Ken Ouimet, CEO at Engage3, and Wes Bean, SVP Global Retail Network at Catalina Marketing, discuss how some retailers in Europe are experimenting with giving healthier-for-you items in stores premium shelf placement. They also discuss how companies can leverage data science to know the customer better, and the challenges of balancing competitive positions with price investments. This is Part 1 of 2 video series recorded at GroceryShop in Las Vegas in September 2019.
Below is the transcript of their conversation:
Using Data Science to know the customer better
Ken: What do you see as the biggest opportunities for grocers today?
Wes: It’s interesting, I’m seeing investments that were very heavy in supply chain and inventory management and fulfillment that have gone on for years now starting to work closer towards the customer. So investments are coming in around data science to know the customer better, better personalize the experience to them and then better differentiate the value prop from a retailer to a customer.
Ken: Where do you see personalization going?
Wes: I feel like it’s turning the clock back a hundred years, when the store manager used to know the customer, knew him by name, knew the family and the kids. Now we’re doing that through data science and so how can you know me, know my interests, know what I like and make my shopping experience easier, but do it through technology?
Ken: It’s almost like the AI can help us be that store manager that can know everybody.
Wes: That’s exactly it. Today a store manager is dealing with labor and shrink and fulfillment and out-of-stocks and the job has become so complex that technology is now enabling to return back to that core focus of how do I take care of the individual customer and give them a personalized service.
Balancing competitive position with price investments
Ken: What do you think the biggest challenge for retailers in terms of the pricing is today?
Wes: Today there’s such a differentiation in the market between the low cost operators and we see this as Aldi begins to grow its market share, the continued price investments we’re seeing from Walmart, and then those who are looking to differentiate experientially. It leaves a very messy middle in which the value proposition has to be right on price, but it’s gotta be right in the right way as part of their go-to-market strategy. And so it’s going to be a continual focus as they look for the right mix of margin to be able to make those strategic investments in eCommerce and their technology platform. So, that critical balance to be competitive in the environment but then also fund the type of long term investments you need is probably a higher pressure point now than it’s been in the last 10 years.
Kids are teaching their parents how to cook
Ken: We’re seeing–we’re in the stores all the time–we’re seeing more retailers have health attributes on the shelf. Where do you see that trend going, that combination of health and grocery?
Wes: It will come into more and more play. So, we’re constantly looking at data and mining that data in terms of how do attributes make a consumers’ behavior influenced in terms of both their planning process and then their at-the-shelf decision making and customers want to be smarter about their decision making. This is actually the first generation where the kids are teaching their parents how to cook. So as the younger generation evolves up, they’re reading the labels, they’re looking for it, they’re making life choices because of that. It will greatly influence how you assort you know, how you merchandise and how you price to be relevant in those specific areas of your assortment strategy.
Figuring out the “why” behind the buy
Ken: Do you envision that at some point there’ll be an app that’ll help you know what products to buy?
Wes: Very much so both in terms of how to shop, and then even from a marketing standpoint. What we do at Catalina is we’ve taken third-party attribute data and we’ve fused it with POS data from retailers to start to look at the why behind the buy . Why is the consumer making that choice and decision? What becomes very interesting is it’s not about targeting because they’re a category buyer or they’re loyal to private label. It’s because they may need gluten-free because they may have a child who has Celiac. And so are you effectively communicating to them the type of assortment strategy you have as you begin to look at those health related trends there? So it’s a lot of disruption that technology can help educate the conversation with the customer as we get smarter behind what drives the decision.
Healthier options get premium shelf placement
Ken: Yeah. We believe–very aligned with you–that the personalized health and personalized pricing, combining those two is going to be the magic.
Wes: It truly will. It’s actually one of the most exciting things that I think about and where I start rolling through with is the applications both in the story that you’re able to sell to the customer itself, but then how it will change the way a retail operator functions. How do I outlay my stores? What’s sitting at eye level? I’ve seen in my travels over in Europe recently where some retailers are now putting health, the healthiest related products at eye level to the customers. And those in which they deem have higher salt, higher sugar, you know, less healthy options are now finding the less premium placement at shelf edge.
Ken: What retailers are doing that?
Wes: A couple over in Europe that we looked at, and then also one in Japan that we saw is testing it right now. But I thought it’s so interesting because the retailers model that real estate has always been about revenue generation. You know, the premium brands can be command the premium locations within the shelf assortment and now it’s listening to what the needs of the customer are as a driver in that shelf allocation. So, I’m waiting to see if tests will become mainstream as people pilot through it, but it’s really aligning with where the customer conversation is starting to drive to– a very customer-centric demand-driven approach.
Stay tuned for Part 2 of this conversation. Ken’s discussion with Jon Springer, Executive Editor of Winsight Grocery, about brand loyalty erosion, privacy vs. personalization, and how Aldi’s efficiencies are keeping Walmart and Amazon on their toes is here.