A next-generation KPI for the grocery industry (and others) – part one

In this three-part series, guest blogger, Ken Hughes, Consumer and Shopper Behavioralist, covers the need for a “change mindset” for the grocery industry, one that is open to looking at insights and KPIs that gives customers what they want… and keeps the retailer relevant.

FMCG slow to change

TortoiseI still remember when I first learned what the acronym FMCG stood for. Our university professor explained that “Fast Moving” goods were those that had simple low-involvement decision-making processes, and were frequently bought. The “Fast Moving” part referenced the idea that the average consumer didn’t deliberate much over which detergent or bottled water they would buy.

As it turned out, I was to later dedicate my career to understanding consumer decision making and to discover that even such ‘fast’ decisions were anything but simple. Shoppers may be ‘fast moving’ but they pack a lot of decision-making into every moment.

At the EXPO in Milan in 2015, I was asked to deliver a keynote on digital culture and the possible impact on the grocery industry. The room held some of Europe’s finest strategic thinkers in the industry and I remember challenging the very name of their industry. When it came to embracing disruption, change, and innovation, I posed the question that perhaps the industry might consider re-branding itself to “Slow Moving Consumer Goods.” Half the room got to their feet in applause, acknowledging where the industry was in the face of significant global disruption. The other half scowled, remained seated, quietly calculating the number of years left to their pension.

I was reminded of this yesterday while at lunch with clients. My lunch partners were frustrated that their retail customers were not more engaged with this future, with what could and should be happening in the industry. In their words, they seemed “not to understand the urgency, the need to change, the need to think about doing things differently.” I could see their point.

Rethinking two KPIs: Frequency and Basket Size

Grocery retailers really care about two significant KPIs. Frequency (how often a shopper comes into the store) and Basket Size (how much they buy). They are the two growth levers. In all my dealings with grocery retailers in the past 20 years, I can attest that Basket Size is always the favorite. “Get one more item in the basket” is a mantra in many stores all over the world. And on this topic, my client posed me a great question: “If Basket Size was the dominant KPI for grocery industry in the past, what would the next-gen KPI be?” I said I’d have to think about that. I did, and here is the answer.

I think in the future, as things change, it will not be just about how much a shopper bought from a store on a given day that will define the success of a grocery business. Nor will it be how often the shopper visited the store. That is a two-dimensional model. The future will be far more 3 or 4D (you might even need special glasses to see it!).

Read part two of this series. 
Read part three of this series.

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