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Lynn Gillis, of Information Resources Inc., says Gen Z is the most omnichannel focused generation ever, and is shown flanked by Cooper Smith of L2 Inc. and Laurie Rains of Nielsen.
It's no secret the grocery industry has been the slowest major retail sector to join the e-commerce bandwagon. But few industry observers expect this to remain the status quo.
A panel session on grocery research, during the recent ShopTalk conference at the Sands Expo Center in Las Vegas, offered insight into how long it will take for the grocery segment to catch up to other retail sectors and what actions are needed to make this happen.
Changing demographics, a collaboration among retailers and "pure play" digital merchants and a dedicated staffing to support e-commerce are among the factors speakers cited that will facilitate the transition.
|L2 Inc., the research firm, identified characteristics of "genius brands."|
'Tipping point': 2025
Two of the three speakers pinpointed the "tipping point" for the digitization of grocery as 2025. The "tipping point" refers the point in time when digital commerce accounts for 20 percent of a category's sales.
The grocery channel is one retail sector that has yet to reach the "tipping point" in e-commerce, said Cooper Smith, research director at L2 Inc., which benchmarks the digital competence of consumer brands.
The book industry, led by Amazon, was the first retail segment to move online, reaching its digital commerce tipping point in 2005, Smith said. Electrics reached the tipping point in 2008-2009, sporting goods hit in 2016, while apparel will get there this year, he said.
The five things that "genius brands" do well, according to L2 research, are:
Food retailers, overall, have done a poor job integrating their recipes into their websites, Smith said.
|Laurie Rains of Nielsen gave insights on what brands and retailers must do to support the digitization of grocery.|
How fast will digital transition continue?
Once digital commerce accounts for 20 percent of the grocery business in 2025, as noted by Smith, the percentage will reach 70 percent five to seven years later, said Laurie Rains, group vice president of retail commercial strategy at Nielsen.
Rains offered insights for retailers and consumer brand manufacturers to prepare for the digitization of grocery.
One of the more positive developments supporting the digitization of grocery has been the realization by many retailers that they need to partner with "pure play" e-commerce merchants, Rains said.
So far, consumer product manufacturers are several steps ahead of retailers in making the digital transition. Rains noted that 20 percent of consumer goods manufacturers believe they already have the skills needed to succeed in digital, compared to 7 percent of retailers.
Nearly a third of CPGs (32 percent) have integrated their digital marketing and merchandising assets, compared to 22 percent of retailers, she said. More than a third of CPGs (35 percent) have already established a digital investment planning and budgeting roadmap, compared to 23 percent of retailers.
Nielsen's research has found that both retailers and CPGs agree that the greatest potential benefits will come from collaborating on master data, promotions and shopper insights. Both groups tag margin improvement from digital collaboration at between 2.5 and 3.5 percent.
What actions are needed
Having the technology alone won't make a brand or a retailer successful, however.
"Technology is an enabler for this change," Rains said. "The people have to be in place." To this end, companies are starting to hire chief digital officers.
A successful digital transformation requires having executive leadership for a cross functional and integrated plan for the organization, Rains said. Digital skills can be gained either by acquisition or internal talent development.
Organizations have to create marketing and merchandising processes that integrate in-store and digital efforts, she added, and they must integrate technology across all key elements of retailer/manufacturer collaboration.
Demographics will drive change
Changing demographics alone will help drive the grocery's transition to e-commerce, noted Lynn Gillis, a principal at Information Resources Inc. Gillis presented research on Generation Z, which she described as the first generation of young kids with purchasing power and possessing a high level of digital savvy.
"They are an entirely new 'zeneration,'" Gillis said, and will change "everything." Gen Zers, on average, receive a $17 weekly allowance and represent nearly $60 billion in direct purchasing power.
"Those kids are out there shopping and spending," Gillis said, as well as participating in the family spending decisions. "They are absolutely making decisions about what goes into that shopping basket."
And while it's true Gen Zers want everything immediately, they are also being taught the value of money and the value of waiting for something of value. In recognizing their children's lack of patience, the parents of Gen Zers are teaching them these values, Gillis said.
Price is a major influencer for what a Gen Z shopper buys, Gillis explained. They are also influenced by diversity, tech expertise and an awareness of the dangers of the world around them.
"They are also the true omnichannel shoppers," she said.
Brands are important to Gen Zers, but brands have to be authentic and they have to be transparent.
"Can you imagine what's going to happen as those kids get older?" Gillis asked.
"The road to profitability has not been paved yet," noted Rains. "There's got to be collaboration among partners."
Elliot Maras is the editor of KioskMarketplace.com and VendingTimes.com.