Grocery stores played a starring role in the pandemic, meeting shoppers’ needs for essentials while supporting new hobbies and habits. But even as sales surged, profits didn’t always follow suit.
Rethinking Brick-And-Mortar Grocery for 2021
With an end to the pandemic insight, intrepid grocers are eager to entice shoppers back to the physical store for additional opportunities to “upsell” customers and foster enduring relationships that will lead to long-term success. But what does a successful strategy for securing more margin look like? In this article, you’ll learn the three things industry leaders say you should be doing to capture a larger share of customers’ wallets and reach new customers:
- Focus on profit, not revenue
- Proactively influence customer behavior
- Leverage data tools that streamline day-to-day tasks
Table of Contents
Content Summary
Success Strategy: Focus on profit, not revenue
Success Strategy: Proactively influence customer behavior
Success Strategy: Leverage data tools that streamline day-to-day tasks
Grocery stores played a starring role in the pandemic—meeting shoppers’ needs for essentials, while supporting their hobbies, like baking, and habits, including eating at home.
But even while sales surged, profits didn’t always follow suit. In fact, a number of factors conspired to compress margins: the hardening of the supply chain; behavioral changes, such as increased online ordering and trip consolidation; and revenue paid to third-party delivery services.
With widespread vaccination imminent, consumers look forward to resuming many of their pre-COVID-19 habits — and as hard as it was to run a grocery store during the pandemic, merchants look forward to winning back these customers as their shopping behavior evolves again. Grocers want to position themselves to maintain customers’ interest as they work to recoup investments they made in new offerings, such as pre-made meal kit capabilities or elaborate proprietary e-commerce platforms.
Intrepid grocers are eager to entice shoppers back to the physical store, affording additional opportunities to upsell customers and foster enduring relationships that will lead to long-term success.
But what does a successful strategy for securing more margin look like? Read on for three tips that will help you capture a larger share of customers’ wallets and find ways to reach new customers looking for grocery stores near them.
Success Strategy: Focus on profit, not revenue
One might assume this would go without saying, and yet sometimes it’s too easy to focus on bolstering sales, even though the true benefit comes from increasing profits. Grocery store profits are notoriously razor-thin in the best of times, and today several factors work against grocers that are slicing them even leaner.
Even though sales have escalated, profits have not kept pace as consumers outsource the task of grocery shopping to others. Many people order online, and the rise of third-party delivery services has diminished grocers’ profits as they absorb high delivery-related fees. Other shoppers have turned to curbside pickup, forcing grocers to reallocate their labor model to accommodate the requests and complete a job that used to be self-service.
“Grocers need to invest in tools that drive proven, additional profit and ensure the grocer doesn’t just promote price reductions that cannibalize their own profit,” said Alex Kinnier, co-founder, and CEO of GetUpside, a retail-technology company that uses cash-back promotions to bring shoppers more value and provide proven profit to brick-and-mortar retailers. With GetUpside, grocers are guaranteed to earn a profit on every transaction, through a model that ensures each personalized customer promotion lies within the margin or the grocer doesn’t pay.
This dynamic creates real value for shoppers and grocers, Kinnier said. The profit potential to grocers is clear, but there is another benefit as well because grocers know consumers want to stretch their dollar as far as they can, especially now with many facing income loss.
“We’re able to help grocers earn incremental profit in a way that also measurably improves the customer experience. Every customer interaction we create is curated based on the shopper’s previous purchase history and their propensity to buy more,” Kinnier said. “In that way, GetUpside offers a win-win for grocers and shoppers.”
“Grocers need to invest in tools that drive proven profit to ensure the grocer doesn’t just make ends meet, but comes out ahead.” – Alex Kinnier, co-founder and CEO of GetUpside
Success Strategy: Proactively influence customer behavior
As consumers’ grocery shopping patterns are upended, new behaviors emerge, chief among them a tendency to make fewer, larger “stock up” trips. Conversely, other shoppers make smaller, more frequent trips, often supplementing an online purchase of basics with a store visit to personally choose select items to ensure freshness, such as produce, meat, and dairy. These two categories of shoppers provide grocers with the opportunity to reach those who might explore new loyalties, preferring to shop at the store that’s most convenient or offers the best pricing.
