Category: Retailer

28 Jan 2019

26 Million Americans May Have Food Allergies: Retailers React

More adults are developing food allergies, and grocers are struggling to keep up with the needs of this food-sensitive group. In a study published by JAMA Network examining 40,443 individuals, researchers concluded that more than one in ten adults are food-allergic. Of those that were allergic, 45.3 percent were allergic to multiple foods, and nearly half reported developing their allergies as adults.

Health-focused grocery stores have long listed potential allergens on shelf labels, and the FDA requires that the “big eight” allergens be listed on packaging. However, as more adults develop allergies, these warnings may not be sufficient. Allergy-aware consumers are eager for clear labelling and warnings, whether they or a family member are the ones with the allergy. Their concerns are valid and urgent, as the number of people hospitalized from allergic reactions to food increased 350% in the last decade.

Show Trumps Tell

In a 2017 paper published in “Allergy, Asthma & Clinical Immunology,” scientists found that consumers preferred the use of symbols over words for allergen warnings. In the same study, people were asked if they were willing to pay extra for allergen information on all food packages. The results were overwhelming: 75% of respondents said they were willing to pay for this, on top of their monthly grocery bill (NCBI).

Shelf Labels with Gluten-Free warning
Gluten-Free shelf labels at a Texas retailer

“In terms of their willingness to pay, the majority of consistent respondents were willing to pay up to $10 extra per month for groceries for the inclusion of allergen labels on food,” reports the study. In other words, consumers are ready and willing to spend more for ease of shopping and peace of mind.

Beyond this, a significant number of survey-takers were willing to pay in the $10-50 range and even over $50. Consumers are willing to pay for the increased cost of food labelling, and may additionally improve their perception of allergy-conscious retailers.

Shelf Labels

Confusing allergen labelling presents an opportunity for retailers to fill the needs of their shoppers. Color-coded shelf labels and warnings make shopping simple for consumers with allergies and dietary restrictions. For this group of customers (which grows larger every year), clear allergen information contributes to their purchasing decisions.

Guide to in-store dietary labels
Shelf labels for dietary restrictions

Customers buying gluten-free products are even more discerning, as gluten doesn’t fall under the Food Allergen Protection Act in the United States. There is an added layer of difficulty when shopping, as food labelling for gluten is lacking compared to other allergens. The FDA only requires the identification of “ingredients that are — or contain any protein derived from — peanuts, tree nuts, shellfish, milk, eggs, wheat, fish or soybeans” (FDA).”

Retailers like PCC Natural Markets, based in Seattle, have taken the initiative ahead of the FDA by labelling gluten-free products with orange shelf tags. The color-coding system makes it easier for consumers with food sensitivities to navigate their aisles.

Current Methods

Whole Foods search filter
Whole Foods product search feature

Whole Foods recently increased their website functionally to account for allergies and dietary restrictions. Online shoppers can filter through products based on gluten-free, keto-friendly, and other attributes. The Amazon-owned grocer is one of the first major retailers to implement a product search system with dietary restrictions in mind, but other food-focused sites have had similar features for years.

In 2014, Pinterest users could start searching for recipes on the website based on their diet and  to exclude certain ingredients. The update made it easier for allergy-conscious home cooks to find recipes, but shopping for allergen-free products was still a cause for concern. Retailers have been comparatively slow to adopt the technology and filter through ingredient lists on a large scale, but health-forward stores like Whole Foods and Earth Fare are warming up to the idea. The Whole Foods website change will likely lead to future app development that allows consumers to search in-store.

What’s Next

Black and White sesame seeds
Black and white sesame, dangerous for those with the ninth most common food allergy

As allergy concerns continue to rise, consumers will be turning to retailers to help keep track of what is safe to eat and what is not. The increased number of sesame allergies is already affecting the market–the FDA is considering adding sesame, the ninth most common food allergy, to the list of necessary ingredient warnings. In the meantime, retailers have the ability to label these “fringe” allergies on shelves and websites. For the consumer with a sesame allergy, this means having a much safer shopping experience.

