AWS for Industries
GroceryShop 2022: 10 takeaways
This year’s GroceryShop was one of the best to date. This event has become “the” grocery industry event of the year and is a must-attend event for the consumer packaged goods (CPG) industry. There were excellent senior leadership speakers. Relevant, targeted content. A focused and lively presentation approach. A space for start-ups and new industry contenders. And as expected, a differentiated, unique, and fresh show format. Everything from signage and décor to registration and the app were top-notch. The team at ShopTalk and GroceryShop have done a great job setting a high bar for industry events, and it’s no wonder attendance continues to grow and the vendor sponsor list is rapidly expanding.
Over the course of four days, we heard from retailers, brands, and solution providers on their outlook on the grocery and CPG industries, as well as how they are prioritizing solutions around the consumer or shopper. Here are 10 takeaways from the week.
Working backwards from consumer preference
The vote for consumer centricity—dare we say, consumer obsession—was unanimous and found renewed emphasis given abating supply chain issues. Brands and retailers came together in support for the omnichannel consumer that shops across physical and digital channels and is more valuable and loyal, buying 2–3 times more on average.
What has changed is consumer behavior. The pandemic fundamentally shifted how consumers shop and engage with brands. As we move out of the pandemic, we continue to see certain behaviors stick. Consumers continue to buy groceries through online channels. DoorDash shared that it is continuing to see incremental activity at home, even as people return to restaurants. Consumers demand choice in everything and expect brands and retailers to meet them wherever they are, be it online, in store, on social, or elsewhere. Instacart outlined how it is matching current and forecasted consumer demand for food options. Consumers expect to be understood and engaged on a personal level, especially Gen Z. Plus, they are looking for brands that aligns with their health, wellness, activity, and sustainability interests.
A major topic of discussion throughout the week was the increase in product prices at the shelf due to inflation. Inflation has not been this high since the 1980s. Somewhat surprisingly, speakers at companies such as Instacart and Thrive Market shared that they are not seeing as much of a trading down effect, meaning consumers are still buying products aligned to their values. They are also spending the same amount but buying less overall.
In an “always-on” world, the consumer is frequently online and the line between consumer and shopper is blurring. Two out of three shoppers say that mobile is the most important tool for research before a purchase (Nielsen) and they expect a connected experience across mobile and store. Every moment is shoppable. Consumers expect to be met where they are, be it online, in store, or on social.
This requires brands and retailers to be always on as well. This is the case with:
- Advertising: For instance, pause bidding on keywords for an out-of-stock item or bidding during specific times of the day when demand is higher
- Revenue management: AI-powered revenue growth management (RGM) tools for agile decision making that look at historical and real-time inputs into pricing and promos
- Marketing/trade: Shoppability in recipes, videos, and livestreams, or through retail media and digital activations in store
Connected path to purchase
While brands and retailers have been activating customers around moments that matter across their path to purchase (for example, curated landing pages, shoppable recipes, videos, and livestreaming), consumers expect engagement to carry across online and in store. They also expect engagement to inspire and discover further up in the funnel, to help drive to purchase and service afterwards. This means that there is a bigger role for digital engagement in and out of the store and a central role for the in-store experience.
The CEO of Whole Foods, Jason Beuchel, shared how the company is “changing the theater of retail” by taking out the “chores” with frictionless commerce technology such as Just Walk Out technology by Amazon, Amazon Dash Carts, and Amazon One. These technologies free up employees to focus on the “explore” aspect through investment in experiences (for example, butchers and cheese experts to engage consumers 1:1 and provide the convenience of expert advice and curation). Retailers at Casey’s are constantly looking for ways to use data and technology to drive automation and free up employees and resources for reinvestment in consumer experience. One retailer that is seeing real value here is 7-Eleven. The retailer underwrote and produced a punk rock love song called “Ode to the 7 Eleven Nacho” that was penned by a Pennsylvania-based band, which drove a 15% sales increase in nachos when they launched a new formula of nacho cheese.
While personalization is not a new concept, what is new is the data platforms and technology that enables it within and across channels. The bar is higher in grocery, where you get more consumer exposure on a regular basis (2–3 times/week). This means that retailers and brands must test and iterate on the right balance between discovery and relevance. For instance, a consumer may not need a product in the moment, but a brand might still want to create an impression as part of product discovery for a later time.
Convenience in all channels, not just “convenience” stores
GroceryShop concluded with a session that focused on the concept of convenience being more than a mindset than a channel. It is not only for convenience stores (c-stores), and it looks different for different consumers. For example, Casey’s looks to enhance different experiences for different types of customers leveraging different technology. Known for its in-house made pizza, it has an app for online ordering, but it also uses natural language processing and AI to simplify and improve the experience for those ordering by phone.
