Grocery Store Analytics

A typical grocery store often sells non-perishable food items that are packaged in cans, bottles and boxes, with some stoes also having fresh produce, butchers, delis, and bakeries. As groceries are mostly commodities, they have very little margin. Branding can help them to increase the margin, but that is not feasible for the most. Even for the ones who wants to increase branding, biggest challnge is to do proper analysis and finding insight in their business.

Can todays analytic technology bridge this gap and help grocery business with such insights?  Lets explore.

What exactly does grocery business wants from analytics?

To be successful, a modern grocery store would need to empower itself with abilities that would give competetive edge. To be precise, they would need to have below capabilities from the analytic technologies:

  • understand customer demographics
  • understand what products are bought together
  • understand the locations in the store that are more noticeable
  • decipher the trend in buying
  • predict customer trends and understand seasonalities
  • build targetted promotions

How analytics can strategically help grocery owner?

Advanced customer analytics tools are implemented by a range of large to mid-sized grocery chains and supermarkets across the globe. While I was studying some of the product offerings in this segment, came through many case studies and success stories.

Let me introduce some of the top picks from these.

  • Strategy-1: Customer specific promotions
  • Strategy-2: Market basket analysis and effective planograms
  • Strategy-3: Optimum shelf life management
  • Strategy-4: Beacon technology and location based marketing
  • Strategy-5: Pricing it just right

Strategy-1: Customer specific promotions

With over 130 years of history, Krogger is one of the popular grocery chain United States. With the help of analytics Krogger has implemented customer 1st strategy. Kroger's four keys of its customer first strategy are their people, their products, the shopping experience and the prices. With this strategy the firm focuses efforts on improving employee communications and training; boosting customer loyalty by improving customers' shopping experience; and pricing within an acceptable range of discounters'prices so that price becomes a neutral factor in customers' shopping decisions.

Grocery promotions

As a result of using the analytics, Krogger has found more customer base and increased revenue.

  • Today regular customers at Kroger redeem nearly half the coupons the retailer sends out, which is far higher than the average trend of 1 % to 3 % redemption.
  • Kroger customers get in their inbox, mailers which are of relevance and interest to them. The idea is to offer them ‘what they actually buy in the store, and not trying to sell things they have never bought.’

Strategy-2: Market basket analysis and effective planograms

Planogram is a model that indicates the placement of retail products on shelves in order to maximize sales. How good it be to place meat and bakery products adjecent? Obviously customer will not be pleased. Market Basket Analysis, one of the well known analytic method helps to solve such concerns. This can give insights such as:

  • Placing products together to increase cross sell – e.g. Dairy Products along with Bread and Baked products
  • Keeping Cheese and Sausage as a party platter offer

There is a well known anecdotes about a man coerced into buying a pack of diapers from the corner store by his beautiful spouse on his way home from work, hears the siren song of the pyramid of beautiful cases of beer. So, being that it is Friday night, he picks up a case of beer as well.

The legend says that a study was done by a retail grocery store. The findings were that men between 30- 40 years in age, shopping between 5pm and 7pm on Fridays, who purchased diapers were most likely to also have beer in their carts. This motivated the grocery store to move the beer isle closer to the diaper isle and wiz-boom-bang, instant 35% increase in sales of both.

Strategy-3: Optimum shelf life management

Products such as meat, dairy and seafood are all perishable in no time and would need efficient inventory management. That means grocery store would need accurate analysis and forecasting of buying behavior and product demand from multiple perspectives and scenarios.

According to a report from Manthan, a closer understanding of shopper behaviour and demand patterns through the use of advanced customer analytics and forecasting tools helps grocery stores to make efficient inventory management. Such a strategy worked for U.K. grocer Waitrose: Deeper insight into consumer buying behavior and demand patterns via advanced customer analytics and forecasting tools helped the supermarket chain "maintain optimized stocks, achieve faster turn-rates and reduce wastage on their perishables."

Strategy-4: Beacon technology and location based marketing

Bluetooth beacons are hardware transmitters - a class of Bluetooth low energy (LE) devices that broadcast their identifier to nearby portable electronic devices. The technology enables smartphones, tablets and other devices to perform actions when in close proximity to a beacon.

Bluetooth Beacon Technology

Beacon technology, shelf sensors and in-store cameras can all be used to detect patterns of shopper activity in the store, which can provide valuable information to both retailers and product supplier. Using this technology one can understand whether the product has been moved or touched, or to understand if somebody lingers.

In June'15, British supermarket giant Tesco said it was rolling out beacon technology to 270 stores in partnership with CPG supplier Unilever to promote Unilever's Magnum brand ice cream to customers who had downloaded the Mpulse app, which allows customers to find the nearest Tesco Express store in London offering discounts on certain Magnum ice cream products, according to a report in NFC World.

Strategy-5: Pricing it just right

With a very slim margin, grocery store business requires efficient pricing of the products. Predictive Analytics can give answers to several questions that are in the minds of the grocery retailers where pricing is critical aspect to attarct new customers. Analytics can aid the pricing in many ways as below.

  • Identifying customer segments can improve placing right products and prices
  • Identifying pricing opportunity for some quick bucks in a shorter time
  • Planning for price changes based on supply and demand
  • Picking the best pricing and promotions for targetted customers

Conclusions

Many of the leading retailers in the world such as Amazon, Target, and Kroger have been applying predictive analytic capabilities to aid their business. A retail grocer can pick such technologies for making best strategic decisions. 

But this need not stop them from making use of analytics for day-today-operations as well, infact many of the mentioned top retailers are using analytics precisely for optmizing their operations. Adopting the technology in the right way is the key.

References:

https://www.nfcworld.com/2015/06/15/335978/tesco-puts-beacons-in-270-london-stores/
https://www.manthan.com/cpg-solutions/insights/503-top-3-grocery-retail-strategies-using-better-shopper-insights-1