Frank Scorpiniti, CEO of Earth Fare, recently talked with Ken Ouimet of Engage3 on food allergies as well as many other topics. In addition to product searching, the two CEOs envision a store with full app integration to help consumers navigate aisles and avoid specific ingredients. To learn more about the future of app integration in retail, you can watch the video here.

26 Jan 2019

Nuro: Kroger’s Self-Driving Delivery Ace

Self-driving vehicles are set to transport more groceries than passengers, if Kroger continues its efforts. With the deployment of automated delivery cars in Scottsdale, Arizona, Kroger is taking steps to make grocery delivery easier than ever. The self-driving R1 vehicles, built by Nuro and working to bring Fry’s Food & Drug products to customers in the trial area, are indicative of a growing trend towards convenient grocery tech.

Fry's Groceries inside a Nuro R1
Fry’s and Nuro partnership

However, most consumers aren’t ready to take the leap of trusting self-driving cars, at least as passengers. In a recent survey by the Brookings Institution, only 21% of the thousands of respondents said they were willing to ride in a self-driving car. Much of the hesitation comes from moral concerns and how the vehicles should react in car crashes, but the technology is still appealing.

Self-Driving Versatility

Cooler-sized Amazon Scout
Amazon Scout robot

By bringing self-driving cars into the grocery space, tech companies can test and demonstrate the vehicles with minimal safety concerns. Consumers also have a chance to interact with this tech on a regular basis and grow to trust the delivery vans. Companies besides Kroger have started to integrate automated vehicles into their supply chain as well, most notably Amazon. The retailer recently deployed delivery via cooler-sized robots in a Seattle neighborhood. According to Amazon, though the carts require human supervision for the first stages of testing, they will eventually be able to deliver items on their own.

Still, the R1 cars in Scottsdale are the most advanced grocery delivery vehicles in use, and it’s easy to see why. Nuro, a company founded by former principal engineers at Google, has gathered an impressive team from tech giants and universities around the world. From the Nuro safety guide, we see a glimpse of the future to come: “Our custom vehicle is engineered to make delivery of everything more accessible — from groceries to pet food, prescription drugs to dry cleaning.” By partnering with a team on the cutting edge of self-driving technology, Kroger has set themselves up to be a leader not only in the grocery industry, but in automation as well.

The Nuro Ecosystem

The electric vans travel at a maximum speed of 25 mph and were originally accompanied by human drivers. The supervising employees traveled behind the Nuro R1s in their own vehicles as a way of monitoring the new technology. Since launch, the company has taken steps toward making the delivery fully autonomous.

What differentiates this kind of delivery from the competition is that the customers in Scottsdale can schedule the Nuro vans for same-day delivery, done through the Kroger app. Once a van arrives at a shopper’s home, they unlock a locker compartment on the vehicle with an in-app code. The speed and ease of delivery sets Kroger up to compete with heavy hitters like Amazon and Instacart, even if the range of the electric vehicles is limited.

The added consumer appeal of having groceries delivered via self-driving car is worth noting, as well. Nuro’s R1 fleet is fully electric, and the company frames their self-driving cars as an environmentally-friendly solution to errands. Their focus is on fewer emissions, safer deliveries, and less traffic congestion. It’s unclear how soon Kroger plans to expand their service with Nuro, but the technology is drawing interest from all over the retail industry.

Opportunities

Though consumers are slow to trust self-driving vehicles, Nuro’s R1 vans and similar delivery services may be able to win them over. The R1 is designed to be self-sacrificing and prioritize human safety on the road. Delivery vehicles are free from the ethical debates that have accompanied self-driving technology in the past.

