\r\n
\r\nThis increased reliance on technology is allowing grocers to win the grocery wars, and will be the focus of our discussion here today. With us to explore this important topic are Drew Whiting of Kroger, Linda Palanza of OneView Commerce and Anne Johns of Pomeroy.
Drew is the director of digital commerce and planning at Kroger, leading the development of short- and long-term strategic planning, and objectives needed to accelerate the growth of Kroger's omnichannel business. He also facilitates alignment among cross-functional work streams and partners throughout the organization on annual planning and strategic activities.
\r\n
\r\nAlso joining us today is Linda Palanza, the CEO at OneView Commerce. She is a crucial evangelist for retail and powered platform technology, envisioning and leading the product strategy of OneView's offerings. She works closely with visionary tier one retail executives who want to take control of customer experiences and see the value of platform adoption to achieve business strategies, differentiate brands and delight customers.
\r\n
\r\nAnne Johns is the managing director of retail software solutions for Pomeroy. She's responsible for setting the retail verticals growth strategy and cultivating the portfolio, establishing partner alliances and working with clients to solve challenges while driving incremental value.
The grocery segment, along with the entire retail industry, is undergoing a massive digital shift. Shoppers have grown accustomed to the convenient nature of e-commerce and demand an equally and seamlessly customer-centric experience from grocers, both in-store and out. Drew, realizing the importance of moving to customer-centric retailing, what are some of the considerations that you see in moving a retail organization in this direction?
\r\n"},{"id":22699,"bundle":"image","imageSrcset":{"src":"https://assets1.risnews.com/styles/max_width_480/s3/2020-02/one%20view%20slides_Page_06.jpg?itok=derculRq 480w, https://assets1.risnews.com/styles/max_width_640/s3/2020-02/one%20view%20slides_Page_06.jpg?itok=6adwD56h 640w, https://assets1.risnews.com/styles/max_width_800/s3/2020-02/one%20view%20slides_Page_06.jpg?itok=keolsSu5 800w","sizes":"(min-width: 1300px) 741px, (min-width: 920px) 50vw, 100vw"},"imageCaption":null,"imageAdvertisement":false,"imageSize":"large","imageLink":"","imageExpandable":null,"fullSizeImage":{"id":6852,"alt":"","width":960,"url":"https://assets1.risnews.com/styles/max_width_800/s3/2020-02/one%20view%20slides_Page_06.jpg?itok=keolsSu5","height":540}},{"id":22700,"bundle":"basic","text":"Drew Whiting: So when I think of digital transformation what resonates with me is taking a legacy business and moving it to a business capable of future growth. To do that, take a hard look at where the business currently is today, leverage any kind of existing data, customer insights, and the competitive landscape.
\r\n\r\nFrom there, take a good, hard look at what service and capabilities you have and what customer experiences you can deliver. What is your right to win? Evaluate upcoming priorities based on speed to market versus what value you can deliver to the customer and the business. Above all, else focus on outcomes, not outputs.
\r\n\r\nAnne Johns: I think what I consistently hear retailers say is they need more nimbleness and control; they need that to drive the speed that technology can be deployed. That often leads the discussion to what are the areas that change the most frequently? That's commonly promotions and payments, more specifically they're looking for promotions and loyalty engines that improve targeting tools and to have visibility across channels. If they look at their legacy point-of-sale systems, promotions are often entwined with that point-of-sale logic and they really want to get that externalized so that they can move faster.
\r\n\r\nI would say ditto on payment systems. They relate to being able to keep pace with regulatory items as well as a lot of ongoing, fast changes and offerings in digital wallets — really focusing on both solutions that improve continuous customer engagement across channels as the consumers are researching, purchasing and then reflecting on their purchases, and especially if those types of initiatives get the retailer to repurpose their traditional labor.
\r\n\r\nI think my last comment here would be a high percentage of the grocers that we work with, they believe that innovation speed requires having more control of their IT footprint and they want to minimize that reliance on third parties to move at the pace they need. They want the ability to control their own destiny and are often skittish about being locked into a single vendor relationship.
\r\n\r\nDenman: I’d agree with you. You mentioned cross-channel — the omnichannel term has certainly fallen out of favor with the retailers, but that has not changed the fact that omnichannel is happening (whether we call it omnichannel, cross-channel, unified commerce or just plain retail), the ability to shop anywhere, anytime has fundamentally changed the way retailers and specifically grocers do their business.
\r\n"},{"id":22701,"bundle":"image","imageSrcset":{"src":"https://assets1.risnews.com/styles/max_width_480/s3/2020-02/one%20view%20slides_Page_07.jpg?itok=hBg8h3Oh 480w, https://assets1.risnews.com/styles/max_width_640/s3/2020-02/one%20view%20slides_Page_07.jpg?itok=gPCLyrCK 640w, https://assets1.risnews.com/styles/max_width_800/s3/2020-02/one%20view%20slides_Page_07.jpg?itok=bbD75Lcv 800w","sizes":"(min-width: 1300px) 741px, (min-width: 920px) 50vw, 100vw"},"imageCaption":null,"imageAdvertisement":false,"imageSize":"large","imageLink":"","imageExpandable":null,"fullSizeImage":{"id":6848,"alt":"","width":2934,"url":"https://assets1.risnews.com/styles/max_width_800/s3/2020-02/one%20view%20slides_Page_07.jpg?itok=bbD75Lcv","height":1650}},{"id":22702,"bundle":"basic","text":"Retailers are investing in a slew of technology to make anytime, anywhere shopping seamless, including advanced digital capabilities, personalization, new product development, expanded home delivery, and of course mobility.
\r\n\r\nDrew, as you look at the continuous evolution of digital strategy in your business, how has the process of building strategy changed as the omnichannel world becomes more pervasive and increasingly seamless?
