You Don’t Need A Weatherman to Know Which Way the Wind Blows
By Ron Lunde / October 2016Insights
My observation is that retailers almost always think in terms of how their business, their industry … operates within the existing order rather than how to create or adapt to a new one. Retailing has always been a race for customer attention and loyalty. Retailing has always been a marathon without a finish line. Then change happens, and the marathon has to be run … at sprint speed!
Today, technology is changing the customer mosaic. 1st came the Internet, followed by the lap top and cell phone and now the smart phone. Connectivity is now nearly ubiquitous. Futurist Parag Khanna observes, “Connectivity is the change emerging from within the system that ultimately changes the system itself. Its networks are not merely conduits of connections, but the power of the network itself increases exponentially as the number of nodes increases.” (see Metcalfe’s law). The centuries old formula / format for consumer retailing—simply—changes! The winds of change are blowing from a different direction.
Digital is the new connective infrastructure. About 48% of the world’s population now uses the Internet. And …history tells us that supply always seeks demand. Inertia is always subsumed by momentum.
Because of the impact of the digital connective infrastructure—suddenly, we have to move from the existing order to a new order…perhaps more aptly described as hybrid value chains…the merging of the physical and the digital. Ideas, theories, philosophies, supply chain, tactics, patterns and strategies…add manufacturing and the services combined with the value added from intangible factors such as competence and reputation…they are now all part of a new customer focused business equation. Old business models must adjust or even morph to totally new.
Consumer Retailing is Changing
Amazon is forcing the change to a new model—eCommerce. In response to the Amazon challenge, Walmart’s Doug McMillon, in a recent analysts’ call, observed, “The average shopper who only buys in a Wal-Mart store spends nearly $1,400 a year, compared with someone who only shops at Walmart.com spending about $200 a year. But a customer who shops stores and online spends significantly more. The customer who shops us through multiple channels spends more than $2,500,” he said.
Walmart is spending billions through both internal adjustments and acquisitions in an effort to understand what’s next after what’s next…to better serve today’s sophisticated Omni channel shopper. Walmart serves the spectrum of consumer goods from fashion to food. “Online retail is hard, grocery retail is really hard, so online grocery is of course really, really hard.” Neil Ashe Walmart
The Necessity of Competitive Insights
Many management teams today still rely on internal data for insights. The traditional data insight span is from POS to P&L. Those metrics give a pretty good view of any changes in the enterprise environment. But those metrics are siloed and alone do not detect the missed customer opportunities … the escalating, potentially broad and disruptive changes occurring in the market…until it’s too late.
Data Visualization—From Complexity to Simplicity
Back to Bob Dylan. “Something is happening here but you don’t know what it is, do you, Mr. Jones?” Remember, no idea is a good idea—forever.
We all know the world is awash in big data metrics, but how do we visualize that much data? How do we know when something is happening? How do we know what is happening? How do we find the insights that challenge our current perspectives? How do we visualize and explain the data? How do we move from complexity to simplicity?
We know that figuring out the implications and insights of change we need a structure based on both internal and external data, hard analytics and both inductive and deductive reasoning…and the ability to explain our insights. How do we tell the story?
Let’s Look at Some Current Numbers
The Prosper Insights & Analytics team allowed me to look at their multi-year consumer insights data base for this article. The data I used is current through September, 2016 and is based on an ongoing survey with over 6,500 monthly consumer panel responses.
Change—the Grocery Retailing Model?
First, let’s use the survey data to get a total market eCommerce share perspective.
Chart 1 allows me to track reported spending by both customers who identify themselves as being Amazon Prime members and those who reside in the East North Central Region of the U.S., which includes Ohio.
In Chart 2, Walmart shoppers were asked, ‘Do you have an Amazon Prime membership?’
In Chart 3, Walmart shoppers were asked, ‘Do you have a Walmart Shipping pass?’
Now, let’s drill down to the grocery segment.
Chart 4 indicates what percent of groceries surveyed consumers buy online.
This chart gives you a pretty good idea of the growth of online grocery shopping and its impact on major grocery retailers in the East North Central Region of the U.S., which includes Ohio. Remember, around 90 to 120 days ago, Amazon went ‘live’ with its billion dollar plus distribution and data insights investment…and 1-hour delivery.
Sooo… Mr. Dylan… in 5 easy charts, we now know what’s happening here and which way the wind is blowing. All we have to do … is to figure out…what to do!
And … now…you know why retailers are spending millions to billions of dollars…trying to figure it out.
“Something is happening here but you don’t know what it is, do you, Mr. Jones?”
“You don’t need a weatherman to know which way the wind blows.”
Contributed by Ron Lunde, Senior Marketing, Advertising Executive & Market Strategy Consultant. Ron held senior management positions in grocery retailing including Supervalu, Grand Union and Price Chopper. He was also a Sr. VP. at the Leo Burnett Advertising agency. Ron is credited with introducing Space and Category Management systems to the industry as well as working with the Price Chopper team to introduce and deploy the first data driven frequent shopper program in the US. He was also a consultant to the Financial Accounting Standards Board in developing the Issues that govern the accounting requirements for all trade promotion and marketing expenditures. Lunde currently serves as a Market Strategy consultant to retailers and CPG brands.