Convenience means more than just speed of delivery or frictionless transactions. It includes reliability, breadth of assortment, and relevance. In fact, success demands a unique combination of these factors. Assortment and relevance are particularly interesting where more is not always better. Although we’ve been hearing how ecommerce helps the industry by providing an endless aisle that increases choice, retailers such as Whole Foods and Thrive Market are successful in doing the opposite. Instead, they are limiting and curating product offerings to help consumers find products that align with their values.
Talking about speed, more is not always better. It’s more about optionality. There are a plethora of quick commerce and last mile fulfillment options ranging from scan and go, pick up in store, curbside, next day, same day, under two hours, and in 15 minutes. As Matt Van Gilder from SpartanNash said, “It is not that different customers prefer different things, but the same customers in different need states can prefer different things. In addition, it’s really about meeting the customers where they are and offering enough optionality to best serve your consumers in all their moments of need—thereby maximizing your incremental revenues.”
Retail media networks
Another key topic of discussion at GroceryShop revolved around retailer-CPG brand collaboration. Moving beyond joint business planning (JBP) and one-off collaboration, the discussion centered on data sharing and collaboration in merchandizing, marketing, supply chain, and broader insights. One area to check out is retail media. This topic came up several times in the sessions. 7-Eleven and Peapod, for instance, announced a launch of retail media networks. These conversations centered on collaboration across the grocery ecosystem.
So, what is a retail media network? It is a form of advertising that allows retailers to monetize first-party data to better serve consumers with more relevant offers as they shop in digital and physical stores and through email and SMS, for example. As such, retail media promises better closed-loop attribution by being able to tie engagement across the consumer’s path to purchase on their properties. Brands typically don’t have enough data to serve 1:1 messages to consumers at scale. Retail media allows them to create a better consumer profile for personalization by leveraging retailer first-party data in a privacy-safe way. Ultimately, this collaboration allows for better engagement with the always-on consumer across their path to purchase. This win-win-win proposition is strong enough to indicate that retail media networks are expected to grow faster than all other media except connected TV.
This is an exciting space to watch, and one in which there may be plenty of innovation in the coming months. Retail media networks shift the dynamics so that the retailer is now the vendor, and the brand is the buyer. It builds a mechanism for collaboration across brands and retailers. For retailers to monetize data in this fashion, companies may have to build trust in the offer and provide verifiable results so retail media can generate incremental returns to brands. If included as part of strategic partnership discussions through JBP as another lever alongside driving trade, shoppers, and retail execution, it could allow for value creation opportunities for all.
At Mars Wrigley, the sales and marketing analytics have been brought together into a One Demand Data and Analytics (ODDA) organization. This should break silos, enable interconnected insights, and drive better decision making as outlined by Deepak Jose, Global Head of ODDA Analytics Solutions. Learn more about this effort in Jose’s talk earlier this year at AWS Industry Innovators: Retail & CPG.
On the other hand, Charisse Hughes from the Kellogg Company—where AWS is building a globally consistent platform for next-gen analytics—shared how the CMO role has evolved at the Kellogg Company to include brands, advanced analytics, and marketing. Hughes also highlighted the importance of a single source of data, and how it’s powering the brand’s improved performance to drive on-shelf availability (OSA). This is easier said than done and many CPGs are still on the path. Both Hughes and Jose shared how hard it is to get a siloed CPG organization to collaborate around a single source of truth and put data at the heart of solving every problem and evaluating every opportunity.
Direct-to-consumer and marketplaces
From a CPG perspective, the majority of brands do not view direct-to-consumer (DTC) as a profitable growth channel. It is expensive to set up, challenging to manage shipping costs and returns, and more. This is why brands like Amazon are leveraging marketplaces for direct consumer engagement as the last mile is managed efficiently by a partner. Speakers from the Kellogg Company and Hormel shared their views of DTC as a channel to experiment, learn, and gather data with, but not to scale, since the economics are still unattractive. Pepsi shared that it plans to support a strategy “to be present in all channels where the consumer desires their product, but is not meant to be a scaled value proposition.” All brands use DTC footprints as “marketing” to build 1:1 relationships with consumers, allow for product sampling, and offer customized and limited-time products that create loyalty for the brand.
