The rise of the customization nation
One of the more interesting sessions at this year’s Food Marketing Institute Midwinter Conference in Miami this week was "Built for Yesterday, Facing Tomorrow: Food Retail’s Engagement of the New Consumer." Presented by Anthony Flynn, CEO of YouBar and author of Custom Nation, the premise was that grocery retailing is an industry grounded in the delivery of mass produced goods through bricks and mortar locations. It has a very long history of customer service and of striving to provide the best value for shoppers.
The shopping environment has changed dramatically, however. Technology now enables consumers to create their own customized supply chains and requires personalized products designed to meet particular health goals, dietary desires and cultural values. As revealing, Flynn suggested that the things once thought paramount to cultivating customer loyalty, like discounts and promotions, may not be that important after all.
Flynn, whose company sells customized energy, protein and nutrition bars, cited two components critical to this new type of retail:
- Configurator: a website that helps the customization process
- Batching: the grouping of orders by ingredients
He added that success is based on reducing choices and curating the experience, which moves the retailer from the role of simply satisfying a need to a trusted advisor position that enables them to proactively sell.
Supermarket operators are buying into the concept of customization, taking risks and challenging the old ways of doing business. The reward is a distinct uptick in relevance to the shopper.
"As retailers, we have the intimate relation with the shopper," said Bill Nasshan, executive vice president & chief merchandising officer at Bi-Lo Holdings, LLC. "But to become even better, we need to move from just asking the shopper, ‘Did you find everything you needed’ to ‘You should try this product.’"
Discussion Questions
What impact will the rise of customization have on traditional and ecommerce retailing? Do you see greater opportunities for customization in food or other retail channels?
Minimal impact on traditional retailing, except that this should encourage retailers to constantly re-evaluate their assortments. E-commerce, on the other hand, is ripe with customization opportunities.
Customization can be a really important driver of business, but not everyone is capable of offering it. Depending on where/how a brand’s products are produced, spoilage, time-to-market, materials, etc., it may or may not be a consideration for food or other vertical producers. That said, packaging, order quantity, replenishment options and combining of products are alternatives that almost any brand or retailer can leverage to offer a degree of user-driven customization.
On the small scale customization has space to grow. On the larger scale—price is first, then service, then marketing gigs like custom. A majority of the shoppers do not have the time, patience or spend to support custom.
Innovate and change this as we go forward. Food is a first area and fashion is next. Food in-store, fashion online and in-store.
I think this is one of the biggest growth opportunities retailers and CPG brands have globally. Some brands already have made great progress in this area of customization. For specialty apparel, I have seen dressing room kiosks and “smart mirrors” to create customized fashions and/or request assistance from in-store staff. Similar services are also growing with online apparel merchants. In the food business, custom recipe services are becoming more prevalent, especially online, but also in-store. Live in-store cooking classes are a big draw.
There could be customization if food retailers looked at my purchases and provided relevant offers on my receipt based on the ingredient-trends in my shopping basket, like what Catalina does except focused on consumer needs and not the retailer’s need to extract funds from center-aisle tenants.
I guess someone could visually scan my basket and upon seeing a few items take a guess at what might be a good suggestion, but I think this needs to be computerized.
This would require more data at the item level (ingredients) but for sure, if that system existed, it would see a drastic change in what I am buying (New Year’s resolution) and it would be nice to get offers that reinforce my new behavior.
It could work in other channels—it will mean a greater amount of data and that would require something like a semantic web for retail.
There are a lot of advocates that believe customization is the next wave in growing e-commerce, and I definitely see this happening in certain categories. Supermarkets, even my size, carry a minimum of 9,000 SKUs, and can go up to 70,000 SKUs in superstores, which makes the platforms for online shopping overwhelming to manage. There are already custom food sites online that deal in niche items doing quite well, and IMO, this is where customization will have the biggest benefits for consumers.
Anyone in business today must make sure they are reaching consumers in multiple ways, and the most successful retailers are offering different options to purchase products that fit their needs, which could include traditional, organic, gluten free, and diabetic-friendly on many similar foods. The high-end, all natural farms have some very effective websites, selling locally produced organic foods, that sell very well to consumers around the country.
So yes, customization is here, and will continue to grow is scope, to make sure all consumers have choices that fit their taste in food, clothes, beauty supplies, and home furnishings.
Customization can mean differentiation. A retailer of any kind has the advantage when it can customize the customer’s experience. A retailer can customize by region, by city, by neighborhood and even by the individual customer.
I’m not a huge fan of making a distinction between the channels, at least not at first. Net net, if it leads to a better experience, the relationship will be strengthened and the rewards will be sales and loyalty. How this splits between online and in-store is something yet to be discovered. At some point the experiences need to be linked from planning through execution and evaluation.
Very little on traditional food retailing. More on ecommerce.
Ecommerce will gain an advantage over in-store by adding customization and curation. The gap between ordering and pick up allows time for the customization to occur which is largely impractical in the store. Curation smooths reorder and can suggest “best path” navigation of the store prior to arrival but otherwise has limited value for in-store shopping. Special diets—gluten free; low salt; low cholesterol; low calorie, etc.—are good areas for customization.
In-store, consumers want: Predictability – products/brands needed, location expected, price similar or better than last purchase; Variety – new options in taste, convenience, quality, etc.; Convenience – location, speed of check-out, wide range of items, ease of shopping, payment options, etc. Advice and customization are the least of the shopper’s in-store priorities today—and for a long time to come. Integrating the customization/personalization, aside from catering orders and deli items, requires an omnichannel approach and consumers are slow to adopt the use of online with offline food shopping.
Becoming an adviser is a big stretch for a food store. Aside from the in-store pharmacy and produce person, few grocery staff provide product advice today and most have zero training in this area. To become a source of advice will require training staff. A tall order. Many store staff don’t even know the product selection in the store very well let alone differences between products. Electronic signage could be a practical option for providing shopper’s advice however, the advice would need to be unique given all the online sources of information available. For example, the advice could be tied to the store (where to find all the ingredients to make X dish or announcements of in-store event promotions), immediacy (dinner tonight) and local culture (local products, events, etc).
I see customization being more effective with loyal customers and influencers. These are the customers who will spread word of mouth about the product as they are able to customize the product/service. I do not believe providing customization to every consumer is efficient.
Like a lot of developments in the food industry, customization has the potential to follow an evolutionary process. The process of curating at the individual customer level is already part of a buying process in which most consumers have already participated in on Amazon, “customers like you that bought that product also bought these other products … “
Given the time-starved nature of a lot of families these days coupled with the increasing interest in new food options like enhanced healthy products or ethnic flavors it would behoove any retailer to help individual customers to find food solutions that speak to their specific needs. If grocery retailers analyze their customer data and understand the needs of individual customers sufficiently well then it is possible to provide product suggestions via the customer’s channel of preference that are similar to the approach currently employed by Amazon. This process could evolve such that retailers can identify new product offerings that could be developed and offered to individual customers on a trial and repeat basis.
The economics of fully-customized product development on a broad scale in the food sector could prove challenging but in other areas of retailing where purchase frequency is lower and purchase consideration higher, customization could become an offering that is highly valued by shoppers