Kroger has aggressively expanded their services in the past months, starting with their acquisition of U.K.-based Ocado. In November, the retailer announced plans to build an automated warehouse in Cincinnati. In combination with the Nuro’s vehicles, as well as a pilot to pick up Kroger groceries at Walgreens stores, the retailer is building an impressive infrastructure to compete with Amazon.

We recently attended GroceryShop and were able to see future developments in the retail industry. To learn more about retail tech innovations, watch this video of Tim Ouimet discussing the rise of agent-based shopping.

15 Jan 2019
Price Image

Using Price Image to Formulate Pricing Strategy

Price Image is how shoppers perceive a store’s pricing relative to its competitors. It is not the same as Price Index. Many more things go into establishing price image, including promotion programs, elasticities, seasonality, price ending numbers, and the overall design of a retailer store.

Price Index vs. Price Image

Price optimization solutions that are available today are based on rules and price indices that exclude your desired price image. What is needed are psychological models that measure your consumers’ perception of your pricing AND predict the impact of price changes on that image.

At its core, Price Image takes customer excitement into account. Whereas Price Index relies on historical data and plotting points, Price Image is predictive and non-linear – making it much more useful in making strategic pricing decisions. It incorporates psychological elements, making it a consumer-specific metric.

A Nobel Prize-Winning Approach

The calculation of Price Image was inspired at Engage3 by Markowitz’s Efficient Frontier Theory. It’s a theory  that has been successfully used for decades in managing financial portfolios and is now applied to retail pricing.It enables retailers to strategically manage competitive price adjustments so they can balance their profit goals with a desired price image in the market.

Efficient Frontier

What to Look For in a Strategic Pricing Solution

Price Image takes psychological factors and applies them to pricing data. The resulting models can be used to predict future profitability and are not reliant on historical data. Below is a list of what to look for in a strategic pricing solution:

  • Integration with clean, comprehensive, and accurate competitive intelligence data
  • Statistically-driven performance reporting that separates real pricing impact from market level “noise”
  • Streamlined workflow for competitive price recommendations and approvals
  • Alerts for incomplete or outdated competitive data for review
  • A visual price modeling tool to define the impact of strategic pricing alternatives
  • Competitor activity and movement callouts on highly elastic products
  • Makes price recommendations based on your objectives for:
    • Price image
    • Profitability
  • Allows Merchants and Pricing Teams define their strategy and show the financial tradeoffs for different alternatives

The predictive model is especially valuable in forecasting sales, because Price Image allows a retailer to see how its customers are responding to different pricing strategies. Greater visibility translates to higher profit margins and happier customers!

Learn more about how the Efficient Frontier Theory is applied to retail pricing in this video.

10 Jan 2019
Earth Fare

CEO of Earth Fare Talks Shop With Ken Ouimet

At the inaugural GroceryShop event in Las Vegas late last year, Frank Scorpiniti, CEO of health and wellness store Earth Fare, sat down with Ken Ouimet, CEO of Engage3.

Frank talked about hiring a Chief Medical Officer for his stores, bringing more value to his health and wellness shoppers, and how he envisions a future of 1:1 customer-centric marketing using loyalty data in the very near future.

Following is their conversation:

Ken: Welcome, Frank, thanks for being here at the show with us today. What’d you think of the show?

Frank: The show’s been well organized, there’s an immense amount of emerging technology that really excites us for the potential to have it help Earth Fare continue to grow.

Ken: Is there any particular technology you’re most impressed with?

Frank: Well I spent some time on the exhibit floor and I was pretty impressed with what seems to be some off-the-shelf technologies to help us eventually create more attribute conversation with our customers, right on the sales shelf. And our customers are really seeking better health and wellness, so in order to tell a product story is something that we’re really looking forward to leveraging.

Ken: How would you communicate that to customers?

Frank: Well I think we have a lot of work to do to figure that out. That’s been a big challenge for us. As the leading grocer in North America with the cleanest product assortments, one of the biggest challenges we have is getting the message across to our customers about how unique our assortment really is, so I don’t have that solved yet.

