Are supermarkets digitally disconnected from retailing reality?

Photo: RetailWire
Aug 16, 2016
Warren Thayer

Through a special arrangement, presented here for discussion is a summary of a current article from Frozen & Dairy Buyer magazine.

It’s hard to find a CEO who isn’t apologizing to Wall Street for training shoppers to buy only on deal and spending trade money foolishly. But what improvements do they have in mind? Like our presidential candidates, they’re short on details.

I asked a friend who just retired from a major chain about this. He said, “First, larger companies want to really ‘partner’ with the retailer and build promotion programs that the retailer commits to. This was an effort I was involved with at (Retailer X) since 2009. Each year it got better and the larger companies really made an effort to build programs that were around strategies that were important to us. There were mixed results but everyone thought that this was worth the effort.

“Second, for the last five years manufacturers of all sizes have been trying to figure out how to tap into social media to promote their products. The technology is changing much faster than the typical ‘annual planning’ that companies are tied to. There are many efforts to understand the ‘cost per impression,’ more efforts to understand the ‘cost to act,’ and these are driving major reallocations for manufacturers away from traditional promotional spends such as FSIs.”

My gut tells me that the sexiness (and opaqueness) of digital is making it the untouchable darling of many companies.

Food Marketing Institute’s “Financial and Strategic Initiatives in Food Retailing” study from earlier this year showed 59 percent of retailers plan to increase their spending in “omni-channel strategy and technology” in 2016 and 2017. That’s higher than “expansion of top-line growth” (53 percent) and “data security and privacy” (50 percent).

But now let’s look at what retailers said about their top three strategies for driving top-line growth in 2016 and 2017. Making the list of the top three were, in order: “store/product innovation” (65 percent); “pricing and promotion strategies” (50 percent); and “new merchandising strategies” (41 percent). To me, that’s a bit of a disconnect.

Hey, I recognize that digital is going to become a bigger part of everyone’s strategy. But, as the saying goes, “Be careful out there.”

DISCUSSION QUESTIONS: Are grocers in danger of losing focus of what’s most important to consumers as they push their digital agendas? Do you think chains are investing too little or too much when it comes to digital marketing versus traditional methods such as FSI’s, in-store signage, etc.?

"Grocers need to balance digital programs with the traditional tried-and-true marketing programs which are proven to deliver revenue."
"Consumer experience matters in grocery, and digital media is an agent of benefit."
"I can’t believe we are still talking about FSIs! My children, who are both late 30s and your prime demographic, have NEVER BOUGHT A NEWSPAPER!"

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14 Comments on "Are supermarkets digitally disconnected from retailing reality?"

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Ross Ely

Grocers need to participate fully in new methods of digital marketing such as social media, e-commerce and moblie promotions. Ignoring these high-growth trends puts the retailer at risk of appearing out-of-touch and behind the times.

However, the results from these digital programs are still relatively unproven and difficult to measure. Grocers need to balance these digital programs with the traditional tried-and-true marketing programs (print circular, in-store signage) which are proven to deliver revenue.

Brian Numainville

Taking a generational look at this, younger generations are more engaged in the digital marketing realm while older shoppers are not as much, but our research shows that Facebook, for example, is heavily used across all generations. Even so, there is a “digital disconnect” with social media, for example, showing a large gap between those who are engaged on social media and connectedness to their primary supermarket. The opportunity to close this gap is going to continue to grow and grocers do need to be engaged in the digital space or they will be viewed as not “with it” by shoppers as time goes on. Having said this, there does need to be a healthy balance between traditional marketing tools and the newer digital tools as they continue to evolve.

Sterling Hawkins

Digital agendas need to be developed alongside what is most important to their consumers to be effective. Different retailers have different shopper needs and demographics so how they balance digital vs. traditional spend should vary. I think we all know what direction things are headed; as retailers can continue to innovate and add more value in the digital world, the better they’ll be better equipped for the long run.

Tom Redd
Grocery needs one thing! A strong cell signal in all parts of the store so people like me can call home and make sure we have the right butter — unsalted or salted. It kills me that my favorite store has such a weak cell signal and if I have the wrong butter during critical baking months at our home I am DOA. All the other noise on digital, promos and social will come in time as more is needed, but if a store maintains the focus on making sure the shoppers have service out on the floor and product in stock they will do great. In our favorite regional Kroger store — Fry’s — we have a lady named Mary that has been at the store for more than 20 years. She is now 80 so she works part time. She wanders the floor with the returns re-stock cart and she knows where everything is — new or basics — and has advice on any type of cooking or products, like “Mary which of… Read more »
Peter Charness

Hey Tom … Mary’s retiring and being replaced by an in-store drone … but seriously, have you seen another Mary coming up the ranks? With a good cell signal you can probably self-serve everything you need to know in the store — that’s the future.

Ralph Jacobson

It’s not so much as how much retailers are investing in digital, as in, what they are investing. Merchants and marketers alike need to build their digital shopping experience for contextual interactions that are personalized in real time and informed via analytics. They must design these experiences for flexibility, security and availability via any channel. They also need to navigate digital and physical channel convergence while supporting corporate goals for market expansion. There are specific tools to do all of this and more, and retail executives need to identify the capabilities truly required for their particular environment.

Ryan Mathews

I think grocers don’t appreciate the difference between technology and culture — and that’s a major problem. There seems to be a leitmotif of belief out there that (culturally) we still live in the 1960s and that all that has changed are these technological add-ons. Too many grocers are worrying about “omnichannel,” for example, without considering that the “omni” in “omnichannel” only refers to three interfaces — physical, web and mobile — in a world where wearables, voice activated technologies, the IoT and IoE, standalone smart devices and yes, soon, implants are all evolving “channels.” Supermarketers are still trying to figure out a Facebook strategy in a world where people suffer psychological withdrawal if they are forced to unplug. It isn’t just that things change, it’s that the change is profound, deep and changes culture. If I were a grocer, that’s what I’d be focusing at. The technology is just enabling structure, it isn’t where the prime focus ought to be.

