is aware of Amazon’s and Jet.com’s dynamic price algorithms and their ability to intelligently change prices in real time. In an omnichannel environment where shoppers expect consistent pricing between online and in-store, it can become very challenging to offer a shopping experience that meets those expectations.
In the online channel, shoppers are accustomed to dynamic pricing and expect the prices to change as often as multiple times a day. This works well in the digital world, but having prices change in-store as shoppers walk by has not always been feasible. Electronic Shelf Labels (ESL) have been around since the 90s but adoption was limited due to the lack of a positive ROI. Today, ESLs are becoming more widely adopted worldwide. This adoption is seen predominantly among European retailers, where in-store prices can be adjusted nightly, but other markets will soon catch up. According to MarketsandMarkets, North America will be an ESL market leader by 2020.
Through the use of dynamic pricing in combination with ESLs, retailers are now able to develop and successfully execute omnichannel pricing strategies that enable consistent pricing for those items shoppers are most price sensitive to.
Strategic pricing approaches
Grocers need to adopt an omnichannel strategy aligned to different types of shoppers. Fortunately, new-generation pricing technology leverages machine-learning science, along with predictive analytics and cloud-based architecture, to enable retailers to price competitively – in a surgically focused fashion – while preserving margins.
The solution a company chooses should ideally support the following capabilities:
•Pricing across channels and categories: The right price approach should look across a retailer’s channels to factor in channel-specific costs, shoppers’ price sensitivity, and competitive price responses. It also should support specific category roles and strategies such as increasing basket sizes, enhancing margin, driving traffic or growing revenue, to name a few.
•Dynamic pricing with optimal recommendations: The solution should enable dynamic price optimization, leveraging scientific algorithms, combined with a retailer’s strategies, costs, pricing rules and policies to identify shopper price sensitivity and competitors’ price elasticity to make optimal price recommendations. If desired, these recommendations can dynamically and systematically adjust prices across channels to bring a retailer’s pricing strategies to life at the shelf – and online.
•Self-learning models: The solution should leverage predictive science that is productized and self-learning, which gives it the ability to quickly pick up fluctuations in demand due to changes arising from shifting market trends, shopper price sensitivities and competitive market conditions.
In summary, strategic price optimization turns competitor and consumer data into actionable pricing decisions, enabling retailers to price right against their competitors without killing profits. It helps align a retailer’s pricing strategy to the organization’s financial and brand image objectives. Harnessing the power of innovative pricing technology enables retailers to make smart decisions in real time, which drives sales, profits and enhances customer loyalty.
Cheryl Sullivan is chief marketing and strategy officer at Revionics.
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Tile Shop tops Q3 estimates
The surge in home improvement projects is helping fuel sales at The Tile Shop.
Tile Shop Holdings Inc. on Tuesday reported third-quarter profit of $4.6 million for the third quarter, ended Sept. 30. Earnings, adjusted for non-recurring costs, came to 10 cents per share.
The results topped Wall Street expectations. The average estimate of four analysts surveyed by Zacks Investment Research was for earnings of 9 cents per share.
The wall and flooring retailer said its net sales grew 8.5% to $78.6 million in the quarter, also exceeding Street forecasts. Same-store sales increased 5.7%.
“We are pleased to report another quarter with strong results and continued momentum for our business,” said Chris Homeister, CEO, Tile Shop, which operates 120 stores in 31 states. “Our ability to deliver sustained progress across all of our key initiatives resulted in another quarter with outstanding sales performance and significant earnings growth, as well as an increase to our full year outlook. We look forward to building upon our accomplishments as we seek a strong finish to 2016 and the continued delivery of significant growth in sales, operating margins and earnings per share in 2017.”
For the nine months ended September 30, 2016, net sales grew 12.0% from $221.1 million in 2015 to $247.5 million in 2016. Comparable store sales for the nine month period increased 9.0%.
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Watch out: Organized retail crime is on the rise — and so are the losses
Organized retail crime does not discriminate.
In a unanimous finding, a full 100% of retailers reported that their companies had experienced ORC in the past year, up from 97% in 2015, according to the 12th annual ORC study released by the National Retail Federation. It is the first time in the survey’s history that all responding companies reported being a victim.
The survey of 59 senior retail loss prevention executives found that organized retail crime is continuing to grow, with 83% of merchants surveyed reporting an increase in the past year.
The average loss was $700,259 per $1 billion in sales, a significant increase from $453,940 last year.
Los Angeles continued to be the hardest hit area for ORC in the nation, a position it has held since 2012. Following in order were New York City, Chicago, Miami, Houston, San Francisco/Oakland, Arlington/Dallas/Fort Worth in Texas, Atlanta, Philadelphia and Orange County, Calif.
ORC gangs often use storefronts, pawn shops, flea markets and kiosks to fence stolen goods, and 63% of retailers surveyed said they had recovered merchandise from a physical location. But many criminals turn to the Internet for the anonymity it offers — 58% of retailers said they had identified stolen merchandise from an e-fencing operation.
Criminals are also finding ways to manipulate store return policies. According to the survey, 68% of respondents said they had experienced thieves returning stolen merchandise for store credit, which is often resold to secondary-market buyers.
Four new states — New Mexico, Oregon, New York and Vermont — have enacted ORC laws in the past year, bringing the total nationwide to 34. But 56% of retailers in states with ORC laws said they had seen no increase in support from law enforcement, the highest in the survey’s history. Retailers continue to support creation of a federal ORC law, which is backed by 79.7% those surveyed.
“It is critical for our industry to continue pushing for strong federal legislation that would properly define ORC and make it a federal crime. said NRF VP for supply chain and custom policy Jonathan Gold, who heads the group’s lobbying efforts on ORC. “Until there is a federal ORC law to counter this increasing criminal activity and the ability to transport stolen products across state lines, it will be nearly impossible to put a dent in this $30 billion-a-year problem that threatens retailers, the economy and consumers across the country.”
Cargo theft continued to impact retailers, cited by 44% of those surveyed, up from 38% last year. The most common place for cargo theft to occur is when merchandise is en route from the manufacturer to a retailer’s warehouse or from the warehouse to a store, followed by on-site at the warehouse.
Need to use IoT for ORC
Organized retail crime has led to losses of over $30 billion in 2016. There is a need to understand how these criminals operate and then a solution can be applied to deter them. With the help of IoT based solutions for the retail industry, retailers can add an extra layer of security to their retail stores by adding an intelligence to their operations and security. You can read in detail regarding the same here - http://gizmosupport.com/combat-organized-retail-crime-with-retail-surveillance/