Ken: One of the technologies that I was really impressed with was seeing the advances in the speech recognition.

Ken: At one end I saw something by Apple recently where it actually had a bot that could schedule a haircut for somebody, and get through all the navigation of a real conversation. I was curious to get your thoughts, as we get these digital assistants starting to have these capabilities that talk to people in real time, you see an opportunity where we could use technology to get back to the old store where the grocer knew the customer, and have a more intimate relationship with each consumer.

Frank: Why, I suppose that’s an opportunity, I think customers have a lot of questions in our stores. We have fantastic team members that, many of whom are lifestylers, they live the health and wellness lifestyle, but some of the questions are becoming more complicated about health, so the potential to have that kind of on-demand understanding and data could potentially create an experience for a customer that’s above what we can achieve today.

Ken: Yeah, I imagine as people become more aware of the foods they eat and the effects it has on their bodies, they’re getting more particular on what they eat.

Frank: Yes, consumers are starting to become very aware of the U.S. food supply and that over the years it’s had many, many more chemicals go into it. Some may say some of these products aren’t foods, maybe they’re stuffs with calories. We think that more Americans are looking for healthy foods to feed their family and feel good about what they’re doing.

Ken: I’ve seen a naturopath the last ten years and they routinely will take blood samples and test food sensitivity.

Frank: Yeah

Ken: And I was blown away when I asked them how many people were affected by food sensitivities, and he said it was roughly 70% is what they’re estimating, but only less than 5% are aware of it. There’s a lot of people out there that are affected but don’t know that they’re affected, and some of the athletes are starting to realize that they need to cut out the foods they’re sensitive to and their performance goes up. My brother has a doctor that, he has his office on top of a grocery store, and walks his customers through the aisles to show them what to eat. I’m just wondering, have you thought about having maybe even naturopaths. I know you have a medical officer, is that any direction you’re going?

Frank: We have a Chief Medical Officer, Dr. Angela Hind, and she keeps us on the cutting edge of making sure that we take out of our stores. We’re trying to keep away from things that make our customers sick, and she can only be in one place at one time. Some of the exciting stuff that I think is in our future, particularly with what you’re working on at Engage3, Ken, is our ability to take our loyalty data, where our customers share with us some of their needs around health, and be able to customer-centrically create one-to-one offers. And maybe that could take the place of the naturopath, probably not all the way to the extent your brother experiences or having a naturopath above a store, but the opportunity to guide a particular person with food sensitivities into things that are safe for them, say through an app that [ Earth Fare ] eventually could offer our customers, that could be an incredible experience that I don’t see happening today.

Ken: Yeah, I think there’s a real need for that, because you start looking at reading the labels for what fits your diet, that’s a lot of work. I would think as a consumer I would want something that navigates me around the store like the GPS navigates me around the city.

Frank: I think that could be just an incredible advancement in retail for [ Earth Fare ], we have a food philosophy that disallows a lot of artificial ingredients, and so we say to our customers, “We read the labels so you don’t have to.” That’s removing a lot of the chemicals, but to take it to the next level that you’re describing, then tailor the shop for each individual consumer, it really could excite our customer base. And they’re already looking for better health so it’s the right audience.

===end===

Engage3 Competitive Intelligence Platform helps retailers like Earth Fare improve their pricing performance and compete more profitably through data science & analytics. To learn more about voice-activated shopping and other innovations discussed at GroceryShop, watch this video of Tim Ouimet discussing the rise of agent-based shopping.

09 Jan 2019
Sam's Club Now

Sam’s Club Now: A Review

sams club now signageIn response to the opening of new Amazon Go stores, Walmart and Sam’s Club are doubling down on its retail technology with an experimental store location in Dallas.  At the end of October, the retailer announced its latest venture: Sam’s Club Now. The shopping experience is similar to Amazon’s cashier-less convenience stores but with a larger focus on customer engagement. Engage3 visited the Dallas store to see what Sam’s Club Now had to offer, and we were surprised by how similar it was to the retailer’s traditional locations.