\r\n\r\nWhiting: So I think what you see is the customer is ever-changing as well, and it's hard to know exactly where they're going to be in two years, three years, five years. So what we've done at Kroger, at least from a technology and customer experience standpoint, is we've really moved, shifted our focus from a project-based mentality to a product-based mentality. With a project there's a finite beginning and end, and then once you're done it kind of sits off in a corner, whatever you've built or delivered, then you move on to the next thing.
\r\n\r\nWhat we've found is that as the customer changes and there's new demands on our technology and experiences, we really need to operate in a product fashion or product development. That is the continuous iteration and optimization of what we design and build, as well as getting to invest in it. So the way we build is, I don't want to use the buzzword future-proofing, but that's essentially what we're trying to do is we want to continually listen to our customers, listen to where the business is going and be able to pivot and be nimble through our product development life cycle.
\r\n\r\nJohns: I think Drew is right on, and I think while we've always heard clients asking for faster, better, cheaper, I'd say it's a frenzy now. They want more functional and predictable releases put out to the stores per year, as well as being able to do ad-hoc on-demand releases, and you see so much more experimentation going on with various concepts that they either rollout quickly if they pan out or the buzzword of failing fast, they pull them out quickly.
\r\n\r\nTo do that the technology that supports that kind of need for constant innovation, there is a focus on how do we take these siloed solutions that have these dependencies across hardware or less on the application and really towards externalized shared services to get to provide some of that resharing and nimbleness.
\r\n\r\nI would just comment as we talk about, Drew kind of talked about agile without saying it so much, but as we talk about that, my experience in working with clients is while they talk about agile, they have to recognize that it is a transformation within itself and that the way the internal and IT teams are doing work together, as well as the way they bring in vendors like us into that mix for collaboration, is so important.
\r\n\r\nLastly as we talk about that and we talk about constant innovation, the realities of the industry and having to move fast — they also recognize they don't have the luxury of pausing and replacing systems, but as Drew commented, they need to align their new initiatives and with the next-gen IT roadmap that delivers evolution as they go.
\r\n\r\nLinda Palanza: I think that what Drew and Anne both said are in tune. It comes down to a fundamental consideration that I am always telling the retailers that I talk to virtually globally, and that is that one of the most important aspects of the store is the transaction log that comes out of the store based on activity and most retailers and most grocers are really looking to sell product in a store and keep their supply chain healthy.
\r\n\r\nWhen you're looking at that, as you keep adding and testing and learning all these different technologies, when you do decide that these are going to be ... they're sticky technologies that want to stay, then you have to look at how you're going to get that data backup to corporate.
\r\n\r\nWe're a big believer in that there should just be one transaction processor and as you continue to introduce all of these new fun technologies, you have to make sure that there is a consistent way to get that data back up into these backend systems. I think that really holds true for the work that we've done with Kroger and customers in other parts of the world as well. It's very important consideration as we start to do this digital transformation.
\r\n"},{"id":22703,"bundle":"image","imageSrcset":{"src":"https://assets1.risnews.com/styles/max_width_480/s3/2020-02/one%20view%20slides_Page_08.jpg?itok=NNM5_fbX 480w, https://assets1.risnews.com/styles/max_width_640/s3/2020-02/one%20view%20slides_Page_08.jpg?itok=ePiqhPML 640w, https://assets1.risnews.com/styles/max_width_800/s3/2020-02/one%20view%20slides_Page_08.jpg?itok=BSx_7BBK 800w","sizes":"(min-width: 1300px) 741px, (min-width: 920px) 50vw, 100vw"},"imageCaption":null,"imageAdvertisement":false,"imageSize":"large","imageLink":"","imageExpandable":null,"fullSizeImage":{"id":6844,"alt":"","width":1067,"url":"https://assets1.risnews.com/styles/max_width_800/s3/2020-02/one%20view%20slides_Page_08.jpg?itok=BSx_7BBK","height":600}},{"id":22704,"bundle":"basic","text":"Denman: Earlier this year RIS surveyed retailers on the current state of technology in the grocery industry. One area of focus specific to technology investments, is where grocery retailers plan to allocate dollars this year, next year, and in 2021.
\r\n\r\nWhat we found is that a lot of the investments for this year and the next year are what we would consider core competencies, the ability to stock shelves, take payments, fulfill online orders, and plan for the upcoming season. But if you take a peek at the 2021 results, you begin to see a lot more future-forward things, such as scan-and-go and chatbots.
\r\n\r\nAre grocers just being optimistic for the future, or will we be seeing meaningful investment in these areas in the next 18 months? Judging by the activity of the leading retailers we examined in the report, I would definitely say yes. Grocers are investing now and plan to continue to invest heavily in the customer experience.
\r\n\r\nFor example, Kroger has gone live with in-store farming in select stores to bring new meaning to the term farm-to-table. These types of concepts are clearly not for every grocer, it speaks to the importance of innovation and keeping the in-store experience fresh.
\r\n\r\nDrew, as you look at new initiatives such as in-store farming, how has your organization matured in terms of its ability to build, test and learn? Do you imagine the company's ability to continue to evaluate, execute, and evolve groundbreaking ideas is one of the key capabilities that positions Kroger for effective digital engagement, and what makes that possible?
\r\n\r\nWhiting: During my time at Kroger I've really seen the overall enterprise start to embrace the test-and-learn experimental model more than ever. As we look at our core business and we have competitors from every segment — it could be a traditional retailer, a quick service restaurant, a gig economy delivery model — we always have to be quick and nimble in order to react to where the customer is going.
\r\n\r\nI'm really happy to see some of the things we've been doing in terms of the in-store farming, we're also launching a partnership that delivers hot ready-to-eat meals out of a dark kitchen in Indianapolis and Columbus recently, and so those are both kind of responses to where our customers are and where they're going.
