Most businesses, especially today, are customer driven. Gone are the days when you could promote a product or services, and customers cheerfully and unwittingly handed you a credit cards. Consumers are now in control with the abundance of information on the Internet to do research, read reviews, compare prices, discuss in forums, and decide whether to buy online or through a brick-and-mortar.
Some brick-and-mortars, however, are in the rarified position of not having to worry about embracing the latest online, data-driven strategies to delight existing customers, and attract new ones. These businesses include neighborhood and regional florists, plant nurseries, bird seed shops, farm supply, and traditional hardware stores.
Some of these businesses have been part of their communities for decades, and their reputation is built upon generations of relationships. Others have 5 or 6 locations, depending on personalized services and stocking items not typically stocked in large nationwide box stores. Some like Wild Birds Unlimited and Ace Hardware are nationwide brands, but are highly focused on meeting the needs of their local community rather than being copycats of stores in other towns.
Product Supersedes Expectations
This localized focus became crystal-clear to me a few months ago. After checking out several grocery stores in a community where I recently moved, I settled on an older market with just seven locations in a 126-mile radius. The store is a bit shabby, aisles are narrow, produce is piled up rather than neatly stacked, shelves are blanketed with paper sales tags, making it hard to discern what is or isn’t on sale, banners dangle from the ceiling, proclaiming, “Rock Bottom Prices,” similar products appear in different area, there’s no bakery, meat or fish counter, and the small deli mostly sells fried foods.
Gotta’ admit it sounds dreadful.
However, the store is a short drive from the Naval Air Station Whidbey Island (NASWI), which is home to people from around the world. Knowing this fact, the store stocks items that might be challenging to find — even in Seattle — unless you went to a specialty grocery store. In an open refrigerator case, in the produce section, is fresh okra, two kinds of eggplants, fresh banana leaves, Chinese long beans, numerous kinds of peppers, stalks of lemon grass, boxes of exotic mushrooms, and other produce essential for preparing ethnic dishes.
At least a third of the store has fresh, frozen, and packaged products for making Chinese, Japanese, Thai, Vietnamese, Mexico, Pilipino, and other ethnic and regional dishes. In an article published in 2012 about the opening of a new store, the general manager John Hames commented, “We tend to merchandize to the community around us. We have some stores that are aimed at the eastern European and Russian population in Tacoma [WA].”
The first few months I started shopping at the store, I made gumbo, char su pork, green curry, massaman curry, marsala, yakisoba, and jambalaya. Every visit to the store is inspiring (and exciting).
Here’s the drawback. If you want to take advantage of the store’s sale you need to cut the coupons out of their weekly newspaper insert, and then present them to the checker at the start of the transaction. As one checker explained, they don’t have fancy cash registers so they need to compare the coupons to what the customer is buying and take the discount at that time.
While a bit inconvenienced, customers are oblivious to the store’s use of older technologies. What’s important to them is the wide variety of foods, prices, and friendliness of the staff. Visiting Yelp, comment-after-comment about the grocery chain lauds their variety of international foods, prices, and unexpected surprise of finding something that’s not available elsewhere (like cans of Tom Kha soup!!) or they hadn’t considered purchasing previously.
Market Basket Analytics Drives Decisions
On the other side of the coin, is Fred Meyer, which is part of Kroger. After moving back to the Pacific Northwest from Texas, the first place I went was Fred Meyer. It’s my “happy place.”
Kroger, and its collection of grocery stores like Fred Meyer, merchandizes and makes business decisions based on data gathered at checkout stands, observed via video throughout the store, and captured on devices. When speaking at the U.S. Chamber of Commerce’s Farm to Table: A Tech Story event, Kroger EVP and CIO Chris Hjelm shared, “Our goal is to make more and more decisions that are data based versus instinct based.”
Most of Hjelm’s talk centered on the internet of things (IoT) to monitor and report on cold storage cases, determine staffing based on historic traffic patterns, use algorithms to optimize stock rotation, and display real-time information about the availability of sales items to nudge customers to purchase before supplies run-out.
Having shopped at Fred Meyer for many years, I’m keenly aware they track my buying habits, sending me coupons every month, which match what I previously purchased. In addition, my husband receives updates on his phone with in-store coupons he can redeem at the register.
The ability to deliver personalized coupons might seem straightforward, but it requires extensive data integration, data mining of huge customer databases, and advanced analytics to match the right offers with the right customers – all in real-time. Kroger reports that nearly half the coupons they send to customers are redeemed, which is dramatically higher than the average trend of 1 to 3%.
Unlike the community grocery store where I now shop, Fred Meyer checkers can enter coupons and discounts at any point in the transaction. The sophistication of their point-of-sale terminals also enables the output of personalized coupons, information about a customer’s reward or loyalty points, and other valuable information, which enhances the shopping experience.
To make shopping more convenience, Fred Meyer has ClickList, which enables customers to order their groceries online, and then pick them up when ready. Some stores offer delivery. With each added to the list, Fred Meyer is gathering customers’ data and insights, which further enables them to deliver increased levels of service.
Data analysis and mining techniques, which discover co-occurrence relations or affinities between recorded or observed activities and an individual or group is called affinity analysis. One example is market basket analysis, which helps grocers and retailers understand the purchase behavior of customers. The intent of market basket analysis is to determine whether a customer chose a product because it was on sale, they ran out, were intrigued by packaging and shelf placement, or another reason like they’re cooking a special meal or having a party.
The illustration above came from Greyferret.com, which is a leader in market basket analysis.
In addition, market basket analysis helps grocers forecast shopping patterns to more intelligently restock shelfs, rotation inventory, reduce spoilage of perishables, and respond to store traffic based on peak hours, holidays, and events (i.e. Super Bowl, Thanksgiving, etc.).
This data is also being used to determine what type of items customers typically purchase in other stores. For instance, if a grocery store added a mini post office with stamps, shipping supplies, greeting cards, and FedEx pick-up, they could see an increase in business from people dropping off letters and parcels, and then zipping into grocery store to purchase food for the rest of the day.
No One Right Answer
There isn’t a fail-proof recipe for success in a constantly evolving, customer-drive economy. However, customer-data and actionable intelligence has the potential to empower grocery, online, and traditional brick-and-mortar stores to knowledgeably compete against competitors and growth their market share.