Compared to the tech-forward Amazon Go stores, Walmart seems to put the human experience first, aided by technology. According to the Sam’s Club press release, “Our associates are key to bringing this experience to life…we’ve known for a long time our associates make the difference, and that won’t change just because shopping preferences evolve.” 

This latest offering by Sam’s Club is about one-fourth the size of its traditional stores and includes electronic shelf labels. The retailer suggested the possibility of camera technology in the future as well. Purchases are done through the Sam’s Club Now app which tracks the items in a customer’s cart. Once the app is downloaded, a shopper can make grocery lists, search for items throughout the store, and use augmented reality features on certain products.

 

The Sam’s Club Now Experience

sams club parking
Sam’s Club Now Parking

On arrival, the first thing we noticed was the curbside pickup spots outside of the store. Apart from smartphone integration, it seems that Sam’s Club is focused on ease and accessibility with this experimental store. 

Once you enter with your club membership, you encounter a large charging kiosk with instructions on how to shop in the store. In order to make any purchases, you would need both a membership and a smartphone capable of downloading the app. There were no cash transactions in the store, so we had to rely on the Sam’s Club Now app. Thankfully, it was easy to set up. After opening the app and creating an account, we were ready to start shopping.

Sam's Club Kiosk
Sam’s Club Now Information and Charging Kiosk help you get started

 

From the entrance, we made our way around the store, noticing the electronic shelf labels that were set up throughout the aisles. It resembled the larger warehouse locations, but with a focus on items that could be easily picked up and scanned. However, products were still displayed and stored in the traditional Sam’s Club warehouse style. The pallets, bulk items, and stacked shelves made it clear that this was a Sam’s Club store.

 

Amazon Go Store and Sam’s Club Now Comparison

We compiled some photos of AmazonGo (left) and Sam’s Club Now (right) to give a side-by-side comparison.

 

Beyond the center store, there were separate areas for dairy, meat, and produce. These refrigerated sections featured a more limited assortment than the retailer’s larger stores, but each area had enough space to add more products down the line.

Sam's Club Departments
Center Store is separate from the refrigerated sections

For checkout, the retailer is relying on its experience with the Scan & Go app introduced two years ago. The app we downloaded allowed us to scan each item in our cart and track its total. When we were ready to check out, the transaction happened in the Sam’s Club Now app. Once it was complete, the app generated an e-receipt which we had to show upon exiting. Associates near the exit scan a QR code generated by the Now app, putting the checkout experience somewhere in the middle of the spectrum from tracking cameras to human cashiers.

 

sams club ereceipt
Showing your e-receipt on your way out

Sam's Club Now Electronic Shelf Labels
Sam’s Club Now Electronic Shelf Labels

We were thoroughly impressed by the app integration and electronic shelf labels, especially with how large the store is compared to an Amazon Go convenience store.

Amazon Go and Sam’s Club Now are operating different store sizes, but the smartphone-focused technology looks to fill the same need for shoppers. Easier navigation in stores and convenient, secure payments are featured in both. While Sam’s Club Now may be a much larger space, this experimental offering shows that retail technology is exploding in popularity. With the recent announcement of Kroger and Microsoft’s partnership, the trend towards smart shopping continues to grow.

To read our review of the Amazon 4 Star Store in Berkeley, California, click here.

 

 

18 Dec 2018

The Aldi Effect: Are Walmart prices higher in locations where there is no Aldi store?

When European retailer Aldi started opening stores up and down Britain in 2016, people who lived close to a new retailer location started noticing that the value of their homes went up by as much as £5,000. It was called the “Aldi Effect” by the local media and, soon enough, the vicinity of an Aldi store to a piece of property became a listing feature.

