Business Intelligence-Grocers Use Customer Insights to

VIEWPOINT
C
Business Intelligence: Grocers Use Customer
Insights to Inspire Change
By Andrea Morgan-Vandome
> Vice President of Retail Strategy, Oracle
RETAIL
Use customer insights to shape store layouts, product
assortments and service offerings
Grocery retailers are well aware of the need to keep their businesses on a consistent path of growth, because in this low-margin, highly competitive sector, it’s never
enough to simply maintain market share and customer count. This is particularly true
today as online retailers encroach on grocers’ traditional turf, offering convenience
and low- (or no-) cost shipping. At the same time, small-footprint convenience stores
have been upping their game, nibbling at traditional grocers’ sales opportunities with
higher quality fresh and prepared food offerings.
So growth is an urgent business imperative. Fortunately, there are numerous ways
grocery retailers can achieve it, and all involve varying degrees of change:
• E
ntering new markets via acquisition or by building new stores
• R
educing costs by improving supply chain and operational efficiency
• “ Buying” market share with aggressive promotions
• E
xpanding into new product areas such as organic foods
• Increasing share of wallet with existing customers
Building a Foundation for Profitable Growth
But whichever strategy they choose, grocery retailers must ensure that they don’t
sacrifice overall profitability in their search for growth. This may seem basic, but it’s
frequently overlooked. For example, it’s easy to boost top-line sales of a particular
item with a combination of price adjustments, promotions and shelf placement. But if
higher sales of this item mean sales of a competing item — one that provides the retailer with a higher profit margin — go down, the result is a net loss in profitability. The
problem can even be compounded if the competing item is frequently purchased with
other high-margin products, creating a negative ripple effect when its sales take a dip.
In today’s tough market, making this corporate commitment to profitable growth is an
important first step for grocery retailers. Following through requires a combination of
advanced technology solutions, careful execution down to the store and shelf levels,
and high levels of intra-departmental communication and coordination.
Get Closer to Your Customers
One critical necessity is conducting careful analysis of customer data, and using
these insights about shopping patterns to more precisely target individual store
assortments. The days of “cookie-cutter” assortments, determined at the corporate
level and based primarily on store size and layout, are fast drawing to a close. To be
successful today, grocers need to know who their most important (read: profitable)
Andrea Morgan-Vandome joined
Oracle Retail through the acquisition of Retek, and brings more
than 20 years of consulting,
solution marketing, and application
software management experience
to her role as Vice President. She
works closely with our global retail
customer base to truly understand
the needs of the retailers, the
vision for the industry, and the
strategy required to be successful.
From 2001 to 2005, Ms. MorganVandome served as Vice
President of Consulting, Presales,
and Product Strategy at Retek.
Prior to joining Oracle Retail,
Ms. Morgan-Vandome held key
strategy, marketing, and
management positions within
IBM, i2 Technology, and Connect3
Systems.
customers are, and which categories/products are most important to them – and then
use this information to inform category management and assortment decisions.
It should be noted that grocers can gain valuable insights without having detailed data
that goes down to the individual customer level. Grocers typically have access to a
wealth of data already from a range of sources, including store sales data, their own
loyalty programs, and third-party providers. Using technology solutions that allow
them to discover trends around how similar groups of customers behave can significantly improve grocers’ decision-making capabilities.
What grocers do need to gain is a more sophisticated understanding of products’
roles, learning which items are purchased in combination with others and by whom.
The goal here is to not only attract and retain high-value customers, but to increase
market basket sizes and profit margins when those customers do visit the store.
Gaining a better understanding of customers’ shopping patterns should also inform
operational decisions, such as whether to offer in-store pickup and/or home delivery
for orders placed online, and to identify the optimal store locations at which to offer
such services. Today’s consumers certainly seek the convenience of such options,
but grocers need to ensure that enough customers at a given store will use the service to make the investment worthwhile.
In addition, grocers need to keep a sharp eye on operational costs, particularly when
they move into new service areas or expand into new product categories. Profitable
growth comes not only from providing something customers want, but doing so
efficiently and cost-effectively. The requirement to both satisfy customer demands
and control internal costs means grocery retailers need to foster greater communication and coordination among internal departments that have often operated as
quasiindependent fiefdoms: inventory management, assortment planning, store operations, supply chain, marketing and merchandising.
Better internal cooperation will also keep the grocer’s organization more nimble —
another key element of profitable growth. By focusing on customers and how they
interact with products, while keeping a sharp eye on operational efficiency, grocers
can effectively reconfigure their growth strategies both today and in the future, when
consumer trends and market conditions will undoubtedly change the competitive
landscape yet again.
Growth is an urgent business
imperative. Fortunately, there
are numerous ways
grocery retailers can achieve
it, and all involve varying
degrees of change
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