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An Appetite for Disruption

The recent $13.7 billion acquisition of Whole Foods by Amazon.com got everyone speculating about the next wave of disruption in the food industry. Food retailers everywhere are being driven to evaluate their approach to digital transformation if they haven’t already done so. In this article, we’ll provide insight on how they should treat this critical exercise. As it turns out, successful digital disruption depends less on technology and more on strategy.

Understanding the Market

The food retail industry is huge and extremely competitive:(1)

  • In 2016, revenue was $627 billion.
  • The biggest player is Walmart, but there are also many regional brands.

In addition, the market is highly dynamic due to shifting consumer behavior:(1)

  • “67% [of consumers] say that they use a certain supermarket store type more or less often in comparison [to] two years ago.”
  • “58% [of consumers] say that they will use a certain supermarket store type more or less often within the next two years, compared with their current situation.”

Putting Customers at the Center

In this highly competitive and dynamic environment, the winners will be those who anticipate and serve customers’ needs better than the other guys. According to McKinsey & Company, “As digital-first disruptors reshape the business landscape, customer demands for more digital services and operational expertise are posing a challenge to incumbent players across all sectors. The response calls for a new operating model that puts the customer’s needs and wants at the center of a digital transformation strategy, enabled by redesigned customer journeys and agile delivery of insights and services.”(2)

Successful Digital Disruption

In recent years, there have been several paradigm-shifting disruptions in the food industry, both online and in stores:

  • Last-mile delivery options: Brick-and-mortar retailers are working to make it frictionless for consumers to get the goods they want by introducing new delivery options. Examples include allowing consumers to shop online and then pick up their purchases in nearby stores, also known as click-and-collect; allowing consumers to shop online and then having store employees deliver their purchases to their vehicles, also known as curbside pickup; and allowing consumers to shop online and then delivering their purchases directly to their front doors.(3)
  • Checkout-free shopping: Spurred by Amazon Go, grocers are also looking to create checkout-free stores, where customers can pick up items and have those items automatically billed to their credit cards, without having to wait in a checkout line. Typically, this is done through a combination of image and weight analysis of the items in combination with a mobile pay system.(3)
  • Auto replenishment: One-touch delivery is also becoming a top priority for food retailers, especially through mobile ordering or physical devices like Amazon Dash and Dot. “The one-touch-button functionality of Amazon Dash will continue to shake up grocery product fulfillment as we know it.”(3)
  • Voice-enabled digital commerce:(4) Finally, retailers are also investing in voice-powered ordering through devices like Google Home and Amazon Echo so consumers don’t even have to sit down at their computers to order food.

Strategy, Not Technology

What these and other promising disruptions have in common is not that they utilize some new, sexy technology. Rather, it’s that they:

  • Put the customer front and center and are designed to improve the customer experience.
  • Require seamless interaction across a variety of technologies and channels.

When confronted with cutting-edge disruptions like the above, it’s easy for leaders to become mesmerized by a given set of technologies and pursue it to “be competitive,” whether it includes native apps, the cloud, AI, marketing automation, or what have you. This is where the faulty “the other guy has an app, so let’s make an app” thinking comes into play.

However, digital success isn’t all about technology; rather, it’s about strategy. A 2015 study by MIT Sloan Management Review and Deloitte found that “maturing digital businesses are focused on integrating digital technologies, such as social, mobile, analytics, and cloud, in the service of transforming how their businesses work [emphasis added]. [In contrast,] less-mature digital businesses are focused on solving discrete business problems with individual digital technologies.”(5)

According to the study, “only 15% of respondents from companies at the early stages of what we call digital maturity — an organization where digital has transformed processes, talent engagement, and business models — say that their organizations have a clear and coherent digital strategy. [But] among the digitally maturing, more than 80% do.”(5)

Conclusion

That's where GLG and the PLUS Network can help. Our digital transformation strategy offerings will take your business to the next level by providing clear direction on how to improve the customer experience at each point of the customer journey and then prescribing a digital roadmap to facilitate the details of implementation. Again, true experience-improving disruptions are the result of well-coordinated efforts across technologies and channels, and this requires strategy.

As part of our process, we will:

  • Map the desired customer journey and document your requirements.
  • Take an inventory of what’s already working at your organization and plan to retain these elements.
  • Do a fit/gap analysis to identify the new initiatives that are needed.
  • Craft a prioritized digital roadmap to guide implementation rollout.

We’ve already helped a variety of companies craft their transformation strategies, including one of the largest privately held food companies in the nation, so reach out today to whet your appetite for disruption!

 

1. YouGov Reports, “Aldi Meets Amazon.”
2. Oliver Ehrlich, Harald Fanderl, and Christian Habrich, “Mastering the Digital Advantage in Transforming Customer Experience,” McKinsey & Company website, May 2017, https://www.mckinsey.com/business-functions/operations/our-insights/mastering-the-digital-advantage-in-transforming-customer-experience.
3. Sandy Skrovan, “10 Innovations That Could Disrupt Grocery in 2017,” Retail Dive website, December 14, 2016, https://www.retaildive.com/news/10-innovations-that-could-disrupt-grocery-in-2017/432309/.
4. Michelle Evans, “5 Ways Amazon Will Disrupt Commerce Before Amazon Go Comes to Your Neighborhood,” Forbes website, January 5, 2017, https://www.forbes.com/sites/michelleevans1/2017/01/05/5-ways-amazon-will-disrupt-commerce-before-amazon-go-comes-to-your-neighborhood/#4f33d73b358b.
5. Gerald Kane, Doug Palmer, Anh Nguyen Phillips, David Kiron, and Natasha Buckley, “Strategy, Not Technology, Drives Digital Transformation,” MIT Sloan Management Review website, July 14, 2015, https://sloanreview.mit.edu/projects/strategy-drives-digital-transformation/.