Aldi started putting up more stores all over the U.S. starting in 2011, with a total of 1,600 stores to date. And just like in the U.K., it would seem that there is yet another advantage to having an Aldi store in your neighborhood – lower prices for everyday groceries at your local Walmart store.

Walmart and their everyday low price (EDLP) approach has consistently driven a low price image across the U.S. With their limited assortment and private label focus, Aldi has also worked to deliver customer value through low prices. When both retailers are present in a market, they have demonstrated an ability to fight head-to-head for low-price leadership.

Engage3 collects and monitors grocery pricing in markets across the U.S., and identifies pricing patterns and market trends.

For this study, we created a basket of 50 grocery staples that were price checked at three Walmart locations within each of the four Texas markets studied – Austin, Dallas-Fort Worth, Houston, and San Antonio. Dallas and Houston have 36 and 50 Aldi store locations, respectively, while Austin only has 1 store location and San Antonio has none. The competitive landscape in Dallas-Fort Worth and Houston is much more robust, with not only Aldi in the mix, but Kroger and Safeway banners as well.

Our study revealed that in Austin where there is only 1 Aldi store location (north in Pflugerville), Walmart pricing for the basket of staples was 16.2% higher than in Dallas, and 17.6% higher than it was in Houston.

Aldi Report Austin

In San Antonio where Aldi has no store presence and where H-E-B and Walmart are the dominant grocery players, we found that the Walmart basket was between 21% and 22% higher than the exact basket in Dallas-Fort Worth and Houston, respectively.

Aldi Report San Antonio

 

While the average pricing differences in the four cities taken together were between 6% and 11%, some pricing disparity on items like peanut butter and mac and cheese were fairly significant. The chart below shows peanut butter at a Walmart store in Dallas-Fort Worth priced at $1.18, while the same jar was priced at $2.18 in Austin – a whopping 54% difference. Similarly, the mac and cheese, priced in the Dallas-Fort Worth stores at $0.34, was double the price at $0.68 each in Austin.

Aldi Report Table Austin DFW

The same pattern can be seen in Houston, where there are currently 50 Aldi stores. The chart below shows peanut butter at a Walmart store in Houston priced at $1.78, while the same jar was priced at $2.58 in San Antonio, or 45% more. The same mac and cheese, priced in the San Antonio store at $0.68, is 100% more expensive than in Houston at $0.34.


The market basket data used in this analysis is objective and precise. But while the same 50 items were used across all markets, the correlation of Aldi’s effect on a market is still subjective.  Based on Engage3’s observations of competitive pricing data across the U.S., we have determined consistent patterns of Aldi’s influence and effect on market pricing.

Pricing has always been like a chess game, where each retailer is reacting to their competitor’s moves, while trying to predict how their competitor will react to their maneuvers.  But, unlike chess, this game is often played with 3 or more players, and aggressive moves can make it difficult to discern strategy from reactive tactics.

For more information on how to build a strategic competitor assessment and market price monitoring program, watch our competitive pricing video here,  request our white paper on how to leverage AI and big data in competitive pricing here, or contact us at 530-231-5485.

 

 

05 Dec 2018
Agent-based Shopping

The Rise of Agent-based Shopping

 

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.

 

Artificial Intelligence

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.

 

Agent-based shopping

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.

 

Demand-side attributes

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:

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.”

 

 

30 Nov 2018
Tariffs

Pricing in a Post-Tariff Market

Pricing in a Post-Tariff Market

As the markets closed on September 17th, the United States announced another round of tariffs against Chinese products. The tariffs, this time consisting of $200 billion worth of goods, were implemented on the 24th and will increase from 10% to 25% over the coming months. In return, China fired back with a list of 5,207 U.S. imports to be taxed, totaling $60 billion. National retailers like Walmart have responded by voicing concerns to US Trade Representative Robert Lighthizer and addressing potential costs to American consumers (CNN).

