The Supply Side: Navigating the omnichannel transition in the grocery industry

While mass retailers like Walmart and specialty retailers like Ulta Beauty have worked to become omnichannel by offering a unified shopping experience that bridges digital and physical commerce, the traditional grocery sector is still trying to make the transition.

Developing a unified experience that offers a customer-centric strategy takes advantage of physical stores and consumer data to create engaging experiences, according to Deborah Weinswig, founder and CEO of Coresight Research, who spoke recently at the GroceryShop event held in Las Vegas.

She said that when creating unified shopping experiences, retail companies must manage data integration, inventory visibility, seamless checkout, a user-friendly website and mobile app, social commerce integration, flexible fulfillment options, analytics and employee training. She said leading omnichannel retailers are still working out the kinks of the transition. For example, Walmart recently revamped checkout options in its stores and updated its website for better usability.

Walmart has said its omnichannel shoppers spent two times more than those who shop only in stores or online. Manish Sharma, vice president for omni-commerce at The Kellogg Co., said omnichannel shoppers spend two to four times more than non-omnichannel shoppers. Sharma said Kellogg is still experimenting with omnichannel strategies.

“It’s a journey,” Sharma said. “We have made strides in the right direction, but we haven’t solved the problem yet.”

Weinswig said brands and retailers must devise multiple ways to engage with shoppers regardless of where or how they shop. She said retailers use QR codes to enhance in-store experiences and offer order-ahead and delivery options for made-to-order items such as sub sandwiches.

Coresight Research said it’s also essential to allow customers to create personalized shopping lists and elevate mobile technology to help customers quickly navigate stores. Also mentioned was providing real-time updates and communication on orders.

According to CEO J.J. Fleeman, Ahold Delhaize, a multinational retail and grocery company based in Europe, is also transitioning to an omnichannel business. At the GroceryShop event, Fleeman said delivering a connected experience is a top priority for the company. He said the company has invested in various technologies to achieve a unified commerce experience. Fleeman said offering the omnichannel experience is crucial because engaged shoppers spend more time in the store.

While Ahold believes physical stores remain important, the company anticipates continued accelerated e-commerce growth in the coming years.

The company is growing its digital media income which is up 70% year over year. Fleeman said retail media can strengthen the relationships between consumer packaged goods (CPG) partners and aid in consumer discovery.

Walmart has commented similarly about its Connect advertising business which grew revenue by 26% in the fiscal third quarter. The advertising business was one of two bright spots Walmart U.S. reported. The company grew revenue by 36% in the second quarter and has nearly doubled in two years. Walmart’s advertising platform has been so successful in the U.S. that the retail giant has rolled it out in Mexico.

“The most important part of retail media is how you create relevant experiences for the customers along each part of their shopping journey, from inspiration to purchase in stores and online,” said Beatriz Jimenez, chief growth officer at Walmex, at the GroceryShop event.

DELIVERY PLATFORMS
According to Jennifer McKeehan, senior vice president of transportation and delivery at Walmart, fulfillment and delivery services are crucial to omnichannel success. McKeehan said different customers want different things, and retailers and brands have to focus on getting products to customers when and where they want them.

While Walmart built out its own delivery platform — Spark — that uses independent contractors to pick and deliver for online commerce, other retailers like Aldi and smaller regional grocery chains like Harps Food Stores Inc. have turned to Instacart to help them with their omnichannel transition.

Lowes Foods, a regional grocery chain based in Winston-Salem, N.C., said at the GroceryShop conference that it views Instacart and similar companies as a way to deliver goods to customers as they desire. Chad Peterson, head of e-commerce at Lowes Foods, said it’s also essential to align the inventory in physical and digital businesses so that what shows up online is also available for pickup in stores.

Scott Benedict, a partner at Chicago-based McMillan Doolittle, said third-party delivery services are viable solutions to help smaller, regional grocery chains offer online commerce without the substantial upfront investment. The retailers must still make sure the inventory visible online is what is available in stores.

Aldi is a national retailer with more than 2,000 stores, but it has chosen to work with delivery partners instead of building its own system.

“We know Aldi shoppers want choice and convenience in how they shop. Our partnership with Instacart and DoorDash allows us to offer the convenience of online shopping and same-day grocery delivery options. At the same time, we focus on providing affordable, premium groceries,” the company notes on its website.

Earlier this year, Aldi announced 30-minute delivery from more than 2,100 of its U.S. store locations with the help of its third-party partners.

AI IMPORTANCE
Generative artificial intelligence in retail is gaining steam and importance in omnichannel transformations for consumer brands.

Monica McGurk, CEO of Tropicana Brands, said the company uses “TropGPT” an internal generative AI tool with natural language processing capabilities, which allows users to ask questions and quickly receive answers. She said the tool is valuable for performance management, historical analysis and trend identification. The more the company uses the software, the smarter it becomes, as it can learn from common inquiries. McGurk said she sees TropGPT eventually extending to sales training, personalization, customization and content generation.

Walmart is also using generative AI — “Ask Claude” — with its merchant teams who can ask the software to run reports, pull outside data, marry data with internal facts, do repetitive tasks that free up their time to do more complex tasks or interact with suppliers and look for new products.

Tim Simmons, chief product officer at Sam’s Club, said generative AI and automation do not put people out of work. He said Walmart uses AI and automation to remove mundane and repetitive parts of employee jobs and empower workers to be more productive and have more time to help customers.

Weinswig said most grocery executives have said they see the adoption of AI as crucial to their survival within the next five years. She said generative AI and other types of automation have enormous potential to drive better decisions and facilitate omnichannel transitions.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Firebend.