Ben Ball
Amen, Ryan! Too many grocers and CPG execs don’t realize the the “path to purchase” hasn’t just changed — it’s not even a path any more — it’s more like an ecosystem. Call it “the 360 Consumer Experience.” As a result “doing digital” is more of a check the box thing for these execs. Kind of like “doing category management” used to be. I can just imagine the conversation in the C-suite hallway: CEO Doug: “Say Tom, I’ve got that Q3 analyst call coming up next week and the P.R. guys tell me to be sure we have digital covered. We are doing digital, right?” Marketing VP Tom: “You bet Doug. We hired a digital marketing manager last month and she has engaged a digital marketing agency. We expect to be online with Facebook, Twitter and Instagram next quarter.” CEO: “Good stuff Tom. Let me know how it goes and be sure and get me an ROI number on digital for the Q4 call.” And the part about why is digital right for us? Or… Read more »
Phil Rubin
1 year 3 months ago

Grocers have a built-in advantage over some emerging new models but the longer they fail to innovate the more they will be displaced like retailers in other categories. Whether it’s new models like Blue Apron, mass merchants like Target increasing their emphasis on grocery or Amazon Fresh, there are plenty of threats to grocers who are and continue to lag behind where consumers and technology are going.

Beyond some of the individual relationships, the main driver of grocery “loyalty” is habit as much as it is anything else. Beyond those local relationships, which are really tough to scale, grocery shopping, in spite of the data being collected, is still too much of a mass marketing and old-school game.

Liz Crawford

Grocery needs to decide the role it wants to play in the lives of shoppers.

The younger generation of consumers are hooked on immediate consumption and spontaneity. In fact, 20 percent of Millennial shoppers consume their grocery purchases within two hours of the transaction. That consumption pattern competes with restaurant take-out. So many grocers are shifting toward a grocerant format (Fresh Market, et al.), allowing customers to browse in a pleasant environment for heat-and-eat dinner choices.

Let’s say a grocer is in fact competing with restaurant take-out, what is the logical digital connection? What is Omnichannel? Well, it isn’t Facebook. It’s more likely an app such as GrubHub, which caters to the 4 p.m. “what’s for dinner?” crowd.

All of this is to say, I’m not convinced that grocers are seeing the landscape of consumer choices and shopping dynamics clearly. Most need a good ethnographic study to enable effective digital strategies.

Lyle Bunn (Ph.D. Hon)

As the battle for share of $1.5 trillion in annual North American food spending is fought every meal and snack time daily between grocery and food services providers, grocery must leverage the recurring patron visit by activating the aisles.

Product information, preparation approaches and food value can be easily presented using highly influential digital media, while cross-selling and margins can be maximized.

Operational applications (i.e. inventory, POS, etc.) can fuel MarTech (marketing technologies) that improve the shopper experience and margin per-cart.

I’ve been impressed by a grocer kiosk program being provided by Provision 3D that attracts and engages patrons at the entrance with 3-D holograms, dynamic advertising, mobile downloads of available coupons, shopping lists and recipe suggestions.

Whole Foods’ (Avalon) use of video walls, interactive signs, shelf signage and specialty area (wine/cheese) digital signs are a step beyond the success of deli area digital signs that have been put to good use at Tops in Buffalo.

Consumer experience matters in grocery, and digital media is an agent of benefit.

Kai Clarke

Supermarkets require that consumers have a physical presence for many items (fresh meat, fruit, vegetables), as well as the experience which they offer as consumers stroll each aisle. To date, there has yet to be an online presence that truly competes the same way as the in-store experience has. For this reason, it is clear that supermarkets can thrive, without being digitally connected (and thus their lack of a pressing issue when examining digital retailing).

Ken Morris

Digital is the future of retail and any retailer that doesn’t focus their marketing efforts on digital will suffer. Consumers now spend more time on the Internet with their mobile devices than traditional computers and most Millennials don’t read physical newspapers. Supermarkets and all retailers need to catch up with tech-savvy consumers and market to my children — not my parents. I can’t believe we are still talking about FSIs! My children, who are both late 30s and your prime demographic, have NEVER BOUGHT A NEWSPAPER!

Supermarkets need to quickly shift their marketing spend away from FSIs to digital media such as mobile apps, online and social media. This is not “untouchable” for supermarkets, as some companies like Stop & Shop are already doing it and other retail segments are already far down the digital path. It is time for supermarkets to catch up. Remember, my mother is on a fixed income!

Jon Polin

Not only do I agree with Ross Ely, Sterling Hawkins and others that the digital marketing ship has sailed and stores not onboard risk drowning (or being out of touch with reality) but, even more so, these stores need to be embracing full digitally integrated engagement and shopping. Traditional grocery has inherent advantages that should translate well online, including an established brand (at least within their respective regions) and stocked warehouses in the form of local store shelves. These advantages should be huge assets over pure-play online grocery players (or online meal delivery businesses) but only if stores take the online plunge and leverage their assets. Too many grocery businesses are watching passively as pure-play online businesses are nipping away at the grocers’ advantages and putting the grocers in the position of playing follower instead of leader.

"Grocers need to balance digital programs with the traditional tried-and-true marketing programs which are proven to deliver revenue."
"Consumer experience matters in grocery, and digital media is an agent of benefit."
"I can’t believe we are still talking about FSIs! My children, who are both late 30s and your prime demographic, have NEVER BOUGHT A NEWSPAPER!"

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