Will Dunnhumby’s analytics do for Whole Foods what it did for Kroger?

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Photo: RetailWIre
Feb 17, 2017
Matthew Stern

The last few years have seen Kroger strengthen its position as the top supermarket chain in the U.S. while Whole Foods has taken its hits. As it struggles to regain ground, Whole Foods is forming a relationship with the analytics company generally associated with making Kroger such a success.

Whole Foods has brought on analytics provider Dunnhumby in an effort to better assess and meet shopper needs, the Cincinnati Business Courier reported. This comes in the wake of Kroger’s success with, and partial acquisition of, Dunnhumby. In 2015, Kroger acquired a chunk of the U.S. wing of the analytics company and spun it off under the moniker, 84.51, leaving the rest of the enterprise to continue doing business with other companies.

Around the time Kroger acquired the company, people were calling Dunnhumby’s analytics the “secret sauce” behind the grocer’s success. That is a secret sauce that Whole Foods could use, given its six consecutive quarters of same-store sales declines, as reported by Fortune.

In the past year, Whole Foods has taken numerous steps to try to get things back on track. To streamline processes, management has shifted buying authority from local buyers to headquarters-based category managers. The chain brought on marketing firm MediaCom to handle its national media strategy. It announced the rollout of a nationwide loyalty program. And it has begun to source prepared foods from external vendors making products based on Whole Foods’ recipes, rather than preparing fresh offerings at store-owned kitchens.

While the impact of these moves remains to be seen, some believe the Dunnhumby relationship could effectively inform a few of the new strategies, as reported in Supermarket News. The article suggests that both the loyalty program and the new category management initiative could take successful cues from Dunnhumby’s data insights.

Whole Foods has also made significant management changes. Towards the end of 2016, the company parted ways with Co-CEO Walter Robb, a 25-year veteran who had been in the role for six years, during which time he was instrumental in the chain’s expansion.

DISCUSSION QUESTIONS: How much have customer analytics been responsible for Kroger’s success in recent years? How likely is it that analytic insights will fix what ails Whole Foods?

Braintrust
"Dunnhumby will help some, but I just don't see it as quite the same as Kroger's problem."
"Dunnhumby’s analytics are likely to be a good start, but I’m not sure how that will help Whole Foods capture new buyers or fix prices. "
"There’s no doubt that the effective use of shopper analytics has been a major contributor to Kroger’s success."

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11 Comments on "Will Dunnhumby’s analytics do for Whole Foods what it did for Kroger?"

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Paula Rosenblum
BrainTrust

I think Whole Foods is battling on multiple fronts. As I said the other day, I think the technology refresh currently underway is a very big deal … especially price optimization. Dunnhumby will help some, but I just don’t see it as quite the same as Kroger’s problem.

Mark Ryski
BrainTrust

The benefits of analytics are irrefutable, but results only improve if the insights extracted from the analytics are acted upon. Based on the much-reported work Dunnhumby has done with Kroger, I suspect that Whole Foods will indeed gain important insights from working with Dunnhumby. However, whether or not this translates into better results will be determined by how Whole Foods’ management consumes and applies the insights. Overall, I say it’s a smart move.

Dr. Stephen Needel
BrainTrust

Dunnhumby’s analytics are likely to be a good start, but I’m not sure how that will help Whole Foods capture new buyers or fix prices. Relying on pricing models from back data always has some risk to it, although they tend to point you in the right direction.

Ross Ely
BrainTrust

There’s no doubt that the effective use of shopper analytics has been a major contributor to Kroger’s success. Its executives consistently tout the company’s “Customer First” program as having significant impact on its shopper retention and growth.

Whole Foods should be able to leverage this capability successfully as well. The insights from Dunnhumby will help Whole Foods identify its top shoppers, understand their purchase patterns and cater their assortment and services to better meet the shoppers’ needs. Whole Foods can also use the data insights to create targeted and personalized offers to shoppers to grow their purchases (similar to the Kroger model).

