Newfangled collaboration: Part two
I first offered ideas on this topic a little over a year ago and remain passionate about the possibility of unlikely bedfellows creating new shopper experiences. With recent news of relationships between Kohl’s and Aldi, and Kroger and Ace, and recent innovations in the grocery channel — Dollar General opened a gorgeous, fresh-focused format in Florida and The Salvation Army opened their own grocery store, DMG (Doing the Most Good), in Detroit – I felt it a great time to revisit the concept.
For purposes of this article, I’ll first examine the pros and cons of these two more recent mash-ups and then offer a few ideas to help fire up your imagination.
For Kohl’s, which frankly has been experimenting in a number of ways, it is yet another example of a department store looking to not only attract new shoppers but increase the appeal to visit more often. If you recall, Kohl’s has been working with Amazon in a limited scope trial to serve as drop-off points for Amazon return efforts. Additionally they have not been bashful about foretelling that the space within their traditional footprint needs to be reengineered to create a better experience. Not sure they will go as far as the two entrance test underway with rival Target, but undoubtedly they are considering all options.
As to the pros, I like the idea of bringing more reasons to the forefront for shoppers to visit Kohl’s department stores and the profiles of Aldi and Kohl’s shoppers may not be that dissimilar. Another advantage is that the real estate choices made by Kohl’s may, in many cases, lend themselves to offering grocery in high demand markets.
The cons are certainly worth noting. Placing the Aldi outside the physical structure does little to nothing to leverage the physical footprint of Kohl’s square footage. Also, the two operations may simply coexist in the same proximity (e.g., parking lot) which does not do much to cross-pollinate shoppers nor build the basket. However, I can’t blame them for staying separate – the grocery experience within Target has definitely not reached its stride and many critics suggest it is a failed model.
Turning my attention to the possibilities of the Kroger and Ace combination, I’m a big fan. In fact, not terribly long ago I had suggested a similar home improvement and drug store alignment to meet the needs of family caregivers modifying their homes for home care.
The pros, in my opinion, far outweigh the cons. Not only does such a partnership build a stronger market basket and take advantage of the frequency of trips to the grocery store, but it also is largely non-competitive. For Ace, it adds store count and visibility – two things that can be achieved without the expense of real estate or less-than-optimal inventory. For Kroger, their shoppers should welcome easy access to everyday hardware products.
On the con side, I do see spatial issues. Hardware merchandising demands substantial space. Furthermore, the size, variety, and logistical aspects will put additional strain on supply chain management. I’d also be curious how other Ace franchisees are feeling about this new “competitor” potentially entering their neighborhood.
Wondering which potential partners may boost your bottom line? Don’t confine yourself to traditional thinking. Who would have imagined meatballs in a furniture store (e.g., IKEA)? Here are several other far-reaching partnerships that I can imagine evolving. Feel free to reach out and offer your ideas – remember the impetus for this blog series was my late father’s mantra, “I have ideas I haven’t even thought of yet.”
- Could fitness centers introduce mini-electronics’ kiosks with headphones and cases inside (think the vending type machines we see at most every airport)?
- What might a natural skin and personal care “store within a store” look like inside a massage franchise?
- Would it be inconceivable to team a mini version of the struggling Toys-R-Us assortment within a drugstore operation?
- How could a disaster recovery or first aid supply-focused retailer reside in a grocery store?
- Is it possible that a more experiential offering like a sporting goods retailer (Dick’s or Bass Pro Shops) could show up inside a department store?
Keep dreaming. The possibilities are indeed endless. Retail must continue to evolve and I truly believe we ain’t seen nothin’ yet!
Dave Wendland is vice president, strategic relations and co-owner of Hamacher Resource Group, a company focused on improving results across the retail supply chain located near Milwaukee, Wisconsin. He directs business development, product innovation and marketing communications activities for the company and has been instrumental in positioning HRG among the industry’s foremost thought leaders. You may contact him at (414) 431-5301 or learn more at Hamacher.com.
Retail needs to get really personal
You only think you know me.
Those are words a retailer never wants to hear, especially after tailoring marketing and assortments to consumer needs.
The desire to get more targeted has the industry excited about a new era of personalized marketing. You think local marketing is cool? Personalized marketing is far more powerful. It’s generating buzz across retail channels, from mass market to hard goods to grocery.
Just to be clear, much of the momentum is driven by competitive threats. “It’s due in no small part to Amazon, which is presenting shoppers with items based on their past purchases, browsing, and wish lists,” said Gary Hawkins, a former retail CEO and an expert on consumer loyalty at retail. “So to compete with that, retailers need to become adept at personalization and relevancy.”
Retailers vary widely in these capabilities, with such companies as Kroger, Walgreens and Nordstrom often cited as leaders.
Why didn’t years of retailer loyalty programs manage to accomplish the kind of personalization we are now talking about?
A big reason is technology. It’s only now that new technologies, such as artificial intelligence and machine learning, are advancing capabilities. The excitement is about more customized solutions for everything from consumer products to healthcare, combined with better ways to deliver offers to customers, including through digital coupons, apps and digital wallets.
New developments also are starting to make personalization more affordable and less labor intensive. The era in which retailers need to employ large, expensive teams of data analysts may be coming to a close due to software advances that boost personalization capabilities, said Hawkins, a strategic advisor to digital solutions company Birdzi, which focuses on this strategy.
Personalization has the potential to address some of the most important consumer needs, delivering convenience to time-starved shoppers through on-demand products, or relevant healthcare solutions to consumers based on specific conditions.
The health and wellness potential can’t be overstated, especially in the face of overwhelming U.S. health challenges, much of it due to chronic conditions.
