7 key areas for digital transformation in grocery
Randy Evins is the senior principal for food, drug and convenience at SAP. With 30 years of experience in the grocery business, Randy Evins is fluent in the language of food and drug. In his role at SAP, Evins helps food and drug customers understand SAP, as well as help SAP understand what the industry is asking for. Working for one of the world's largest technology companies in a space that has been late to adopt technology as a strategic competency gives him the opportunity to provide leadership and a positive view of the future.
To survive tsunamis of technology disruption, further empower the consumer to act independently and enable new competitors, traditional grocers must address a key aspect of their business. Digital transformation is the new imperative across the grocery ecosystem. It eliminates silos of information and enables business processes to quickly evolve and adapt to current conditions. It also provides near-instant insights into the profitability of existing and new processes -- long before they reach enough scale to appear on historical reporting systems. The results of transforming to a digital business include the ability to deliver distinctive experiences that delight and engage the shopper, driving advocacy and loyalty, and delivering revenue and profit.
The imperative to digitally transform the grocery ecosystem has generally been focused on the digital consumer, who is at the center of the grocery universe. However, there are six additional imperatives that are intertwined with fulfilling the needs of that consumer. Each is part of the “digital pulse” of the business – “24/7 always-on insight” into the grocer’s ecosystem.
The digital consumer has obliterated traditional retail in general, and food retailing specifically. It's not just millennials, although they are at the forefront. This is coming from everywhere, and it isn’t going away.
Digital shoppers and the information they generate have opened doors to an amazing transformation that can bring things into light that past grocers only dreamed about. Access to orders, customer profiles and buying habits, accurate predictive analysis, real time inventory visibility (even at the consumers’ pantry), and much more are now available in a digital world.
Digital store operations
A digital consumer is willing to provide not only information about themselves, but is also willing to give you his or her order before arriving at the store (or before it is delivered to his doorstep).
Access to that information needs to be game-changing to the business model. If we know the collective orders at a store, regardless of their origin, then we have a much better chance of eliminating the two things that are the death of grocery: out of stocks and excess inventory, the silent killer.
If we know the customer specifically — and we do if they’re digital — then the opportunities to extend their experience and provide exceptional customer service are nearly limitless. Technologies like beacons and GPS potentially alert us to who is interacting with us and where they are within the store. Store associates are then further empowered by technology to cross sell/up sell digitally and continue to improve the shopping experience.
Digital supply chain
The supply chain is now any portion of a product’s path to the plate or pantry. Supplier, distribution, store, and finally the consumer are its scope. In a digital world, they are all connected.
That connection provides capabilities that will completely reengineer the process. It means a whole different definition of collaboration. The artificial walls built over the years of disconnected, manual and off-system work come down, and the entire supply chain focuses on the shopper.
The digitally connected supply chain can identify the appropriate inventory necessary to support customer demand, then define the cost to serve and make real-time decisions that will focus on the outcomes.
Digital category management
Category management in food used to be the center of the universe: the place where products, vendor relations, costs, deals and promotions came to be. So how will that change in a digital world?
Chances are going digital won't change the tasks. You'll still need products, vendors, costs, and all the above. What will change is the focus: now on a specific customer, not a category. Measurement of success will not be on how a product performed in a category, it'll be on how the consumer reacted to that product. Positive consumer sentiment and satisfaction will be the goals. In the digital world, category managers will know immediately how they are doing. And so will the rest of the world.
Across the retail industry, the CMO (chief marketing officer, not merchandising) has risen to the top — and in some cases is the most influential individual at the leadership table. But not so much in grocery. Merchandising is still king, but there are cracks in its foundation.
Grocers have come to see the marketing department as more than advertising and traditionally have placed e-commerce here. In a digital world, however, marketing is so much more. This is where the future work of the customer experience has its roots. There is also the potential for merging or blending the category work. The digital marketing department takes advantage of the digital pulse across the ecosystem to leverage partner assets — from search-engine-enabled romance copy to mobile-ready content.
If the digital category manager provides the product and the digital marketing team provides the venue, they must join forces. Collisions at the juncture of promotions and consumer offers that lead to profit loss are not the sign of a mature company — yet they happen every single week — and lead to customer dissatisfaction and abandoned physical and digital shopping carts. This would not be the case in a digital world.
Fresh (meat, seafood, deli, bakery, produce) has become the battleground in food. Pure online retailers like Amazon have suspect quality and freshness, as well as inability to serve a consumer that may not know what he or she wants. Traditional grocers can point to these departments as ways they differentiate from the competition.
But digital fresh? The nature of the product, along with grocery business practices that have been invisible for years, define a culture of manual business processes and off-system work in each area: store, supply chain, back office. That doesn't make digital for fresh an easy topic.
However, things have changed. Understanding random weight and tracking code dates, enforcing quality requirements, and making food safety part of a grocer’s corporate culture are all areas that can be dramatically improved with a digital transformation.
Digital back office
The back office (read: accounting) is where this all comes together. It's where the business case is defined, tracked and ultimately realized. It's the bottom line.
So how will going digital affect accounting? There's so many areas: real time P&L, in week/day reporting, daily cash flow trends, and an overarching real-time understanding of the health of the business.
Conceptually, all business executives are exposed to the lifeblood of the company as often as necessary. No waiting for end-of week processing, no cleanup time. Just real access to financial information whenever and wherever needed.