Sterling Hawkins
BrainTrust

Kroger has had one key element that Whole Foods does not: customer identified transaction data. They use that information to fuel pricing, assortment, promotional and other decisions so they’re not flying blind with just movement data. Whole Foods rolling out a loyalty program will finally get them back into the game and make the relationship with Dunnhumby that much more meaningful. Without the ability to gather, understand and use that customer data throughout the organization they won’t be playing with a full deck. Done right, this can be a huge part of their comeback.

Camille P. Schuster, PhD.
BrainTrust

Dunnhumby’s analytics are extremely important for Kroger’s success. What is even more important is the way the information is used — to facilitate assortment, replenishment and promotion as well as to provide consumer personalization. Getting the data from Dunnhumby is important. Having commitment from the top to implement change, to be consumer-centric and to personalize consumer messages using the data is what leads to success.

Brian Kelly
Guest
7 months 2 days ago

Kroger operates 2,400 stores in 31 states and Generates $26 billion in sales revenue. Whole Foods operates 446 stores in 42 states and generates $15 billion in sales revenue. Therefore Kroger is much a more complex business with five times more stores and about twice the sales of Whole Foods, with a much more SKU-intense assortment and many more transactions with more shoppers.

Dunnhumby was critical to Kroger’s emergence as the dominant grocery brand in the U.S. Whole Foods will benefit from having a more micro view of its business and therefore customer, as have other retailers that engaged Dunnhumby. Of course, the risk is paralysis from analysis. The question of how to leverage the micro insights on 446 stores is much different than 2,400.

Simultaneously and more importantly, Whole Foods needs to clarify its point of view within the grocery sector as virtually all grocery sellers have encroached upon Whole Foods’ original positioning. From Target/Walmart to Aldi/Trader Joe’s to convenience stores, all are re-assorting to become more relevant to Millennials in particular and “foodies” in general.

Mohamed Amer
BrainTrust

Historically Whole Foods has differentiated on having the right products in their stores, they didn’t worry about knowing the customer in the ways that Dunnhumby and other analytics vendors can help them achieve. So this is a big deal and a big change for the company as they take on multiple major initiatives simultaneously.

The situation with Whole Foods is very different from what Kroger had faced when they embarked on their analytics journey with Dunnhumby. Could the company benefit from this move? Of course it can; the challenge resides in how much Whole Foods can digest as it executes on multiple fronts to reverse declining same-store sales and rolling out more 365 stores.

Mark Price
BrainTrust

Customer analytics has been the secret sauce in Kroger’s success over the past 10 years. The ability to personalize offers at the SKU level based on advanced analytics has driven customer engagement, repeat and lifetime value. It is unclear if the Whole Foods customer is as offer-driven as the Kroger customer. Whole Foods tends to sell on “value and values” rather than on price. For the Kroger approach to work, Whole Foods must accept that offers will be a core part of their strategy going forward. That seems to me to be the big question.

Personalization with more content and fewer offers may have impact, but the impact is likely to be slower than an offer-based approach.

Tom Redd
Guest

Ditto with Paula … except on the technology refresh. That can help, but tech cannot always repair a brand in the slide, which is what WF is — a brand that overdid its once unique play. That play is now a norm but their elements — the negative ones — are still stuck on them; high prices, shallow assortments, select shoppers. Kroger took the positive from their brand and left the rest.

Time will tell, but Kroger is also ahead on food and drink spot in their stores — another new push that Whole Foods is trying.

Ricardo Belmar
BrainTrust

No doubt Dunnhumby’s analytics will help Whole Foods better understand their existing customers, their product assortment, and the relationship between the two. There are sure to be many optimizations to be derived from this that will help their business. What it won’t do necessarily is help them attract new customers or attract the customers that left them some time ago for other brands. As we’ve talked about on this site before, Whole Foods needs to find its identity and decide what that means to their customers. They might as well have been the originators of the “eat healthy, live well” mantra, but they seem to have lost their way in recent years.

wpDiscuz
Braintrust
"Dunnhumby will help some, but I just don't see it as quite the same as Kroger's problem."
"Dunnhumby’s analytics are likely to be a good start, but I’m not sure how that will help Whole Foods capture new buyers or fix prices. "
"There’s no doubt that the effective use of shopper analytics has been a major contributor to Kroger’s success."

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