If there was any uncertainty about the changes in retail, one need only look at what The Kroger Co. is doing in Arizona.
The Cincinnati-based retailer is in the early stages of testing grocery delivery via autonomous vehicles in the Scottsdale area. Fry’s Food Stores, a Kroger banner that serves Arizona, will build the orders for Scottsdale residents, who can shop for their groceries via the banner’s website or its mobile app and have them delivered to their homes.
This pace of disruption in retail has become so relentless, says Jim Wisner, president of Wisner Marketing Group, that retail companies and their suppliers really only have three choices today
“You can watch things happen, you can make things happen, or you can be left saying, ‘What happened?’, Wisner said during his seminar earlier this week at the 2018 Private Label Trade Show in Chicago. “As Bill Gates says, ‘We always overestimate the change that will occur in the next two years and underestimate the change in the next 10 years.’ Don’t let yourselves be lulled into inaction. What we’re finding with e-commerce is, don’t overestimate the next two days or underestimate the next two months.”
Wisner, along with Heidi Reale, president of the marketing and communications firm SparkShoppe!, led a detailed discussion of the myriad challenges and opportunities for retailers and their store brand suppliers over the next several years. Wisner discussed not only Kroger’s partnership with Nuro’s autonomous vehicles but also innovations at Walmart, Walgreens and Sam’s Club that threaten to upend the retail game entirely.
“Walmart has surpassed Amazon as the largest online food retailer,” Wisner said. “At the end of the day, I believe there is an opportunity for bricks-and-mortar retailers to win this battle in the end. People are finding a way to compete. You look at the regional retailers [that] are starting to crack the code and starting to do this as well or better than Amazon because they have physical locations where a customer can go and solve a problem. They are truly omnichannel in terms of how they relate to their customers.”
Wisner says there will continue to be consolidation in retail, but the remaining retailers need to start thinking differently — and fast — about what it means to be “bricks-and-mortar.”
“Yeah there will be less brick but perhaps more mortar fitting all the different fulfillment options together. It’s how you get the mortar that fits all of this together that’s going to drive things,” Wisner said.
Reale offered several key recommendations for retailers looking to leverage the opportunity in digital marketing, and it all starts with creating an emotional connection with the consumer. She stressed that retailers should focus their digital marketing efforts on emotional connection, not price.
“The price elasticity of demand doesn't play in if you can create an emotional connection with the people you do business with, your customers.. So if you can create that emotional connection, it's worth a lot more than trying to get to the bottom of the barrel with price,” Reale said.
And when it comes to digital retail and store brands, Wisner said, store brands are the only way for retailers and manufacturers to make money going forward.
“Online, store brands are really the only real way to make money because the consumer can shop anywhere they want,” Wisner said. “It really is a race to the bottom with items that the consumer can purchase anywhere. The only way you can be successful is by figuring out a way to get customers to buy products that are unique to you.”
With retailers and store brands speeding up their innovations and shoppers being offered an endless aisle online, the most successful companies are going to be those that understand the consumer’s path to purchase and all the different (online and offline) touch points.
What does this all mean for the private brand universe?
"This could be the greatest risk the industry has ever seen. At the same time this is probably the greatest opportunity the private brand industry has ever seen,” Wisner said. “The center store is shrinking and there’s more space being devoted to perishables, but those generate a higher percentage of store brand penetration. Also SKU rationalization means store brands are losing competitors. If you really look at the numbers, that’s where you really make your money— with products that turn faster and generate higher margins. There’s going to be a lot more store brands than ever before.”