In my opinion: retailers need basket-based, real-time, strategizing, says Intelligence Node

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Major drivers of change are re-shaping the global grocery sector, warns Intelligence Node’s Sanjeev Sularia – and you’ll need to use retail analytics to gain a deeper understanding of shopping patterns to survive

Sularia:

Sularia: retailers can counter the discounter threat with technology

Once, the greatest threat to supermarket margin was from super-sized “one-stop shopping” venues and warehouse clubs.

You might look at all that as when life was easy. However, the competitive landscape for global food retailers has morphed into a bewildering kaleidoscope of super-popular cheap grocery chains, pound shops endlessly adding food lines, and e-commerce players applying price transparency – a tough mix you need to pay close attention to.

Take just one facet, the Euro discount grocery brands Aldi and Lidl mounting their own assault. The business model is about low pricing due to small store size and a highly-contained range, with no national brands and shoppers.

While Europe is the current backyard of discount retailing, in countries like the UK, Ireland and Spain and Germany itself, the discounters are also making inroads in the US. Aldi has 1,400 outlets, and plans 600-plus more inside two years. Its rival Lidl has quietly amassed about as many stores in the US, with plans to take this to 2,000 by 2018. Indeed, Aldi was named America’s third-favorite supermarket brand in the latest Market Force Information report, snagging highest overall score in the “Value” category.

At the same time, the discounters are looking to enter many Eastern European countries and emerging markets to grab a similar stake there.

Of course discounters are not the supermarket of choice for every shopper. But their rise represents as fundamental a way to understand the change of shopper habits that was permanently changed by the recession of 2008.

That sound you hear? The battle drums of a huge grocery price war to ensue, maybe for a generation.

Millions of SKUs

The big supermarket chains have heard that sound too, and are reacting. A prime response centres on technology, which is why retailers are increasingly looking at how to exploit business intelligence in order to be as nimble as they can around pricing and sourcing.

How could that help? A merchandizer can access huge volumes of data and millions of records – and when you consider the fact that a typical supermarket stocks thousands of SKUs and an e-commerce portal racks up millions, you can understand why. This is data you can use to make informed decisions on, not guesstimates or gut feel strategizing.

So on Monday morning you might have had a good week, but the right data tool can tell you that Walmart and E LeClerc or Safeway ran a promotion on bread at the last minute, enabling you to think of a local countermove. For price analysis, it will show you how product X or food type Y is being heavily discounted that week, again, allowing you to react.

Good data technology therefore helps you understand and optimize for demand, trends, products, price architecture and regional behavioral differences. If dairy-free products are in demand this week, for instance, then you will be first to know about it, adjusting pricing and sourcing accordingly.

Meanwhile, volume, pricing and revenue goals with automated price calibration functionality can also be factored in. Brands and retailers have access to historic price and visibility fluctuations of individual items to make better decisions as well.

Smart cart intelligence

Even better, with the right back office system all that information can be connected up with information about the customer as an individual – allowing you to offer highly personalized, price-sensitive, well-curated promotions.

Modern business software can also pro-actively recommend products to these customers based on their previous (on-line and in-store) purchases, and can also unlock and apply desired store-level or category-level discounts, as well as trigger those great Amazon-style, ‘If you bought this, you might be interested in this’ type recommendations – and in real-time, too.

Take highly successful Jet.com, launched last summer but which represents a similar data-powered success (it’s already being ranked as the no 4 marketplace for its sales volume)? The online retailer uses smart cart pricing that intelligently unlocks recommendations and discounts based on a customer’s purchasing and browsing history and this is a big part of what gives the brand its highest margins.

Its smart cart approach saves $$ for its customers by matching customer location and merchandise with the closest available Jet-trusted partner, instantaneously. It’s true basket-based thinking; whenever a product is added to the shopping basket, the software recommends another associated product on which customers can save money.

It’s not just the Jet.coms of the world that can do smart cart thinking, but all retailers to effectively counter the threat of the discounters and find better ways to help customers.

The author is chief executive officer and co-founder of Intelligence Node (http://www.intelligencenode.com), a firm that helps retail brands make timely, data-driven decisions

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