\r\n
The one caveat to all of this is that we really need to be cognizant of the idea that we're going after. There's no shortage of good ideas out there, but we don't want to be in a world where we have a solution looking for a problem, we want problems in need of solutions.
\r\n\r\nSo I think that's the lens we should use when evaluating the potential test-and-learns: One, what's the problem statement? Two, what do we hope to learn? Three, what's the path forward? We don't want to get in a spot where we got a great idea, customers love it, or the business partners love it, but we have no idea how to scale this to the rest of the enterprise. So I think those are the three key things to think about and to keep in mind as you're evaluating, test-and-learns.
\r\n\r\nPalanza: Thanks, Drew. I think that that's the key component of the success — the ability to introduce new technologies into the business very quickly and in an agile manner, be able to learn from it, but also be able to add to it very, very quickly, weekly so that you can fine-tune ideas based on the feedback that you're getting. That makes a big difference in coming out with a technology that took you six to 12 months to build putting it in, but having to change anything that's not working is a problem, so therefore it ends up being a failure.
\r\n\r\nWhereas if you take this kind of small and agile approach, and then be able to keep building off of it so that there is the ability to then deploy it statewide, that's where you're really going to win time and time again.
\r\n\r\nJohns: I would just add, I think what Drew mentioned about the transformation in the Kroger organization is not just about the technology. We can certainly help with technology and providing technology, that's externalized and helps you move faster, but wrapping all of this technology around operations that make it scale and work is key.
\r\n"},{"id":22707,"bundle":"image","imageSrcset":{"src":"https://assets1.risnews.com/styles/max_width_480/s3/2020-02/one%20view%20slides_Page_10.jpg?itok=zmuiCsPJ 480w, https://assets1.risnews.com/styles/max_width_640/s3/2020-02/one%20view%20slides_Page_10.jpg?itok=RexlV0rt 640w, https://assets1.risnews.com/styles/max_width_800/s3/2020-02/one%20view%20slides_Page_10.jpg?itok=VBTXNE-M 800w","sizes":"(min-width: 1300px) 741px, (min-width: 920px) 50vw, 100vw"},"imageCaption":null,"imageAdvertisement":false,"imageSize":"large","imageLink":"","imageExpandable":null,"fullSizeImage":{"id":6835,"alt":"","width":2427,"url":"https://assets1.risnews.com/styles/max_width_800/s3/2020-02/one%20view%20slides_Page_10.jpg?itok=VBTXNE-M","height":1365}},{"id":22708,"bundle":"basic","text":"Denman: As all three of you said, not every innovation is perfect for every retailer and you kind of have to hedge your bets on what you pick. Let’s talk about Sobeys, who's piloting new smart carts that are designed to make the shopping experience more interactive, freeing up associates for more meaningful interaction with shoppers.
\r\n\r\nWhen you're evaluating innovations like this, grocers need to weigh the time and financial costs of implementing against the potential benefit for the organization and their customers. Drew, when you look at building a new tech strategy, how do you weigh the balance of developing concepts versus evolving an existing strategy?
\r\n\r\nWhiting: That’s a great question and it's one we go through every day at Kroger. The way I look at it is there are buckets in two different areas: things that we need to do to run the business, and then things we need to do to change the business. You hit on it earlier — it's not one-size-fits-all for everybody, so what you can have to do is look at your current situation, see where you need to make those investments. Is it your core legacy technology that needs to be updated, or needs to move to something else? Is your current business being disrupted so much that you need to reinvent yourself?
\r\n\r\nYou just have to weigh the pros and cons of each. I think of it as a roulette table. You have a certain amount of chips you can bet per spin of the wheel, you have to decide based on what your customers are telling you, based on what your business insights are telling you, where you should place those bets strategically.
\r\n\r\nPalanza: I just think it's so exciting to see so many different retailers testing different ideas. So this example here, this is one of many that we see out there, but they're all helping to craft what the shopping experience is going to look like in the future. I think the most important part of this is how do we as consumers want to interact with that brand and what is going to make our job easier? Maybe we are a techie and we don't want to talk to anybody — we want that frictionless experience and sometimes we just want it to be made easier.
\r\n\r\nBut what's really exciting in terms of — we call this the grocery wars — there's so many now going out there and testing what the customer experience is going to be in the next three, five, 10 years. It will be very exciting to see what comes out on the other end because I do think that we have different people that want different experiences and technology will play a key part of that, but I also think the customer is going to play the biggest part of this.
\r\n\r\nJohns: I agree. I think if you look at historically, as a technology provider, we used to say, \"If we build something and somebody adopts it, it'll be the domino effect and everybody else is going to also adopt it.\" Now it's more challenging to create a portfolio because you're not seeing that so much because the focus is on the differentiation of the retailer. There is so much experimentation going on you don't see a lot of me too’s, but more differentiated trials.
\r\n\r\nDenman: One thing that is certainly becoming a little bit of a “me too” is this scan-and-go, which was popularized by Amazon Go and then a lot of retailers wanted to get in on the action, and now it's a content that provides convenience for shoppers while infusing grosses with a certain level of cool. Drew, what's your holistic strategy to execute on the customer's definition of what frictionless is, and what are some of the key business drivers beyond the hype of a concept like Amazon Go that drive frictionless as a true business strategy?
