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Digital Grocery Retail already has #1 share

Let me start by outlining a few core personal beliefs that this assertion is based on:

  • Convergence: There is no online and offline anymore…there’s a proliferation of digitally connected consumers shopping across a wide range of channels, and this is impacting grocery too.
  • There are no such things as technology companies anymore, there are just companies that use technology. I’m hardly the first person to say this, but I’m bringing it back up since this isn’t yet common ground.
  • For retail, digital selling channels often overlap and include, but aren’t limited to:
  1. Traditional eCommerce on desktop and mobile, where goods are shipped to your home via common carrier, e.g., Amazon.com and the Amazon app (yes Amazon is a retailer but it’s also half the traditional “eCommerce” market and growing faster than almost anything else, so it’s not unreasonable to put it in a class by itself), as well as native eCommerce Amazon grocery competitors (Boxed.com, Thrive Market), and digital extensions of brick and mortar retail (Walmart.com)
  2. Variations of subscription grocery delivery business models, e.g., eCommerce retail (Amazon Subscribe and Save), CPG DTC (Soylent), and Meal kits (Blue Apron)
  3. Various attempts by traditional food CPG to sell DTC for their mainstream goods (Shop General Mills, Bud Light Button). These have mostly failed, although it has worked well in other non-food categories like Warby Parker, Harry’s, Honest, etc. so I wouldn’t rule it out unconditionally.
  4. Variations of brick and mortar handover options, e.g., Click and collect/ curbside pickup (Curbside), Personal shopping services (Instacart, Google Shopping Express), Ride Sharing (Uber Rush)
  5. Mobile loyalty apps with digital offers that shoppers use while shopping in the store (just about every traditional retailer at this point). Did this one catch you by surprise? Bear with me… the reality is that’s every bit an eCommerce channel. It’s time we start treating it that way. More on this later….

Other core beliefs:

  • Food retailers may have been slower to embrace the capabilities allowed by digital, but it doesn’t mean it won’t quickly catch up: reasons to believe include Walmart’s aggressive push to win in grocery to differentiate from Amazon, the smaller behavioral hurdle of adding fresh products to a shopper’s pre-existing (mostly non-fresh) digital shopping trip, and the rapid early growth of digital-first food retailers like Boxed.com and Thrive Market, coupled with a recent series of high value acquisitions of other digital retailers (Jet.com, Chewy.com), which is raising the attention paid to the space
  • Most retailers are already digital, and they just haven’t realized it in their actions
  • These changes are affording an economic opportunity that is “unparalleled in the history of economics”

First, some history…. This was before my time, but I’ve been told that Walmart’s entry into grocery was met with industry skepticism. The common lore of the industry is that some retailers like HEB grew up fighting Walmart in grocery from the very early days, but the industry as a whole ignored them for too long. In a presentation a few years ago Professor Stanton at St. Joseph’s University claimed that the food industry really only recognized Walmart as a credible grocery competitor once it had #1 share of grocery.

I think we are repeating the same thing when it comes to digital. Sure, it has taken off really slowly in food, but there’s tons of precedent for other categories to fall to digital commerce, and the proof points are all around us… at this point, the MAJORITY of brick and mortar grocery shopping trips touch a digital asset at some point in the path to purchase. An “offline” sale is really only something that happens if you go shopping during a cell tower blackout. Some percentage of us even order things online using our phones while we’re standing in a physical store of a competitor. I do that.

So what does that mean for traditional grocery? I think brick and mortar retailers are actually digitally connected retailers, most just haven’t noticed it yet, and the ones that adapt the fastest are going to clean the clocks of the rest. How are digital companies different? If you look at native eCommerce companies you’ll see that they run their businesses fundamentally differently.

Let’s take three examples outside of grocery: Rent the Runway, StitchFix, and Netflix. They all have hard-core data science arms and a massive team (for their size) assigned to experimentation, personalization, and tracking. Just look at the public information that they put out: http://dresscode.renttherunway.com/, http://multithreaded.stitchfix.com/, https://medium.com/netflix-techblog … imagine what’s private?

Is food retail different? If anything, food retail has better data… more repeat purchase cycle events, a larger number of transactions per user, more data and more loyalty. It’s only a matter of time before the winners realize it and start separating themselves from the pack.

The future of food retail must be personalization. It requires experimentation, and rapid changes to adapt to changing contexts. Most of the industry processes are painfully analog…. 12 week load times for a digital promotion, manual QA on digital content that restricts the number of personalized offers to just a few, expensive consulting to set up small run project-based custom personalized marketing flights, etc.

In a world of dynamic pricing a brick and mortar retailer can’t change its in-store price tags multiple times a day (except with deployment of internet-connected digital signage), but if its apps were good enough, it could change its load to card offers right away for those shoppers who are cross shopping.

Digital retailers may use machine learning to power their assortment and how items come up in search, but there’s nothing stopping a brick and mortar retailer from doing the same thing to their circular, or their personalized deals.

An example from this month’s Atlantic probably put it best:

Simply put: Our ability to know the price of anything, anytime, anywhere, has given us, the consumers, so much power that retailers… are now staring back through the screen. They are comparison shopping us.

They have ample means to do so: the immense data trail you leave behind whenever you place something in your online shopping cart or swipe your rewards card at a store register, top economists and data scientists capable of turning this information into useful price strategies, and what one tech economist calls “the ability to experiment on a scale that’s unparalleled in the history of economics.”  

The author got is mostly right… the potential is there… but most retailers aren’t taking full advantage yet.

Digital is here, and it already has #1 market share. Is your company on the winning side?