The GetUpside app and partner apps can help grocers connect with noncustomers, which is key given that there are many more noncustomers than customers moving by your store daily.
“Grocers need to win a larger share of each customer’s wallet and attract the baskets sold at their competitors’ stores. GetUpside determines which of our 26 million users are near your store and brings them through your doors,” Kinnier noted. “If the customer has transacted with your competitor, we find a way to profitably switch their purchases to your store and prove it to you on every transaction.”
GetUpside uses the anonymized processor data grocers already have to identify new and infrequent customers who should be choosing your store and sending them an attractive offer. In that way, GetUpside supports merchants’ goals by helping to change consumers’ purchasing habits in a way that funnels demand from multiple grocers to a single location.
It also helps them win a larger share of wallet in a way not possible through traditional frequent-shopper programs. That’s because most loyalty programs reward customers for items they would buy anyway; for example, grocers who track sales data might offer a $2 coupon for an item the shopper planned to add to their cart even without the promotion.
“This is a healthy addition to traditional loyalty programs that give discounts to existing customers. We help you reach baskets and trips you weren’t going to get otherwise and bring them into your stores. The interactions GetUpside creates are personalized to each shopper based on their past behaviors, using the minimum promotion amount that will motivate each customer to buy items they would not have otherwise,” Kinnier explained.
Both grocers and customers benefit when customers buy directly from the grocer rather than a third-party service, given that both parties otherwise have to pay fees to the provider. Bill Bishop, co-founder and chief architect at Brick Meets Click, a consultancy designed to help food retailers and marketers meet the challenge of new competition, estimates that buying an identical item from a third-party delivery service costs customers up to 15% more, including the increased cost of the item plus delivery and other fees, compared with purchasing it directly from a grocer.
GetUpside uses the anonymized processor data grocers already have to identify new and infrequent customers who should be choosing your store and sending them an attractive offer.
Success Strategy: Leverage data tools that streamline day-to-day tasks
Employees have more to do than ever before as they work to meet high-maintenance safety protocols related to COVID-19. New sanitation procedures require redeploying staff to cleaning tasks, and many stores are even stationing attendants at the front door to check for mask compliance and visibly clean surfaces like carts and door handles.
In addition, stores that have seen an accelerated interest in their proprietary pickup and the delivery platform now must pick merchandise themselves to fulfill online orders—and often deal with a barrage of complaints when third-party services don’t meet customer expectations.
In fact, 83% of grocers surveyed said they had upped their staff to handle order fulfillment, finds the Food Retailing Industry Speaks 2020 report from FMI-The Food Industry Association. “The number one overall controllable cost for grocers is labor,” says Bishop.
Therefore, many brick-and-mortar grocery stores are turning to automatic digital tools to help improve their operations, with the FMI report finding that more than 80% intend to leverage technology to be more efficient.
Progressive stores are looking into implementing systems such as self-serve scanning, digital signage, and monitoring devices that provide a more modern inventory approach, Bishop said.
But given the extra needs, they are already shouldering, grocers don’t have time to plan and pivot. Instead, they need low-maintenance profit drivers, ideally programs that use the data they already have. “Building on what already exists is appealing to time-starved grocers because it removes additional work,” said Kinnier, adding that GetUpside is effortless to manage because it uses the anonymized transaction data grocers already pay for with their card processor. There’s no new technology, operational changes or upfront cost.
“With all grocers have to go on, they want to rely on partners who can give them something that’s easy for them to implement so they don’t have to redo all their systems,” Bishop said.
And that’s where GetUpside comes alongside grocers to help them improve their reach. “Large brands have made significant investments in building their own personalization and measurement engines, and our goal is to help all grocers realize that they can take advantage of our platform for a solution that’s easily implemented,” Kinnier said.
More than 26 million shoppers nationwide already use GetUpside to decide where to shop. GetUpside determines how to shift those customers away from competitors so they choose participating grocers more often and spend more while they’re there.
“We’re democratizing sophisticated analytics so every grocer can measurably increase trip frequency, basket size and per-customer profitability, without using tactics that cannibalize their own profit.” – Alex Kinnier, co-founder and CEO of GetUpside