\r\n"},{"id":22709,"bundle":"image","imageSrcset":{"src":"https://assets1.risnews.com/styles/max_width_480/s3/2020-02/one%20view%20slides_Page_11.jpg?itok=l09HbUv8 480w, https://assets1.risnews.com/styles/max_width_640/s3/2020-02/one%20view%20slides_Page_11.jpg?itok=5RObExE- 640w, https://assets1.risnews.com/styles/max_width_800/s3/2020-02/one%20view%20slides_Page_11.jpg?itok=FWQ4Etr1 800w","sizes":"(min-width: 1300px) 741px, (min-width: 920px) 50vw, 100vw"},"imageCaption":null,"imageAdvertisement":false,"imageSize":"large","imageLink":"","imageExpandable":null,"fullSizeImage":{"id":6832,"alt":"","width":2414,"url":"https://assets1.risnews.com/styles/max_width_800/s3/2020-02/one%20view%20slides_Page_11.jpg?itok=FWQ4Etr1","height":1358}},{"id":22710,"bundle":"basic","text":"Denman: As all three of you said, not every innovation is perfect for every retailer and you kind of have to hedge your bets on what you pick. Let’s talk about Sobeys, who's piloting new smart carts that are designed to make the shopping experience more interactive, freeing up associates for more meaningful interaction with shoppers.
\r\n\r\nWhen you're evaluating innovations like this, grocers need to weigh the time and financial costs of implementing against the potential benefit for the organization and their customers. Drew, when you look at building a new tech strategy, how do you weigh the balance of developing concepts versus evolving an existing strategy?
\r\n\r\nWhiting: That’s a great question and it's one we go through every day at Kroger. The way I look at it is there are buckets in two different areas: things that we need to do to run the business, and then things we need to do to change the business. You hit on it earlier — it's not one-size-fits-all for everybody, so what you can have to do is look at your current situation, see where you need to make those investments. Is it your core legacy technology that needs to be updated, or needs to move to something else? Is your current business being disrupted so much that you need to reinvent yourself?
\r\n\r\nYou just have to weigh the pros and cons of each. I think of it as a roulette table. You have a certain amount of chips you can bet per spin of the wheel, you have to decide based on what your customers are telling you, based on what your business insights are telling you, where you should place those bets strategically.
\r\n\r\nPalanza: I just think it's so exciting to see so many different retailers testing different ideas. So this example here, this is one of many that we see out there, but they're all helping to craft what the shopping experience is going to look like in the future. I think the most important part of this is how do we as consumers want to interact with that brand and what is going to make our job easier? Maybe we are a techie and we don't want to talk to anybody — we want that frictionless experience and sometimes we just want it to be made easier.
\r\n\r\nBut what's really exciting in terms of — we call this the grocery wars — there's so many now going out there and testing what the customer experience is going to be in the next three, five, 10 years. It will be very exciting to see what comes out on the other end because I do think that we have different people that want different experiences and technology will play a key part of that, but I also think the customer is going to play the biggest part of this.
\r\n\r\nJohns: I agree. I think if you look at historically, as a technology provider, we used to say, \"If we build something and somebody adopts it, it'll be the domino effect and everybody else is going to also adopt it.\" Now it's more challenging to create a portfolio because you're not seeing that so much because the focus is on the differentiation of the retailer. There is so much experimentation going on you don't see a lot of me too’s, but more differentiated trials.
\r\n\r\nDenman: One thing that is certainly becoming a little bit of a “me too” is this scan-and-go, which was popularized by Amazon Go and then a lot of retailers wanted to get in on the action, and now it's a content that provides convenience for shoppers while infusing grosses with a certain level of cool. Drew, what's your holistic strategy to execute on the customer's definition of what frictionless is, and what are some of the key business drivers beyond the hype of a concept like Amazon Go that drive frictionless as a true business strategy?
\r\n\r\nDenman: With scan-and-go you're trying to eliminate labor, which is what is big with self-service, labor costs on the rise, tech savvy employees in higher demand, and grocers are turning to self-service options to help trim labor costs and lessen their reliance on expensive associates. The majority of retailers have seen turnover rise over the last five years with one in five reporting it has risen sharply.
\r\n\r\nAnne, as you speak with retailers who have a strong presence with self-service, how are they continuing to evolve this concept?
\r\n\r\nJohns: Many of the folks that we work with, they have future concepts, store of the future concepts underway and they're testing out new front ends and store-of-the-future designs. Nearly all of those concepts have a reduction in traditional checkout and an increase in various self-service concepts.
\r\n\r\nAs you said, they're looking at ways to optimize the labor for their own benefit, but they're also very, I would say, consumer centric in the way they're looking at this. As we talked about earlier, ways to differentiate experience, but their stores, they are taking a look at the shopper lens and recognizing the need to take what they've been doing themselves, service to the next level with easier and more intuitive experiences.
\r\n"},{"id":22711,"bundle":"image","imageSrcset":{"src":"https://assets1.risnews.com/styles/max_width_480/s3/2020-02/one%20view%20slides_Page_12.jpg?itok=tBBlyFWs 480w, https://assets1.risnews.com/styles/max_width_640/s3/2020-02/one%20view%20slides_Page_12.jpg?itok=IFR1FgqB 640w, https://assets1.risnews.com/styles/max_width_800/s3/2020-02/one%20view%20slides_Page_12.jpg?itok=W5eWkx-J 800w","sizes":"(min-width: 1300px) 741px, (min-width: 920px) 50vw, 100vw"},"imageCaption":null,"imageAdvertisement":false,"imageSize":"large","imageLink":"","imageExpandable":null,"fullSizeImage":{"id":6827,"alt":"","width":2427,"url":"https://assets1.risnews.com/styles/max_width_800/s3/2020-02/one%20view%20slides_Page_12.jpg?itok=W5eWkx-J","height":1365}},{"id":22712,"bundle":"basic","text":"Johns: I think we've seen them adding more in-aisle and at the curb convenience features and even going so far as to say, \"Can we have our self-service technology learn individual consumer's behavior and offer them a personalized experience so that they have a predictable shopping experience.\"
\r\n\r\nThen as I said before, as they look at all this, the realities of how they're controlling shrink starts to weigh in a little bit and so they're avidly looking for solutions that detect and address theft. When they are looking at this self-service, one of the things that they absolutely see the need for is that their self-service concepts mimic, or better yet, share the same business logic that their traditional associate attendance solutions use, and they needed to do that so that they get the agility and speed they need.