What started as a way of bolstering American business has become an all-out trade war between the two countries, with retailers in the crossfire. In such a situation, it can be difficult for affected retailers to implement new strategies quickly and effectively. Thankfully, with some insights into their competition and the national price leader, the most prepared retailers can come out on top.

 

Effects on Price Image

The prime question is this: who is going to pass on the cost to consumers first? Every retailer in the nation is waiting with bated breath for the answer. Private letters from Walmart and Target, among many others, have hinted at increased costs on the horizon, but there is no certainty of the first retailers to implement them (CNBC). The issue is that whoever passes the cost first hurts their price image the most. Items that were not hit by tariffs may still drop in sales because of the price adjustment, making the threat far greater than anticipated.

Still, this is only the beginning. The first retailer experiences the largest effects of the tariffs, but the next retailers to pass on the cost to consumers are also affected. This is where real-time competitive data can make a difference. Imagine that competing Store A raises the cost of a certain tinfoil to $8 in a market, and you are able to monitor that increase. From there, you can raise the price on that same product at your store to a lower price point than Store A. Though both products are affected by the tariff, your price image for tinfoil is maximized because 1) you were not the first in the market to raise the cost and 2) you are selling that product at a lower price than Store A.

 

Sliding Scale Tariffs

What makes these observations more crucial is the nature of the tariffs themselves. The increased cost for the latest affected products will go from 10% to 25% by January 1st, 2019, meaning that these small-scale retail battles will be happening on a weekly or even daily basis. Having up-to-date information on your competitors—both on a local and national scale—will translate to more victories.

The reality is that most retailers will face losses in the coming months because of tariffs, and stores hit especially hard by the increases have already taken steps to address them (USA Today). Accurate and timely competitive data can help to mitigate losses, especially when monitoring the national price leader. This is where store-level pricing is most important, because some price zones will be more heavily affected than others. Competitive data can inform a retailer when their competition is responding to tariff costs and how they can respond effectively. Implementing enterprise-level decisions in stores and going down to the local level can translate to a significant competitive edge in a post-tariff market.

 

A Watchful Eye

With the tariffs increasing to 25% by the end of the year, the market is racing to recover losses—the earlier a retailer can adopt a competitive strategy, the better. Because most retailers operate on low profit margins per item, an increase of even 10% on a product adds up quickly. In the case of a KVI, the increased cost to the retailer could negate any profit on that item, or even come at a loss. Figuring out a competitor’s pricing strategy and how often they update prices makes for valuable insights for decision-making.

At any point in the timeline, a strong price image is necessary to drive traffic to your stores. As we get further into the year, keeping an eye on the local effects of tariffs will be as important as pricing on a national level, and accurate competitive data can make all the difference. With the right insights, the tariffs present a unique opportunity for retailers in the coming months. Click here to learn more about Engage3’s automated price monitoring and register to receive information.

25 Oct 2018
KVI and Price Image

Known Value Items – Drivers of Price Image

A Shopper’s Store-switching Decision

A KVI is a known value item. It’s an item that disproportionally drives the price value perception. So, in a grocery store it would include eggs and an automotive store might include motor oil, and a convenience store it might include cigarettes.

The reason that KVIs are important is because they drive a shopper’s store switching decisions. If the retailer’s prices are out of alignment with the prices that shoppers remembered, then the shopper can reevaluate their decision to shop with that retailer.

A question you can ask a shopper is, what items do you stock up on? And at what price points do you stock up? And you’ll begin to understand what a KVI is with the answers you get to that question.

A Tiny Number of Items

Another element that’s really important with the known value items is that it’s a very tiny number of items that drive a retailer’s perception in the marketplace. Typically, about a third of the price perception comes from only two-and-a-half percent of the products. It’s a very concentrated number of items, and this holds true across grocery, drug, mass,convenience, pet, auto—virtually all retail sectors. So, getting it right is critical.

