Being Good Is No Longer Good Enough
So, if the physical world of retailing is ruled by being close to the customers, Aldi is becoming a larger threat to others' in-store business. Not only will its store base grow 50 percent by 2022, but it's upgrading nearly 80 percent of its existing stores to improve the overall experience. Combined, this means that more households will have access, the format will attract new customers, and spending per visit will likely increase.
Personalization dominates digital
My household was just getting started with shopping online in 2003 – enjoying the fact that we could find the authors and book titles that we wanted to read – and spending a few hundred dollars online per year. By the end of 2017, we bought many other things online and spent considerably more than 10 times that amount. Although Amazon doesn’t capture many of our grocery-related purchases, we are gradually buying more online from other sources.
Walmart wins our cleaning and paper supplies. We simply shop before we run out, throw enough of these products in the basket to take advantage of free shipping, and receive the order a few days later. Ironically, we prefer to shop at a Target store that’s also closer to us; however, it’s more important that we’re able to shop the way we want, and Walmart offers us a better online experience.
PetSmart has long captured most of our pet food and supply dollars, and in 2017, it introduced us to buying these products online. This shopping option was very appealing, as we’d typically made two visits a month to the store and spent 30-plus minutes driving round-trip. Saving time was our motivator in this instance, and the fact that we could still buy what we had bought before was good, too. We could save money via auto-ship or store pickup fulfillment options, but neither really clicked for us.
Less than a year later, we’ve shifted dollars to Chewy.com, since online has given us access to a whole host of other shopping options. Our switch was triggered by finding better chew treats that were good for our dogs. We would have shifted all of our spending to Chewy, but we still needed to buy our preferred dog food, a store brand from PetSmart.
Welcome to the matrix
While our grocery buying online may be more ship-to-home via common carrier, we see the Peapod van making at least a few stops on our street each week. The way our household buys groceries is influenced by the fact that my wife has the time and enjoys shopping. On the other hand, one of our neighbors who uses Peapod is a single working mom, while another is a dual-income family with four kids, so they value their personal time differently.
We know that most grocery trips and spending will still occur in the physical store; however, we also believe that more households and spending will shift online as better options that consumers prefer become available. Physical retailing will remain, and digital will make it an even better experience – and vice versa. All of this will introduce more complexity and cost into the system that retailers will need to manage in order to grow profits. How all of this happens will vary by retailer.
These are the realities that retail is facing, and it’s clear that being simply good isn't good enough, as consumers will continue considering new options that better meet their preferences. If you can’t beat the competition, can you buy them like PetSmart did with Chewy in 2017? If not, can you find ways to partner that make sense? If not, how are your consumer value proposition and operating model going to change so that you survive and hopefully thrive in the new age of retailing?
-
Brick Meets Clicks has highlighted the strategic imperative for supermarkets to consider in a new guidance paper. View it here.