\r\n\r\nDenman: One of the traditional comments with self-serve would be loss or theft. I think the industry kind of has it under control at this point, but I think it's still a concern. Drew, when you look at strategies like this, how do you balance the art of the possible, especially with self-serve — you can have self-serve, but how do you balance that with the ability to execute on effectively?
\r\n\r\nWhiting: When I think of self-service, I see that to echo the earlier points, is that it's very much how do we empower our in-store associates to do their job better, faster in a market where we have more turnover, labor costs are high or are increasing. We want to free them up to do what they do best and that's to engage with our customers to really make it a great shopping experience.
\r\n\r\nAs we think about the realm of possibility and the art of possibilities you really need to have a pragmatic lens. We're looking at that as well because again, Kroger's at a very large scale, whatever we do for our in-store associates in terms of self-service, how would that then scale across our 2,000 stores nationally. I think that's a very critical lens we look at: what's the lead behind from doing something like that if we did some sort of virtual reality in-store system for our store associates? How do we then roll that out, maintain it with the lead behind costs there as well.
\r\n\r\nThat's always the critical eye I look at. We talk about new strategies to go after to support our in-store associates, then to that I think the idea of self-service also trickles into our customers as well. Those tools we build for our associates, how do we then leverage them for our customers to help make that shopping experience easier and take some of that burden off of our labor.
\r\n\r\nIt also goes back to being a product development-led organization, whereas in the past you might have somebody focusing on self-service for our customer and someone focusing on self-service for our associates. We should look at self-service as a capability that we can then scale across the enterprise to different audiences.
\r\n\r\nDenman: Grocery is no longer just a store-based business, which we've talked about kind of at length. Next-gen digital applications allow customers to shop at home or on-the-go, as well in the aisles of their favorite grocer. While the technology is in place to seamlessly accept and process digital orders, the fulfillment piece is still being worked out by a lot of people.
\r\n\r\nDrew, can you talk a little more about the importance of having varied fulfillment options and how tying them all together is critical to ensure the entire experience can be delivered effectively?
\r\n\r\nWhiting: Sure, so from the Kroger perspective, when we launched our click-and-collect curbside business it started off being fulfilled from store only, so that was kind of our go-to-market strategy. We will leverage our physical footprint, our brick-and-mortar stores across the country to stand up this new service and see how customers respond to it.
\r\n\r\nAs that business has matured, we've seen the market pivot more from getting your orders next day, to getting them within four hours, to getting them within two hours, to getting them within a half an hour, and so there really is a kind of race to the customer at this point. But with that comes the tax of how do you then mature your fulfillment model and supply chain ecosystem to meet those demands?
\r\n\r\nWhat you have to look at is having the right inventory at the right place, at the right time to get it to that customer when they need it. So we look at that, we have our core asset of our in-store fulfillment, but then what else do we need to supplement that within our supply chain?
\r\n\r\nPalanza: I do agree. What this whole process has taught retail is the importance of now with customers literally shopping in any channel. Some benefits to that is it gives you some foresight as to what the customer actually wants to pick up tomorrow, and it gives you more data to be responsive in other situations.
\r\n\r\nIt's also just a great opportunity to enhance the customer experience through better fulfillment because what you're looking at is that I want to get curbside groceries, I drive up and I have some substitutions, I don't like those substitutions. That data then could be reused for that particular customer in that instance to know that that customer prefers the brand they shop with. That data can be passed back up to the supply chain with more accuracy of how our customers want to shop and what they like and don't like.
\r\n\r\nI think that the fulfillment piece is a very important piece to the future success of understanding what customers want and what's driving their behaviors and what makes them want to interact with that particular brand.
\r\n\r\nDenman: Linda, you mentioned drive-up and pick-up. How do you counteract the fact that you're not going to get those big in-store conversions because someone is just rolling up to the curb and getting and going, versus coming in and potentially buying more?
\r\n\r\nPalanza: That's a conversation we've been having with the Kroger team as well as grocers in Australia. I think there are two key things: One is that you some shouldn't be surprised to find that the customer is actually still going into the store, but they're going into the store for those things that they would prefer to pick themselves, the perishables. I prefer to pick my own produce, my own meat for instance.
\r\n\r\nBut then I want to get out and go, I don’t want to pick up all the things that I need a big shopping cart to get because I know the paper towels or the napkins that I use. That kind of shopping experience is yet again, another one of being aware that the customer has now entered the store, maybe you look at the reformatting of the store so it becomes kind of like your local little town where we used to have a fishmonger, and a bakery, and things and make it easy for me to get those things.
\r\n\r\nAlso then we now know Linda is coming around to the back of the store to pick up her delivery and we're going make that more efficient as well.
\r\n\r\nThe other thing about the in-store conversion that I tell everybody is that you now know what they have in their basket, and sometimes a day before they're coming. Now it's not just about in-store conversion, it's about touching that customer and letting them know about promotions, trying to see if they'll increase their basket size, that they can add things to their basket up to an hour before the delivery.
\r\n\r\nSo there's ways to even at curb drive that basket size up through better promotions, better understanding of the customer, and really understand the loyalty and the basket behaviors of that customer. That’s really important because we have a lot of conversations with groceries where we talk about the importance of promotions and the importance of the fact that these promotions are driving down the value of the basket, but if I'm on a weekly budget of $200 and I'm getting savings, if I know about that at that time, I'm far more likely to add the cookies or something else that might delight my children into the basket because I can afford to do it.