Personalized wellness has the opportunity to bring together healthcare and food to address this problem, according to a white paper by Hawkins and Dr. Marcus Sredzinski, COO and EVP of Medical Security Card, LLC.
“It bridges the chasm by leveraging nutrition science, big data, artificial intelligence, machine learning, and consumer technology to guide each person to foods and products beneficial to their individual health condition,” according to the paper.
Despite all the promise of personalization, we can’t count the benefits before they materialize. There will be hurdles to overcome. First, if products and offers aren’t relevant, it will turn off consumers, maybe for a long time. Second, it’s not just products that need to be personalized, but also prices.
“Usually the price element is not personalized,” said Graeme McVie, chief business development officer of Precima, a data-driven solutions company. “It’s often done by type of customer at the micro-segment level. But you need to truly get to price by item by customer.”
Roadblocks aside, personalization needs to move forward, because the potential benefits are so great. In fact, this strategy may help determine where consumers will shop in an omnichannel world. Personalization should be a province of tech-savvy online retailers, which have loads of data about their customers. However, it could also be a key strategy for brick and mortar retailers to attract shoppers to physical stores. Retailers need to create relevancy at all shopper touchpoints, including in-store, web, tablet, mobile app, and other platforms, Hawkins emphasized.
Ready or not, personalization will happen. And the generation everyone’s trying to reach, Millennials, will probably be the most receptive of all, as long as it makes a difference in their lives.
If it doesn’t, we’ll hear about it, loud and clear. The marketing may be personal, but consumer feedback these days is rarely private.
David Orgel is an award-winning business journalist, industry expert and speaker who was the longtime chief editor and content leader of Supermarket News. He is currently the principal of David Orgel Consulting, delivering strategic content and counsel to the food, retail and CPG industries.
Tech titans: It’s all about the customers with Alibaba and Amazon
Whole Foods founder John Mackey once said, “It’s competition that forces companies to get out of their complacency.” For Whole Foods’ new owner, Amazon’s Jeff Bezos, and Alibaba’s Jack Ma, that’s not the case. For them, innovation starts with the customer. The impending struggle between these two global giants will directly impact consumer health care and most everything else.
Both companies are pleasing customers globally and will inevitably compete. Bezos, who acquired Whole Foods, observed, “If you’re customer-focused, and you’re already the leader, customers are never satisfied.” Ma is more direct, “Forget about your competitors, just focus on your customers. He also has been quoted saying, “Never ever compete on prices, instead compete on services and innovation.” In the HR realm, Ma is a maverick, “Don’t hire the most qualified, hire the craziest.”
Vision aside, the two companies were even named in a somewhat similar fashion. Ma, during a visit to San Francisco, liked Alibaba — founded in 1999— as a good name. He asked a waitress what Alibaba meant. She said, “Open Sesame,” and indeed, the company opens the world up for small-to-medium-sized companies. Meanwhile, Bezos initially thought about naming Amazon, founded in 1995, Cadabra, short for “abracadabra,” but the name was soon discarded as too similar to “cadaver.” Bezos then settled on Amazon, the world’s longest river, and was strategically helpful in the early Internet days when website listings were commonly alphabetical.
As a U.S. consumer healthcare brand owner, what do the missions of these retailers mean? Essentially, it means that any global aspirations and channel pricing discipline will be framed by one or both of these companies. Of the two, Alibaba is probably the longer-term one to watch. Interestingly, Amazon utilizes Alibaba as its infrastructure engine in China. Meanwhile, Alibaba is studying the U.S. market and how best to enter it. Of the two, Alibaba is the larger. Alibaba’s online sales and profits surpassed all U.S. retailers, including Walmart, Amazon and eBay, combined since 2015, and has operations in more than 200 countries. And some parts of Alibaba, notably its e-payment system Alipay, are not part of the traded stock. In short, if U.S. brand owners worry about the so-called Amazon effect, a bigger storm is on the horizon.
Alibaba, though, has a structural advantage. With TMall and Taobao — Amazon and eBay equivalents — as key interacting divisions, the company’s data, marketing clout, pricing insight and, ultimately control, capabilities, as well as the ability to create, shape and direct efficient logistics are unprecedented. China’s restrictions on the Internet also have sharpened Alibaba’s content. Chinese consumers look to TMall as one of the definitive consumer healthcare information sources. It could be argued that Alibaba, along with other Chinese e-commerce platforms, also serve as their markets’ WebMD.
Coinciding with Alibaba’s structural strengths, the Chinese consumer healthcare market is poised to overtake the United States as the world’s largest, sometime within the next 10 years. While it is difficult to measure the conventional market sizes, China’s traditional Chinese medicines market is both huge and difficult to measure. The Chinese market is larger than the legacy U.S. framework. In short, Alibaba has structural strengths, while leveraging its domestic soon-to-be largest consumer healthcare market.
As a U.S. consumer healthcare brand owner, what is a strategic response? To quote one of my inspirations, Yogi Berra, “The future ain’t what it used to be.” A long-term (what is long-term?) U.S. consumer healthcare strategist must both understand Amazon now and Alibaba very soon — and certainly before it’s too late. When will it be too late? It’s hard to say, but when you consider Alibaba is a teenager and Amazon is in its early 20s, the window is potentially closing fast. Or as Yogi once said, “You’ve got to be very careful if you don’t know where you are going, because you might not get there.”
Ed Rowland is a Drug Store News Contributing Editor covering global issues. As the principal of Rowland Global LLC (rowland-global.com), he believes in the promise of global business and supports companies in their strategy, tactics and execution of international growth initiatives.