For retailers, a digital presence is table stakes. Many retailers and brands that are selling DTC work on channel and product optimization to increase online basket size. They also work to influence basket composition. Instead of just putting the offline assortment online, brands manage price-pack architecture and vary online assortments to include higher margin, larger pack SKUs. When it comes to delivery and fulfillment options, having a robust set of offers remains important as each offer captures a different type of shopper and incremental sales. 70–90% of these sales through third-party platforms are incremental for a retailer according to the analyses done by DoorDash and SpartanNash.
Customer data platform (CDP)
A CDP is a technology platform that creates a persistent, unified customer view (a single view of customer activity). Data is pulled from multiple sources, cleaned, and combined to create a single customer profile. For example, think about your last online grocery shopping experience. You likely searched for multiple platforms before deciding on which service to use (Amazon Fresh or Instacart, for instance). You scanned for a few online recipes on different sites. You researched new food brands. You looked for online coupons. Throughout all of that, chances are you interacted multiple times with the company that you ultimately purchased from—through website visits, live chat, online ads, or email.
CDP technology is popular in the retail industry as well in CPG. It was mentioned numerous times by grocers, c-store leaders, and CPG brand leaders alike over the four days. Interestingly, the topic of loyalty was more popular among c-store leaders vs. grocers, given the 1:1 interactions that grocers have the opportunity to develop daily and weekly. AWS Partners such as Treasure Data, Amperity, and Salesforce were linked to many initiatives and programs focused on better understanding and engaging with the shopper or consumer. Mastering customer obsession starts with data—demographics, psychographics, transactions, purchase records, support cases, product usage, shopping habits, content preferences, paint points, and more. A recent Gartner report found that “less than 10% of companies have a 360-degree view of customers,” and “less than 5% use this view to systemically grow their business.” Further, Gartner found that the top technology area where CIOs are increasing investment is a “business intelligence or data analytics solution.” 45% of CIOs are increasing investment and only 1% are decreasing investment in this area. Expect the CDP solution focus to continue into 2023.
The show floor was bustling, and new tech was front and center, from Fetch Rewards loyalty offerings to Amazon Just Walk Out. Yet, we are in the early days of a “frictionless” experience tech perspective. Every shopping journey has points of friction where the customer isn’t enjoying the experience and retailers want to remove as much friction as possible online or in store. First, “frictionless” should not be confused with “cashier-less checkout,” which is similar but has a different goal. Cashier-less checkouts are focused on lowering labor costs, typically through automation. Frictionless is focused on the customer’s needs and experiences. It may help reduce labor costs, but that’s not the goal. Often times, it simply frees cashiers to do other tasks like help customers or restocking while the goal of cashier-less checkout is to facilitate shopping without cashiers. By the way, frictionless is not appropriate for every scenario. Apparel, for example, is difficult for computer vision to recognize. In other cases, a scan-and-go solution might be sufficient.
86% of US consumers have left a store due to frustration from long wait lines in the last 12 months leading to more than $3B in lost sales from in-store abandonment. 85% of shoppers cited checkout experience as very important or important and yet only 23% of shoppers are satisfied with existing checkout line length.
Retail checkouts have gone through six phases in its history. Consider the friction at each phase:
- Clerk: Shopping started by visiting the store with a list, then the clerk went and retrieved all the items.
- Single checkout: in 1916, the first self-service store allowed customers to pick items from shelves (Piggly Wiggly in Memphis, TN).
- Scaled checkout: Checkout lanes were scaled for volume (Piggly Wiggly Continental, Encino, California, 1962).
- Self-checkout: The NCR Corporation model of self-service checkouts and fast-lane at a Sainsbury’s store.
- Scan-and-go: Allows customer to scan items as they shop (Giant Food store).
- Frictionless Checkout: Amazon Go (2016).
As tech investments in bandwidth and computer vision continue to accelerate along with cloud capabilities linked to store systems, expect frictionless capabilities to advance quickly.
There was a strong presence on-stage from convenience store chain leaders (Casey’s, Oxxo, and 7-Eleven) in addition to the typical major CPG brands and grocers. The presentation sessions brought new perspectives from this channel related to consumer engagement and grocery concepts bleeding over into c-stores. C-store leaders are investing in new in-store technology and staffing up with talent to drive frictionless experiences in store. The sessions shined a light on the similar interests and priorities across grocery and c-stores around the capture and use of data, challenges integrating point-of-sale, and other in-store data, merchandising based on consumer preference and geography, and getting insights and advanced analytics in place to drive new business decisions. Perhaps this is setting the stage for a new “convenience” focused show? ConvenienceTalk or ConvenienceShop? Watch out NACS!