\r\n\r\nBut if we don't know that savings until I get to the checkout, I am not going to go back in and use that savings. So those are important aspects I tell everyone to look at, is to say how are you driving that engagement with the customer and utilizing that to say, \"Hey, you saved $58 on the shop,\" and then you say, \"Are there other things you'd like to do?\" And those are the things that we've really seen a lot of success with.
\r\n\r\nDenman: Drew, I think maybe this is an opportunity to talk through those challenges as well. Is that something you're seeing at Kroger in terms of in-store conversion due to the curbside and are they dropping, is it staying flat and how are you guys addressing it?
\r\n\r\nWhiting: So we've seen from our curbside business when we launched it a few years ago, one of the key learnings we wanted to see was would this cannibalize our in-store trips? So far the answer has been a resounding no. We see incrementality coming from our e-commerce engaged customers, which is good. That means that we haven't replaced that in-store trip with an online trip, it's basically a plus one, plus two, plus three-type of scenario.
\r\n\r\nBut to their point, it is how do you, when you have that transparency of how big your cart is, what you're spending as you build this cart online, it does bring in the budget-minded customer to the forefront. They can now track what they're spending down to the penny, whereas if you're in the store and you're building a big basket, you really don't know what you have till the end, unless you're being super diligent about it.
\r\n
\r\nI think that cost savings, a price-sensitive customer does get some value out of e-comm, especially pick up, to see what their spending levels are. One of the challenges we've seen with e-comm is that since you have that transparency and have that little more discipline, it's gained that kind of impulse buy. So it's how do you get that Coke or Pepsi or Hershey bar during checkout? That type of thing. How do you inject that into the e-commerce basket and help drive those incremental sales.
Denman: Right. And it's not just the curbside that can be affecting in-store conversion, it's the straight delivery to the home. At Grocery Shop this year there was plenty of talk and buzz around the idea of micro fulfillment, turning the back room into a mini fulfillment center, or operating dark stores to fulfill digital orders quickly and seamlessly.
\r\n\r\nDrew what is your perspective and Kroger's perspective on the use of store based fulfillment? I know we touched on this a bit already.
\r\n\r\nWhiting: In-store-based fulfillment has been great. We can leverage our proximity to our customers today, like I said, we've got over 2,000 stores, but with that comes a tax — when you're fulfilling from a store in our current model we usually have a selector or a picker walking the floor with a giant trolley and they're kind of getting in the way of the customers who shop in that store.
\r\n\r\nSo not only is there a traffic issue, but it's also an in-stock issue as well. Someone’s placing a large order, buying all the bananas or all the bottled water online, that doesn't leave the inventory there for the customer who's made the trip to come shop our brick-and-mortar stores.
\r\n\r\nWith that in mind, it's how do we then start to aggregate and supplement our existing supply chain to help take some of that burden off of our in-store fulfillment because — don't get me wrong, in-store fulfillment will always be part of our fulfillment model — but how do we make that even better for our online customer to guarantee that what they ordered is in-stock and our brick-and-mortar shopper to not have to pay that penalty or tax of dealing with an e-commerce picker or selector walking the aisles as well?
\r\n\r\nDenman: Linda, would you be able to share some insight on how the micro-fulfillment model helps retailers meet ever-changing customer demand and expectations?
\r\n
\r\n
Palanza: Sure. I think that this model has been kind of the beginning of click-and-collect, which is something that certainly at OneView we've been working with retailers since 2014 on. It is an interesting model. I will say one of the most important parts of it is real-time inventory control. That is something that grocers and retailers globally are still struggling with to a certain extent — knowing exactly what's moving off the shelves in real-time and knowing that something is not available to sell.
\r\n\r\nThat is a focus that we saw as being really strategic to this whole omnichannel model — the ability to sell, to use every store as a warehouse in a very controlled manner. You have to understand and know what's in the store and what's moving out of the store, and where it's moving to — whether it's going to the back for curb pick up or it's going through the lanes.
\r\n\r\nIt's very important that we know it's moved so that anybody ordering after that event will be more proactively informed — we can tell them what to expect, so no, we don't have that particular bottle of water, but these are your other choices.
\r\n\r\nAs we get closer and closer to that, then that online experience will become more pleasant for the consumer who may be a little bit more picky about their brands, like I was speaking about before. Micro fulfillment is a great way to do that test-and-learn about how our consumers want to engage with the brand and if it's done right, it can continue to be an important model.
\r\n\r\nIt doesn't have to be just a segue into a bigger model, which we're getting into next, but it is a model that if you do use real-time inventory, you would actually be able to continue on a micro fulfillment basis and use, as I said, every store as warehouse.
\r\n\r\nDenman: Tying into micro fulfillment centers is the idea of robotic-fueled DCs, which could potentially be a micro fulfillment center or large-scale distribution centers can benefit from the efficiency that robotics brings to the table. Kroger and Ocado have or are currently operating a host of robotic DCs and they have the stated goal of building 20 of these over the next few years. Drew, can you talk to this partnership with Ocado and how the drive and commitment to gain efficiency makes your job easier?
\r\n"},{"id":22717,"bundle":"image","imageSrcset":{"src":"https://assets1.risnews.com/styles/max_width_480/s3/2020-02/one%20view%20slides_Page_15.jpg?itok=jiIpJ6eB 480w, https://assets1.risnews.com/styles/max_width_640/s3/2020-02/one%20view%20slides_Page_15.jpg?itok=ah4QHLWH 640w, https://assets1.risnews.com/styles/max_width_800/s3/2020-02/one%20view%20slides_Page_15.jpg?itok=ercB5bSN 800w","sizes":"(min-width: 1300px) 741px, (min-width: 920px) 50vw, 100vw"},"imageCaption":null,"imageAdvertisement":false,"imageSize":"large","imageLink":"","imageExpandable":null,"fullSizeImage":{"id":6818,"alt":"","width":2347,"url":"https://assets1.risnews.com/styles/max_width_800/s3/2020-02/one%20view%20slides_Page_15.jpg?itok=ercB5bSN","height":1320}},{"id":22718,"bundle":"basic","text":"Whiting: Yes. As we talk about maturing that fulfillment network and supply chain, Ocado is a huge part of that for us by being able to leverage their smart platform and all the advancements they've made in robotics and automated picking. It's really advantageous to the grocery industry because we talk about our narrow margins, we need to look to cost savings where we can find it.
