Published on: March 21, 2018
Content Guy's Note: The goal of "The Innovation Conversation" is to explore some facet of the fast-changing, technology-driven retail landscape and how it affects businesses and consumers. It is, we think, fertile territory ... and one that Tom Furphy - a former Amazon executive, the originator of Amazon Fresh, and currently CEO and Managing Director of Consumer Equity Partners (CEP), a venture capital and venture development firm in Seattle, WA, that works with many top retailers and manufacturers - is uniquely positioned to address.
This week, addressing the top-of-mind issues of concern to food industry executives.
And now, the Conversation continues…
KC: This week, I want to do something a little different. As I noted on my FaceTime commentary the other day, I had a chance to go to the University of Southern California (USC) to spend some time with folks attending two programs there - the Food Industry Management program, and the Food Industry Executives Program. In advance of the morning I spent there, I asked the students to email me questions that they’d like me to answer, or subjects they’d like me to address. I got to most of them, but you’re a lot smarter than I am, so I thought we could this week’s Innovation Conversation to pose some of them to you. I have four questions to pose … and if we’re going Back to School, think of this as me asking you to perform a Quadruple Lindy.
Should traditional food & beverage retailers be concerned about the increasing amount of control social media companies exert over advertising? For example, not only is Facebook selling advertising, but based on what we’ve learned from the last election, we know that it can essentially be weaponized. That’s leading the social media companies, which are under a lot of pressure, to start controlling their platforms more tightly. What’s the potential impact on brands?
Tom Furphy: I think all traditional retailers and brands should be concerned with the impact and increased control that social media and all digital platforms have over advertising. The personalization that these platforms can deliver based upon user behaviors and attributes is incredibly powerful. For retailers and brands this can provide a wonderful way for them to reach their customers. They can reward current customers and draw competitors’ customers to their store or products.
Companies that do this well, both the advertisers and the platforms, will win. Companies that struggle will lose. And companies that manipulate the experience for nefarious reasons will, I think, ultimately be exposed and have users turn on them just as we’ve seen recently.
The shift from traditional to digital media is now in its adolescence. Most smart brands and retailers are embracing this and are constantly adapting their approach as platform capabilities change and as they gather more data to learn more about what performs well and what doesn’t. As long as these firms remain truthful in their messaging, I think these platforms will be very effective for them.
KC: Here’s another … Are there best practices you have seen outside the grocery business that would translate well to grocery in regards to customer retention?
TF: I can think of three great examples – Amazon Prime, personal service from Nordstrom and the Sky Miles program from Delta. There are elements of all three of these that could be applied in the grocery business, especially by retailers that have good customer data.
Amazon Prime is the program that keeps on giving. Amazon is constantly adding services to Prime with only a few small increases in the cost over the lifetime of the program. The combination of fast shipping, local delivery, exclusive items for Prime members, music, video, original content and more creates a very powerful flywheel effect that gets customers further entrenched in the Amazon ecosystem. For these customers, Amazon is the first place they look to have their needs met.
The personal stylists at Nordstrom are amazing. And as they continue to use digital tools for engaging customers, like BevyUp that they just acquired, these stylists will get even better. They can identify a customer personally in the store, work with them to build out a curated assortment on a digital platform, and then remain engaged with the shopper when they leave. They can introduce new items to customers that are personalized to them while they’re away from the store, they can offer exclusive discounts and they build a personal rapport. There is no reason that grocery nutritionists, chefs, fish mongers, butchers and others couldn’t do that.
Another program that I personally like is the Delta Sky Miles program. In many respects, it’s similar to other airline loyalty programs. Providing increased benefits based on reaching higher tiers of use makes good sense. When I fly, the flight attendants often go out of their way to thank me for my loyalty, verbally recognizing my current Diamond and Million Miler status. They also target special offers to their most frequent customers. Just last summer we got free ice cream sandwiches from a truck in our neighborhood in Seattle. It was really cool!
All of these are things that grocer retailers could certainly do.
KC: A third …When introducing a new product to the shelf that offers a new innovation, how much time should we allow for the product to demonstrate whether or not it can be successful? It takes time for new innovations to develop awareness with consumers, even if they're on trend, but how much time is too much time given how precious shelf space is?
TF: This is a tough, age-old, question. I think it’s up to the budget, patience and measurement criteria of the retailers and manufacturers to determine on a case by case basis. This can be quite expensive in a brick and mortar environment. Advertising, promotions, products placements and the like are costly. And the feedback cycle through uptake and repeat purchase takes some time to develop. It’s pretty hard to accomplish this in under six months total.
It’s much easier to launch products online, where data can help shape the products that are brought to market. Products can be manufactured and introduced in manageable batches, then lit up online. From there, customer uptake and reviews can be tracked. Based on the results, products can be killed, modified or rolled out to the broader market. All of this can happen quickly and for relatively low cost.
KC: And finally … What do you believe is the biggest asset that the food industry possesses currently and how will this asset look in 5,10,15... years?
TF: There are three that I would choose between – stores, people and data. How retailers prioritize and nurture these assets will determine both how they’ll look and how they’ll perform in 5, 10 or 15 years.
Will stores grow as vibrant environments with rich sensory experiences? Or will they become dumb inventory nodes for local fulfillment? If you want to differentiate, I would recommend investing in compelling store experiences that entice customers to shop with you.
Will your people be used merely to move around products, or will they be critical to engaging with your shoppers? Shoppers are looking to have needs met and problems solved. Many times, a human touch and engagement can make all the difference in the world.
As a retailer, will you leverage your data to help solve your customers’ needs? Will you use it to introduce new products, reward loyalty or to drive replenishment of repetitively purchased items? The better that retailers leverage the data, the higher their chance of success.
The Conversation will continue…
- KC's View: