From brand loyalty erosion and privacy vs. personalization, to how Aldi’s efficiencies are keeping Walmart and Amazon on their toes, Ken Ouimet and Jon Springer discuss some of the hottest topics at this year’s GroceryShop conference in Las Vegas.
The following is a transcript of the audio podcast:
Ken: Well Jon, thanks for joining us today. You’re the editor at Winsight Grocery, how did you get into grocery?
Jon: When I came to New York about 27 years ago, I took the first job that paid me to write. I was a former daily newspaper reporter in Maryland, and when I came up here I got a job covering commercial real estate and retail for the International Council of Shopping Centers, which is a trade organization representing shopping center owners and malls and that kind of thing. I got really interested in the tenants more than the landlords, I guess, and so that became an area that I was writing a lot about. When I saw a position open up at Supermarket News, I went over there. I was there for 14-15 years, and then went over to Winsight less than two years ago.
Ken: What would you say is the biggest threat to most retailers today?
Jon: Wow, there’s a lot of threats to retail. I mean understanding this business, understanding the two things that are really going on is that the digitization of society and the industry and where that’s going, where people want to shop–in different ways–the struggle for retailers to understand that and at the same time, market to the shopper who’s also been influenced by the digital revolution, right?. They interact with brands differently than they used to, they expect more from stores than they used to expect, they’re taking personal control of what they’re eating and thinking a little more about how they’re shopping. And I think those things came along with social media revolution and all this thing. What you’ve got now is this cauldron of activity where you’ve got a consumer changing, and you’ve got retail that needs to adjust. So the threat, I don’t know if it’s a threat but it’s a struggle, for the retailers to figure out how to make it work with all this going on.
Ken: Oh yeah, there’s a lot of change.
Jon: Yes there is.
Ken: How would you describe the retailer-manufacturer relationship? And how is it changing?
Jon: Well, I think that retailers and brands are still getting along as a necessity, but obviously retailers moving to private brands has been a big deal. Retailers are making a lot of their progress behind their own brands and they’re becoming vertically-integrated, sort of like the old A&Ps of 50, 60 years ago when they sold their own stuff. This idea that the brands grew up with the suburban supermarket as a format — television and all that stuff back in the 40s and 50s–well, it’s come to change. Television’s not the same thing it used to be, and so relationships have necessarily needed to evolve a little bit, so I guess that’s how I see it.
Ken: What retailer–you know, you’re always watching the game–which retailers do you admire the most?
Jon: Walmart’s transformation in the last 4 to 5 years has been remarkable to see. They went from a company that was big and strong but had dusty stores and indifferent employees, and maybe looked a little vulnerable to big e-commerce players like Amazon. They made, it seems like, a lot of the right investments and a lot of good decisions about how to use this revolution that’s going on now to really set a new trajectory for that company, so that’s been fun to watch.
Ken: Do you think retailers in the U.S. are prepared for Aldi?
Jon: I think they’re already feeling some of it.
Ken: Well on the West Coast I find smaller retailers don’t even know who they are.
Jon: That’s true, right? They haven’t heard much from them, but we see in markets where Aldi’s been around for a long time and where they’re running their game they’re having quite an effect. They’re keeping Walmart on their toes, they’re keeping Kroger on their toes, and I think they’re coming to consumers with a much better proposition than they once might’ve done where they’ve tweaked the assortment and they’ve kept the quality up, and they’re not concerned with brands. It’s also fun to watch how they’re able to get by on a completely different labor model than the regular stores that they’re competing against. The efficiency is something that I think the big grocers like to learn from and, to a degree, try to emulate to the extent they can.
Ken: Do you have a prediction on who’s going to do better in the states, Lidl or Aldi?
Jon: Well, I think Aldi’s got a 40 year head start. I mean it’s funny, I have seen a lot of the Lidl stores and the Aldi stores, some right across the street from one another, and they–for grocers that very similar in a lot of ways– they really give off different vibes at this point. [One] is sedate and quiet and [the other] is a little noisier and brighter and louder. And so we’ll see, Lidl had some issues with real estate at first, they’ve gone to a smaller box in a lot of locations, and they are looking now toward what appear to be denser populations–maybe wealthier populations than when they first came in. But I think between the two of them, maybe they’re not against one another so much as they’re against everybody, because they need everybody else in order to make their value proposition work, right? You can’t really can’t be a discounter if there’s not a conventional store to contrast against.
Ken: Yeah I think coming from Europe into the United States, one of the hard, challenging things would be all the price zones we have here in the U.S.. You don’t have that in Europe.
Jon: It’s like relentless efficiency, relentless simplicity, and there’s something to be said for that. I think consumers like simple things now too.
Ken: As the shopping experience integrates the digital with the in-store experience and consumers can start to search for products on their phone, do you expect that the brand loyalty will start to erode and move more towards attributes that the consumer might search for?
Jon: I think that’s happening already, I think in some cases. Again it’s a struggle for retailers to be able to do that in their stores, but definitely integrating what a consumer can do on their phone and what a store can do for them at the same time is a challenge and as it relates to consumers, yeah. I was just listening to John Furner of Sam’s Club talk about, what did he say–consumers are loyal to experiences now, consumers are loyal to attributes and the things that they believe in, and those are the things that matter sometimes. Not brands necessarily on top anymore, it’s really a consumer being loyal to what they believe or what they believe their brands believe.
Ken: What do you think consumers value more, their privacy or a personalized experience?
Jon: Until now, in the U.S., we are giving away quite a bit in exchange for the benefits that they get from it. I guess until now, maybe in the U.S. consumers have been a little more free with their data than in Europe where there’s more strict restrictions on that. But I think there’s some movement in California about getting a little bit more disclosure about the kinds of personal data sharing and that kind of stuff that you get from consumers, so I can see it going that way as well.
Ken: Yeah, I had an interesting experience. I was in Germany and I was meeting with the CIO of Metro, and he gave me a tour of their innovation lab and they’re putting RFID tags on the pallets, and I asked him about putting it on their product. He says, “You don’t understand the history we have in this country, they’ll never accept it.” So after that I went to their store of the future where they had, on the razor blades, the RFID tags on the product, and they had a scanner. After you go through the checkout, you can scan it so it neutralized the thing so it wouldn’t read, and I asked him while he was giving me a tour, I said, “How many consumers use that?” and he goes, “Nobody.”
Jon: Well, you know what, if people have to take some control over their privacy, it is probably inconvenient for them to do so.
Ken: Jon, thanks a lot for joining us today. We really appreciate you taking the time talking with us.
Jon: My pleasure, it was a lot of fun.
Ken: Thank you.
For more information on GroceryShop as well as insights on trends and technology from last year’s conference, you can watch Ken’s meeting with Frank Scorpiniti, CEO of health- and wellness-grocer Earth Fare here. You can also read more about the interactions between Aldi and other retailers on the Aldi Effect blog found here.
Jon Springer is the Executive Editor of Winsight Grocery Business–you can visit their website here.