Food Forum: Grocers address today’s challenges with customer analytics

Analytics can provide the insight behind the data and allow retailers to make well-founded and accurate decisions.

StephanPolanskiBy Stephen Polanski

The grocery industry is currently in an era of big changes and big challenges, and there is no sign of it slowing down any time soon.

Grocers have to combat pressures brought on by new competition, an oversaturated market and ever-changing consumer demands. Big data is all the rage today, but without the insight, analytics and capabilities to process all that data, the only thing businesses will be left with are big questions.

Grocery retailers are leveraging big data and analytics today to help identify their most profitable target markets and to position their stores not only to leave the customer with a more favorable experience, but also year-over-year business growth. Today, the grocery industry finds that it is in the Wild West of development and change. Here are a few challenges that grocers will find simply unavoidable in the coming years as well as the solutions to address them.

Intensifying competition

Grocery retailers are competing with and losing sales to convenience stores, drugstores, mass retailers and club stores. Grocers can come out on top if they understand they can no longer sell everything to everybody. Grocery retailers must know exactly where they stand in terms of strengths, weaknesses and most promising areas for improvement.

Customer analytics and predictive models can unlock data on markets, customers and spending habits. Grocers’ financial departments may be able to tell them that the needle is moving in the right direction, but the more important questions are how, and why: market-by-market, and store-by-store. Analytics can help provide strategy for site selection, merchandising and marketing as well as an understanding on how to target profitable repeat customers.

Building customer loyalty

It is common today for consumers to visit multiple grocery destinations as they seek out the value, variety, quality and convenience they want. Studies indicate that consumers would like to have fewer destinations. The question for grocers becomes how to fill the demand and get a bigger share of consumer grocery dollars in the process. The answer lies in knowing your core customer.

Consumer analytics can develop detailed customer profiles that offer a wealth of knowledge not only in the realm of demographics/psychographics, but also where they live and how far they are willing to drive to any given location.

Get big by getting small

Smaller concept stores have several advantages such as reduced inventory and lower overhead, and are also able to expand into new and smaller markets that were previously considered out of reach. Generalizations and assumptions about smaller concept stores being the “new” trend should not be taken lightly though, as maximized performance is imperative to be successful with this model.

Grocers looking to expand into this market can utilize analytics by pinpointing specific sites that optimize existing markets by putting them within easy reach of their core customers.

More products, less space

The “trend” in moving to smaller grocery footprints presents its own set of unique challenges. Analytics can inform how to determine the best product mix that will lead to profitable results, increased market share and customer satisfaction. Retailers will be required to think like CPG manufacturers and know what product to place on what shelf in what trade area.

Grocers need to understand what the core customers want and what drives their buying decisions. Analytics can help maximize profits by pinpointing the best prospects for private label products, even down to the SKU level.

Online grocery is growing

Grocers are not safe from the online threat. Online grocery shopping is expected to have a 9.5% growth rate in the next five years and the question is not whether or not it will affect traditional grocers’ bottom line, but simply how much.

Analytics can be used not only to interpret grocers’ own data and target markets, but also the competitions. By better understanding the markets and locations that are most inclined to jump on the online grocery bandwagon, they can explore the potential of either opening up stores in the right areas or offering online grocery incentives to select demographics. 

Stephen Polanski is senior vice president of sales at Buxton, a market planning and marketing services company. He can be reached at spolanski@buxtonco.com or (817) 332-3681.

 

This entry was posted in 2013 09 Article Archives, Columns and tagged , , , , , , . Bookmark the permalink.