In my first blog of this series, I mentioned the need for the fast moving consumer goods (FMCG) sector to move faster in terms of embracing the need to change; to understand the urgency of addressing the ever-changing needs of customers. Today’s customers have new ideas about how they want to interact with a retailer, and they have diminishing tolerance for those who don’t try to get to know them.
More channels, omnipresent customer expectations
Customers today live in an “omnichannel-expectant” world. In fact, the word “omnichannel” has kind of fallen out of favor at retail industry conferences. It just goes without saying, like the “www” part of a URL. Consumers today expect seamless, multi-touchpoints. They expect a brand to live their ethos and business in a frictionless way across all channels. That expectation is going to get more important for every business as the number of channels increases, and so it is with the grocery business.
15 years ago, I could look at an average shopper and count their grocery trips to stores in a week. That was the share of the pie, I as a retailer, competed for in terms of traffic flow. I could then look at their average spend per trip (basket size) and deduce my share. Today it is not so easy, and in the future, it certainly won’t be. We need to start looking at Unique Household Interactions (UHIs – any new KPI must have an acronym of course!). Basket size may be leaving retailers feeling empty.
Already today there are many ways we can satisfy our needs for consumer goods. We can visit a hypermarket, a supermarket, a discount store, a pharmacy, a convenience store, a forecourt/gas station, we can use an app or website for at home delivery, Amazon Fresh, we can click-and-collect, or we can buy a routine replenishment service for certain products. Add in the coming Internet of Things (connected homes, connected cars, connected kitchen), Machine-to-Machine and Artificial Intelligence and you have a whole other layer of platforms where consumer goods will be traded. Basket size is not going to be a fair measure of your success.
Think about this. Your average basket size per trip has increased 5% in the last year. The board is delighted, champagne corks fly. However, those same shoppers may be buying more in your store per visit, but what if those visits are getting less and less? What if you are losing significant share to better home delivery players, replenishment services or the machine-to-machine future.
It’s now about your connections
The new KPI will be how many of these connections you are playing in, succeeding in and growing. It is not how many items you sold in the basket in store, or even online. It will be how successful your retail and brand offering has been in infiltrating a household and taking as many of the “consumer goods connection opportunities” there are.
Let’s take an example. Already there are many replenishment services, from the individual Amazon Dash/Echo to the Dollar Shave Club or Le Parcel. Think about it – Le Parcel delivers feminine hygiene products once a month, to your door, in beautifully designed boxes, including a little gift. This was the perfect replenishment economy product category, as was razor blades, or come to think of it, most of the household cleaning, health/beauty products. Why do you think Unilever paid €1billion for The Dollar Shave Club? They see the opportunity to go around the retailers. Retailers will need to start looking hard at direct-to-home replenishment services, outside of the click/collect or current online offerings.
In the third and final blog of this series, you’ll meet the new consumer and I’ll make some suggestions on how you can best prepare for this bold new future we face.
Learn more about Xcelerate Retail Forum