Retail is at a tipping point
This was a main theme at GroceryShop’s inaugural event last month in Las Vegas. The event was attended by over 2,200 retail and CPG executives and was billed as the industry’s leading event for innovation.
Opinions about the tipping point were punctuated by Nielsen’s prediction: in 5-7 years, as many as 70% of U.S. consumers will regularly purchase consumer packaged goods online (“Digitally Engaged Food Shopper”). By 2022, they speculated consumers could spend $100 billion per year for online groceries (equal to $850/year/household).
For shoppers, digitization lowers barriers, making it easy to source product, compare buying options, find offers, transact, and take possession. For retailers, this means further downward pressure on price as competition evolves across more market segments than ever before: store, product, time, customer, channel, pickup and delivery options, cross-sell alliances, marketplaces and shopping apps.
Direct to consumer
Another big topic at the show was brands going Direct To Consumer (DTC) via Instacart, Amazon, and other platforms. For shoppers, it’s only getting easier as computers and AI get better at sourcing, comparing, and finding buying options that best meet a shopper’s current need. In this digital future, relevant offers will find a shopper based on her context (location, preferences, urgency, etc.). Margins will follow a retailer’s ability to make its assortment, offers, and delivery hyper-relevant to a shopper’s context.
Innovative retailers are leveraging AI to defend margins by segmenting markets better and by personalizing services and offers. In her talk, Google’s Laura Antonolli demonstrated Google’s AI-driven conversational assistant, in a machine-to-human interaction. Traditionally, a sales assistant’s role is to connect, understand, personalize and serve. In Laura’s demonstration, Google’s AI assistant searched for a hair salon, called to coordinate calendars for an appointment, and selected a haircut from an array of services.
We are witnessing the rise of a new paradigm in retail – agent-based shopping. Laura said shopping agents and voice-activated search are a new battleground, stating that 22% of Google’s mobile search is voice. Forrester Research Analyst George Lawrie reported that “digital is no longer just a marketing channel, it’s now a sales channel.”
In one retail use-case, George shared that Alexa users spent, on average, £8 (eight British pounds) more per basket than at Morrisons. As of today, use cases for digital agents and household consumables are limited. That said, the promise ahead is for agents to create hyper-relevant offers and close sales based on an individual shopper’s context, values, and preferences.
In large part, limitations come from the need to understand how shoppers compare substitutable product offerings and how those comparisons change under different pricing and offer scenarios. This applies to both within and beyond a retailer’s four walls. As an industry, we’re really good at supply-side product attribute data (i.e. weight, size & ordering info.). But we have yet to understand product attributes on the demand-side. Whether online or in-store, the old adage “price drives sales like no other factor” still holds true. From that perspective alone, comparability of pricing and offers within a category and across the marketplace are significant dimensions of demand-side attributes.
Comparability lies at the heart of understanding shopper values and preferences. As such, this represents a central value driver in any automated shopper feedback system. Without comparability information, offer personalization is largely blind to a shopper’s context, i.e., blind offers are not relevant.
Data takes a new turn
This brings me to a second take-away from the event. We are witnessing a fast acceleration in the variety of demand-side data elements offered by vendors in the space. At GroceryShop, these companies included: Engage3 (my company), Nielsen, Gladson, 1010data, EnterWorks, Label Insights and many more. Each of these companies offer unique data elements relating to different and new demand-side attributes.
As an example, Engage3 provides store-specific comparable pricing data. Nielsen provides measurement data aligned with many causal data elements. Label Insights provides detailed on-package attribute, ingredient and claim data. Data sharing and data feed integration between data vendors is also accelerating. These sharing and integration relationships open new paths to support the full promise of agent-based retailing.
Given the importance of product comparability, expect comparability to emerge as a primary focal point for integration. At Engage3, these sharing and integration relationships are beginning to yield new benefits, including:
- More trustable competitive pricing and product comparability data
- More precise methods for measuring price image
- A broader and more frequent census of the competitive market
- Deeper insights into strategic and tactical pricing dynamics
- Improved automation and control over strategic pricing
All of this helps retailers automate and increase ROI from their pricing, offer generation, segmentation and personalization efforts.
In his talk, Earth Fare’s CEO, Frank Scorpiniti, spoke about AI as an “invisible advantage” that “removes repetition.” He reported that price promo and promo cadence all together yielded ROI of 300 basis points (3% of sales).” Adding “automation requires data quality” and that Engage3’s data has “near 100% accuracy.”
Getting data trustable is one step. Preparing integrated data for automation & advanced analytics is a step beyond. Supporting a client often means integrating a variety of data feeds from across a client organization with that of multiple data vendors. And building those feeds into a model is crucial so decisions can be automated in a controlled way.
Adding to the momentum, research dollars are beginning to flow as universities define research priorities in this space. One university we spoke with plans to create a center for excellence in food through the integration of personalized health, nutrition, and sustainability. Their effort would align both industry executives and academics from the business, engineering, supply chain, medicine & nutrition schools.
Agent-based shopping is set to emerge as a new battleground. Retailers that are positioned to make use of these new data feeds will climb the evolutionary path faster. Expect the industry to evolve rapidly in support of agent-based shopping. It’s an amazing time to be in retail!
For more information on competitive pricing, go to our blog “What to look for in a competitive pricing platform.”