16 November, 2017

Grocery Retailers too Big to Sink? Think again.

Erik Wallin
CEO at Northfork

As some have learned growing up, it’s not the size of the boat but the motion of the ocean that makes a difference. Right now the stormy ocean is not a pleasure ride for a helmsman in the grocery retail industry, but a challenge to keep up with the rapid changing tide of shopper demands. If the belief is that the size of the boat itself is a guarantee for survival, I would challenge that with a Titanic metaphor.

Grocery Retail will never be the same

Traditional retailers are facing the biggest change in modern history going from brick and mortar to omni-channel and online grocery retailing. Many traditional retailers will not be able to handle the shift, hence slowly sinking into the abyss. The winners understand that online grocery retailing is a completely different competitive stage, and the losers will think that the learnings from B&M store translate directly to online. The retail landscape of today challenge the old way of doing business with new business models, new technologies, new competitors and new consumer needs.

Acting like a lonely island and doing everything yourself is something very few or any retailer can handle. Mastering the latest technologies like AI, speech recognition, predictive suggestions and decision management to name a few, will play a central role in grocery retailing in the future. So what will be the answer understanding this unquestionable change in the grocery retail future?

You can’t build in Silo and expect to win. Collaboration is key.

It is like the brick and mortar style of doing business of the past is literally now a pile of bricks on top of some retailers ability to rise above the rubble and get to business. Someone needs to give them a hand. Collaboration is the way of the future in the retail industry. There are a few ways to create a good environment for collaboration, and clear benefits of such collaboration.

Collaboration in the digital age is not a new topic, but it is from a grocery retail perspective. As grocery retail is in its infancy of moving business online, answering to consumer expectation. The problem begins right here at the starting gates.

Collaboration is an effective Sales Tool that differentiate retailers.

The benefits with increased collaboration can be summarized with costs, time and goal fulfilment, or as I would put it; cost control, time saving and improved goal fulfillment.

Cost control and time to market

It is impossible to estimate the real long term costs of adding new functionality to an online platform with in house resources. Keeping all technology development in-house demands know-how and an organization that compete with the best technology companies out there. That’s tough. Choosing one technology over another could mean that you are steering in the wrong direction and are left behind. Costs are also reduced by sharing data and insights, reaching better forecasts and more relevant assortment. Adding features by partnership will mean that you can add, test and implement more features in a higher pace than otherwise possible. What later becomes key features for your shoppers can be evaluated to transfer in house.

Goal fulfilment

There is an increasing number of collaboration reaching better goal fulfilment. One reason for this is the need to align and assigned resources to reach a common goals. Resources is both capital to reach set goals, and human capital. This puts emphasis on reaching goals together, which leads to a partnership mentality where the network supply each other with data and know-how to reach mutual effects. These goals seems to be more performance based rather than non quantitative KPIs that is easier to implement in a silo organisation. A level of collaboration with set mutual goals will harvest an environment where strategic, operational and executional objectives will reach better goal fulfilment leaving disparate targets like growth and profit behind.

The Power Balance needs to be Challenged

The depth of a collaboration varies. What determines the depth of collaboration historically is the power balance. And risk is that it will be so in the future. As retailers have grown in size and power during the last decades, so has grocery retail partnerships. One example is building strong in store strategic relationship. Today it is more of a discussion (read negotiation) of distribution than anything else.

The power relationship between actors in a relationship affects the willingness to collaborate. Power influence the depth of the collaboration. If there is an unbalanced power relationship there will be minimal collaboration.

With minimal collaboration shopper value will be reduced. Shopper value is created and strengthened when parties collaborate to reduce the expectation gap between expected and perceived delivery from retailers.

Photo by James Pond on Unsplash

Traditional retailers will have to change mindset if they want to access new techniques and shopper solutions. If the power is in balance parties in a network will see a reason for increased partnership to improve shopper experience. As industries and corporations are now challenged by smaller, weak power players it creates a gap. The gap stalls collaboration. Strong power players may not even notice or take an interest investigating weak power player solution. It’s these smaller players that develop the techniques and solutions that the moderns consumers are expecting. As the retail industry evolves, partnerships between weak and strong will have to find a match.

A clear advice to retailers is to actively work to eliminate prestige built on power balance. Opportunity will be found focusing on building strategic partnerships, specifically in the areas of technology development. Partners will add features in a higher pace than before to create a significantly improved shopper experience. The course forward is filled with innovation that demands an environment where change and speed is embraced.

So retailers that want to stay afloat on the heavy seas ahead better find a pilot navigating them forward.

About the author

Erik Wallin
CEO at Northfork

Erik is co-founder of Northfork, he has a long experience of the grocery industry within marketing and sales. Before Northfork, Erik founded BagHitch a P2P transportation service.