Dynamic KVIs

Traditionally, retailers will evaluate their KVIs once a year. Over time it’s gotten to a more periodic basis where they’re doing it more often, but the market’s changing faster today than it’s ever changed before. Things are getting localized, things are getting personalized, and with that the shopper’s price perceptions are being set more dynamically.

All of these things mean that calculating KVIs based at the enterprise level is the wrong way to do it. The analysis needs to come down to the store level, down to the shopper level, down to the daily level, and have items coming in and out of the KVI list at those lower levels.

Increased Complexity

The challenge is that all this results in a lot more complexity that needs to be managed. The comp shop programs that were easy for one person to manage before now explodes the amount of competitive data that’s needed and the amount of management time that’s required.

A Platform to Manage Margins and Price Image

The retail marketplace is only going to get more competitive, and retailers need a platform to support themselves in this new environment. At Engage3, we’re on a journey to build that platform to enable the retailer – the early adopters – to outpace their competition so they can outperform them in terms of Margin and Price Image.

20 Oct 2018
grocery

A History of the Grocery Cart

“The wonderful thing about food is that everyone uses it, and they only use it once.” – Sylvan Goldman

The grocery cart, now a retail standard, originally looked nothing like it does today. In 1936, Sylvan Goldman and a young mechanic by the name of Fred Young invented the first commercial grocery cart. It was humble at first, but the pair’s invention went on to change the retail world forever.


The First Cart

original grocery cart
The original design was two metal folding chairs stacked on top of one another with wheels at the base of the legs to roll the cart around a supermarket.

In 1934, Goldman bought the grocery chains Piggly Wiggly and Humpty-Dumpty, both based in Oklahoma City. Around this time shoppers were buying new, heavier kinds of products but still using hand baskets to carry them. The increase in canned goods and refrigerated items inspired Goldman to make shopping easier for his customers. He grabbed his handyman Fred Young and a few supplies, and the two spent a night coming up with a prototype of a rolling grocery basket.

At first, Goldman’s plan didn’t succeed. Women compared the cart to a baby stroller and refused to push around the cart while they shopped. “I’ve pushed my last baby buggy,” they told him. Men were offended at the idea that they could not carry all their groceries around the store, and worried that the carts made them seem weak. Still, Goldman persevered.

He hired young women to model the carts and push them around his supermarkets, demonstrating their utility. This strategy immediately converted a few people. He then recruited male and female actors of all ages to advertise his grocery carts, and suddenly his stores were filled with happy shoppers unburdened by their groceries. Goldman began selling his carts to competitors, and quickly turned his former folding chairs into a booming business.


Trouble on the Horizon

Watson's telescoping cart design
Watson’s telescoping cart design

The grocery industry, however, would soon be introduced to a landmark invention: telescoping carts. In Missouri, business owner and machinist Orla Watson came up with a design for a grocery cart that improved upon Goldman’s basket-carriers. The cart allowed for space-saving convenience in supermarkets and parking lots by nesting multiple carts together instead of disassembling them. Watson filed for a patent in 1946, but had his invention contested by Goldman. In the meantime, Goldman produced replicas of the nesting carts to compete against the new challenger. Goldman sold his new carts for three dollars less than Watson’s, using his manufacturing resources to effectively drive his competitor out of the market. Finally, after an extended legal battle, Watson was granted the patent in 1949. Goldman was required to pay him royalties for each nesting cart produced.

The design of the grocery cart would remain the same for decades, but minor additions helped to shape the cart into what it is today. Most notably, carts were outfitted with seats for children beginning in the mid-1950s. These seats cemented the grocery cart as a supermarket necessity.

The shopping cart can be found today in any website with a product to sell, but its history is rooted in a late-night idea and some tinkering in an Oklahoma supermarket. In the next installment of this history of the shopping cart, we’ll be looking at some of the modern additions to grocery cart design, ranging from security devices to complete redesigns and the jump to online shopping. We’ll also look at where cart-less retailers stand in the market today. Click here to subscribe to our newsletter, and stay up-to-date on future videos and publications.