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Grocers are no longer just competing against each other. They now face an onslaught of new competitors, as big box retailers, pharmacies, dollar stores and deep-pocketed online players all push to sell grocery. In this environment, grocers are increasingly experimenting with strategies to prevent customers from splitting their grocery trips. Here we discuss strategies that are helping grocers remain competitive in this evolving landscape.
Data and Technology Enable More Profitable Targeted Offers: Driven by a decrease in storage and capture costs, many grocers have collected a wealth of customer and transaction data in recent years, and some are starting to leverage this data to offer customers targeted promotions based on their past purchasing history. By rewarding customers with enticing discounts, grocers increase the likelihood that the customers will purchase those items at their store, rather than at a competitor’s store where they may not receive a discount. For example, if a grocer finds that a particular shopper does not purchase a weekly staple at their store, such as milk, the grocer can target that customer with a milk coupon to dissuade her from visiting a competitor (which may have a cheaper price or different selection). To evaluate and refine these types of targeted promotions, grocers should test different offers with different customers to understand which discounts are most profitable for each customer segment. Fortunately, the proliferation of new technologies, like in-store beacons and enhanced mobile apps, enables grocers to more rapidly test and target promotions by pushing offers to customers in real time (with less upfront costs).
Gourmet Items Aren’t Just for “Specialty Stores”: From Growler Stations at Price Chopper to gourmet delis at Wegmans, grocers are increasingly expanding their assortment to include a wider variety of specialty products to cater to consumers who want not only weekly staples, but also artisan foods and beverages. As grocers continue to add more gourmet offerings, shoppers may not need to make additional trips to the specialty stores that they would have visited otherwise. However, it’s not as easy as “offer it and they will come.” Beyond measuring the isolated ROI of each assortment expansion, it becomes increasingly important to measure the incremental impact of the initiative on other categories to determine which expansions simply cannibalize existing assortments by incentivizing substitution, and should therefore be eliminated. Prepared and other fresh offerings also bring up a number of other questions, including: How should we shift labor in our stores to serve this offering?; and How can we reduce spoilage? Staggered rollouts of these new offerings create a natural test vs. control opportunity, enabling grocers to accurately answer all of these questions and refine their investments before spending broadly across the network.