\r\n\r\nI think the robotic DCs are a huge part of that in terms of taking some of the labor out of the equation and really optimizing that picking experience. It not only benefits us from an operational standpoint, but their fill rates and what Linda talked about earlier about being able to predict assortment levels and what's left in the warehouse so we don't sell things we don't have.
\r\n\r\nThose are some of the key things that Ocado brings to the table for us, and I'm really excited about being able to leverage their technologies going forward to help enable us to enable that future growth we're looking for at Kroger in terms of just fulfilling our key markets as well as going to new markets like central Florida.
\r\n
Denman: We talked about this earlier, buy online pickup in-store has become a vital piece of every retailer's omnichannel approach, and Kroger has gone all the way in on the concept and is siphoning business away from its competitors thanks to its ability to provide the service seamlessly.
\r\n\r\nDrew, can you share how you have evolved your strategy to respond to business initiatives like extending the footprint to curb pickups through partnerships like the one Kroger has with Walgreens?
\r\n\r\nWhiting: Sure, you look at our physical footprint and I mentioned a couple of times that we've got about 2,000 stores nationally, and that's more of a larger format traditional grocery store. We look at what we can do with Walgreens: It's a smaller format, it serves a different customer need, it's maybe that quick trip they need to the store.
\r\n\r\nSo how do we leverage that customer need with our core e-commerce business by using Walgreens as a fulfillment point for our customers? We've got 2,000 stores, and Walgreens has stores in areas that we're not in. They also have the corner of happy and healthy, so we can leverage that proximity that they have to the customer to get that additional pickup point for curbside business.
\r\n\r\nPalanza: I think this is probably one of the really exciting things to happen in terms of the vision that the grocery is looking at to have a bigger reach to their market. So Kroger, for instance, is not a brand that's in New England where I live, but we've always heard good things about the brand and I've lived in other parts of the country and been familiar with them. Whether it's Kroger or another brand, here in New England we have Stop and Shop, it's one that's well known, as well.
\r\n\r\nYet when you get outside of your territory, that brand may not be known, but they have so much that they could potentially offer in this kind of a partnership — let's say with Walgreens — more than just pickup in-store number one. It really gives that footprint and that expansion to the point where suddenly you have the potential, if all goes right, to have a touchpoint to customers.
\r\n\r\nThere's a Walgreens within I think five or 10 miles of everybody in the U.S. and that's really looking at innovation, right? I think that just shows you where the grocery market is going.
\r\n\r\nAs I said, this is called the grocery wars and it really is not wars against each other. It's about how am I going to rethink my business so that I can have the touch and experience with my customer that I'm looking to, and potentially expand my markets in a suitable way. I think that's really, really exciting.
\r\n\r\nIn terms of the whole buy online pickup in-store, I think we're still at the beginning of this because now grocers are embracing technologies, they’re are figuring out ways to lower the overall cost and improve the customer experience by bringing technology right out to the car, reviewing with the technology, the substitutions, scanning coupons, and really working towards exactly the kind of experience that the customer wants to have.
\r\n\r\nI actually think that is, though it seems so simple, a very exciting model that has come to be and it goes to show that as partners, organizations throughout the world can get closer to their customers in ways that people hadn't thought of before.
\r\n
Denman: Innovative grocers like Kroger are doing a lot of things like this and innovating in a lot of different areas, and also looking at innovating the last mile fulfillment, which brings us to our next topic — autonomous delivery. Kroger has partnered with Neuro on an autonomous fulfillment pilot that sees driverless vehicles bring online orders direct to shoppers' homes.
\r\n\r\nI'm going to throw this up to the whole panel and maybe Drew can speak first, from Kroger's perspective, can you talk a little bit about this initiative and potentially what the future of it could be?
\r\n\r\nWhiting: It's something that we're super excited about at Kroger, and it helps us test a lot of things currently in terms of what can be our last mile solution? How do customers feel about engaging with an autonomous vehicle? What does it say about order size?
\r\n\r\nIf you look at the picture now there's not so much cubic space in there and when you put all those things together, you get a lot of great key learnings of where we're going in the future. We talk about how we innovate at Kroger, and I think this is a great example of how far we've come.
\r\n\r\nTen years ago we never would have thought about autonomous delivery and here we are, we have these cars driving in Houston delivering groceries to customers. This partnership is super exciting and I can't wait to see where it goes next.
\r\n\r\nJohns: I agree. I think as a consumer I get excited and especially with aging folks, I know my mother would be delighted that she would never have to leave her house to get groceries. So I think it's interesting that what we're going to see here in the next decade is probably nothing like what we've seen in the last decade.
\r\n\r\nPalanza: I, at first, thought that when I saw these I almost had a chuckle about it probably a year ago. Now as a proud owner of a Tesla, I can tell you that not having to always drive myself into work I have now embraced this technology and I second what Anne said. I think that for the aging community it's a fantastic concept and I do understand more about the technology now and believe that it is something that really is going to help in a lot of different ways. I also am very excited to see where it leads going forward.
\r\n\r\nDenman: A lot of these innovative concepts, what they have in common is providing engaging experiences for shoppers. It is these experiences that build shopper value and loyalty, and allow retailers to further experiment with the groundbreaking concepts.
\r\n\r\nAgain, kind of as a wrap up to the whole thing with customer loyalty, let's go around with everyone’s thoughts.
