Can grocers give us an experience to savor?
With margins squeezed, rising customer expectations and the threat of new entrants, global grocery retailers have to change the way they differentiate. PCMS Head of Business Architecture Martin Ward describes how single platform commerce can help grocers win in customer experience, sales, and on cost.
What are the challenges affecting grocers today?
“There are almost too many to count. Competition is fierce and prices are reduced to the bare minimum because each operator wants to stay competitive. The rising costs of gas and wages have been coupled with demands for higher quality food and better sustainability – adding even more pressure to margins. Even at the higher quality end, differentiation is difficult as customers are willing to buy less but more often from different operators.
Many top-tier global grocers are publicly owned, so they have constant pressure to deliver on profitability each quarter. In some instances, this cost pressure has resulted in staff reductions, meaning grocery businesses have fewer employees at a time when customers’ service expectations are only going one way – up. And at the same time, shopping habits have gone through incredible change. Consumers are more likely to use technology to shop more frequently or make purchases based on new criteria such as vegan ranges, traceability and convenience. This constant change on so many levels creates many challenges.”
How have grocers tried to stay competitive?
“The old growth model was to buy land and expand geographically, but this has become more difficult. Hard discount retailers have caused legacy operators to slash prices, leading to long, unproductive sales wars. In response, grocers have added more reasons to shop more and spend more, via cafes, pharmacies, gas stations and cell phone top-up stations deployed on site.
More recently, as Amazon continues to build its investment in grocery, we’ve seen other reactions, for example the growth in home deliveries and digital tools such as Click and Collect. In the UK, we’ve seen attempts to merge and the introduction of discount spin offs and smaller convenience-shop size stores. In North America, grocers have signed strategic partnerships and experimented with restaurant concepts and ‘lab stores’ on premises. But overall, for most operators worldwide, differentiation has been difficult, and that means they’ve reverted to the tried and tested method of remaining competitive – the race to the bottom on price.”
How have they tried to use technology to differentiate?
“Generally speaking, operators are trying to use technology to add efficiency to their own operations rather than to differentiate the customer experience. Often this is a piecemeal process compared to an overarching strategy. They might add some self-checkouts to compensate for fewer staff, but this is rarely joined up to a coherent price and promotions strategy. To be fair, most grocers are hampered by their existing technology. They’re using legacy commerce systems of up to two decades old. As they’ve added services bit by bit, they’ve created an unstable, spaghetti like interchange of third-party applications and bespoke capabilities. The result is that each time they try to update one piece of software, there’s an unforeseen knock on effect somewhere else, meaning they have huge developer costs for the simplest of upgrades. Scalability is also an issue – a handful of stores is generally OK for experimenting with a new capability like self-scan, but when they try to scale on legacy systems, something breaks. But it doesn’t have to be that way.”
How can grocers innovate on experience?
“Experience – high quality, personalized experience – is the true differentiator.
Not every shopper buys on price. What about the shopper who wants minimal interaction with staff? Or one who wants to buy lunch and pay within a couple of minutes. Or another who wants to use their cell phone to scan, see their basket build and then pay? Or the technologically-aware shopper who might just be tempted by a special offer received on their cell phones in-store? Grocery operators need a flexible commerce platform that lets them add capabilities seamlessly so their customers can shop their own way. Our single platform allows their customers to self-scan, BYOD or use a manned checkout, while always enjoying the best promotional deals.”
How else can grocers benefit from working with PCMS?
“In the past if a retailer wanted to add a new complementary service to their stores – for example a pharmacy – they had to purchase a new set of commerce software. That made rollout expensive and experimentation a logistical nightmare. With our VISION Commerce Suite, retailers can have multiple personalities (think grocery, hospitality, pharmacy, gas etc) operating in multiple languages, and accepting multiple currencies on the same platform. It’s a game-changing technology. Grocers also get near real-time insight into inventory, transaction details at a cashier level and understanding of the success of specific promotions, giving them much more agility, flexibility and scalability. All of this is possible without the rip and replace of systems and hardware you might expect.”
How can loyalty programs be improved?
“Loyalty is a key differentiator, and supermarkets should be building sustainable competitive advantages based on this aspect of customer experience. Most loyalty programs today are points-based. They could be so much more than that, with personalized offers delivered via a loyalty lite application in real-time. With our VISION Commerce Suite platform, retailers can influence and reward behavior– not only on spend but on geographic location, specific purchases, recommendations, visits per week… the options are infinite.
How can service be improved while employee numbers are reduced?
“The importance of line busting cannot be over-emphasized – in many cases people’s time is more precious to them than their money. It’s possible to save time in line through enhanced self-scan and mobile / scan / go capabilities, and the introduction of more self-checkout and convertible lanes. In our experience, self-scan can even increase shopper spend, by allowing customers to buy up to their budget. Digital microservices can also play a part, via wearables for staff, for example wristbands that allow employees to authorize alcohol sales from a distance. Aside from that, allowing customers to build a single basket across all channels is key. And as mentioned above, loyalty also has a huge part to play.”
PCMS works with some of the world’s leading grocers. If you would like to learn more about PCMS’ grocery capabilities, please contact us.