\r\n"},{"id":22723,"bundle":"image","imageSrcset":{"src":"https://assets1.risnews.com/styles/max_width_480/s3/2020-02/one%20view%20slides_Page_18.jpg?itok=FkCAYc0k 480w, https://assets1.risnews.com/styles/max_width_640/s3/2020-02/one%20view%20slides_Page_18.jpg?itok=AFJUWPcm 640w, https://assets1.risnews.com/styles/max_width_800/s3/2020-02/one%20view%20slides_Page_18.jpg?itok=jWFIv-7x 800w","sizes":"(min-width: 1300px) 741px, (min-width: 920px) 50vw, 100vw"},"imageCaption":null,"imageAdvertisement":false,"imageSize":"large","imageLink":"","imageExpandable":null,"fullSizeImage":{"id":6808,"alt":"","width":2414,"url":"https://assets1.risnews.com/styles/max_width_800/s3/2020-02/one%20view%20slides_Page_18.jpg?itok=jWFIv-7x","height":1358}},{"id":22724,"bundle":"basic","text":"Whiting: Sure, I think everything we've covered really boils down to customer loyalty and customer retention. As the customers' needs are evolving from the core grocery shop to things they need now or things they need later versus through extended aisle, as a retailer, we need to be where the customer is, and we need to be able to address all the needs that they have gotten.
\r\n\r\nIf you look at things we're doing with Walgreens, things we're doing with Neuro, Ocado, these are all done with the customer view in mind. Yes, we get some organizational benefits out of it, but that doesn't mean anything if you don't have the customer base there. As we innovate, as we look to reduce friction for our customers and ourselves, it all has that customer-centric lens, and so that's kind of if I don't put a bow on everything that I've said and the rest of the group has said, it all comes down to that customer and being there for them with anything, anytime, anywhere.
\r\n\r\nJohns: My background is obviously being a technology provider, and is around execution. This is not a surprise that my perspective, what I see as winning the wars here, is silos coming down. The silos within the retailers between the business and IT are becoming a much different dynamic, and also hopefully the silos between the retailers and vendors like ourselves.
\r\n\r\nThe times have changed now such that the retailer absolutely needs a seat at the table of the technology provider to shape their offerings. It's going to be a much different relationship than the vendor and the retailer have had before, and also the way these retailers embrace vendors is going to be much different where we really have to become a seamless part of their teams.
\r\n\r\nYou really can't see the distinction between the vendor and the retailer working together as they collaborate and innovate.
\r\n\r\nPalanza: That was very well said. To add to that, there's two things: One is talking about customer loyalty.
\r\n\r\nI often tell this kind of silly story, one time I was flying to New Zealand and I was on an airline that I'm not a loyal member of, but I am a very loyal member on another airline. Because of that, I sat there at the gate — and I travel extensively every year and spend a lot of money — and they called the platinums, the golds, the silvers, the people that had credit cards, and whatever else I could come up with, and I literally was the last one standing there.
\r\n\r\nI thought about that and I said, \"Wow what a missed opportunity.\" Here I am, my spend is quite high, and I'm pretty sure that this airline would love to have my spend, but then I showed up and where I should have probably been put on first, I was put on last.
\r\n\r\nI think that's a real lesson learned to any vertical, but it's important to see to also understand those customers that are coming in who aren't known to you or are not loyal customers. What can you really do to turn that customer around to have them be a customer for life?
\r\n\r\nThat's something that grocery really should focus on and look at, because with all of these new exciting experiments that they're doing, they're going to attract their competitors' customers — sometimes just out of curiosity, sometimes because they're fulfilling a need — and you have to capitalize on that.
\r\n\r\nLastly, in terms of this whole conversation, it really started because we've got some platform players that have come into these markets and started to wake people up about threats. I think that's great because where everything was okay and we all were fine with the old siloed technology in the store and in the behaviors, the way they were, it woke people up. It woke businesses up to the fact that we have to take this technology, and this platform technology, very seriously and the amount of information they have about even our own customers.
\r\n\r\nThat's going to be the next chapter. Really looking at loyalty, not just from our own, but at a cloud and platform perspective and how that also can potentially be a threat to us. Those are all challenges that we're going to see over the coming years and some of these front runners like Kroger, I think we'll continue to do the kind of experimentation that will help everyone to understand where the business needs to be in the coming years.
\r\n\r\nDenman: Great, let’s tackle one last question. There's a definitive blur between retail verticals. What should convenience QSR and dollar retailers learn from what's going on in grocery in general?
\r\n\r\nPalanza: I think I alluded to that in my last comments, which is that there's platform players worldwide who are suddenly coming into these markets and posing real threats, and those threats aren't just at grocery. They're at pretty much everyone, probably not the quick serve restaurants as much, but I think that the lesson learned is that these threats, because of platform technologies and because of the reach that we're seeing in these technology players, now means that they can virtually threaten any vertical.
\r\n\r\nLook and learn from how grocery is responding to this and how they are adopting new ways because they do understand brick-and-mortar, they do understand the everyday customer, they do understand their community, they also understand how to run good operations. The reason we can afford our groceries is because they run on very, very small margins and they have to really watch their strength.
\r\n\r\nLooking at the fact that they had good, strong businesses and they've now had to be adaptive to a new competitive environment is important, and I believe that all these other players are going to face the same thing and convenience has to look at how they matter, how the customer once again wants to interact with them.
\r\n\r\nThey're probably more suited towards a scan, bag and go, or frictionless environment where the dollar retailers are much more into how we want to interact. Do we want to go into the store? Do we want to be able to pick up? Also, once again, how we can increase as someone said, those conversions if we're going to offer those types of services.
\r\n\r\nSo I think it's really using them as a test and learn, but also recognizing that nobody is safe from the industry today compared to what it was 20 years ago.
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