#2 Keeping your competitive advantage: Retail
Part of the "keeping your competitive advantage" series. #1 keeping your competitive advantage
Big changes can come in small packages.
In the late 1800’s packed baking powder changed retail entirely.
John and George Hartford started branding and packing a product you could only get as a commodity. Through their family company, named A&P grocery stores, the Hartford's hired a chemist to ensure quality, created a red packaging with the A&P logo and decreased the selling price immediately now that they were producing in volume.
In 1880, A&P created one of the first national brands of any kind.
Since then, the retail landscape has changed entirely and supermarkets are at serious threat to be entirely disrupted again.
Almost 100 years ago, A&P created the first discount retail ever. In 1920, A&P had a new idea to change the industry once again through their “economy stores”. For the first time, all the unitary prices were marked down. From now on, the war was going to be won on volume over high per unit price. Plus, with smaller prices, the average ticket per person was going to increase now that they could afford more items.
One of their employees, Michael J. Cullen, banking on 3 big things - the cars Ford was mass producing, the great depression and refrigerators - decided to spin off and create his own store. He decided to sell as cheap as he could. In 1930, in NYC, he created the first large supermarket. Even though the warehouse was ugly and far from the city, people in New York wanted low prices at all costs. King Kullen is the first proper supermarket according to the Smithsonian.
Size, selection and low prices made the perfect formula. After world war II and sub urbanization, this trend exploded across the US.
In 1960, Piggly Wiggly created a feature that changed the business again: self service.
Now customers could walk into the stores with the ability to put their products in their own baskets. Counter Clocks were one of the first employees to “disappear” or mutate into cashiers. The scenario was perfect and Piggly Wiggly banked on it instantly.
If you want to read more on Piggly Wiggly’s owner, go and get > Business Adventures> which depicts an incredible history behind the supermarket origins.
In the 1970’s, supply chain, logistics, dynamic pricing and purchasing trends gave supermarkets insight on what the people actually wanted. The golden age of the supermarkets was here through the 70’s and 80’s.
Today, many of those shoppers migrated somewhere else; some of them moved online and others preferred drugstores or convenience stores. However, the biggest reason for migration was Walmart.
This June, Amazon made the retail rollercoaster much scarier by acquiring Whole Foods and gaining access to +460 retails all over the world. With Amazon’s power, the high prices of Whole Foods went down immediately.
The digital giant is ready to revolutionize the way we buy once again.
Recently, Seattle has been chosen as the city to open the first Amazon Go, a conceptual place in which the consumer does not “pay” in the traditional way: You enter the store with your Amazon app activated; once you are in, you only have to collect the items you want to buy. Automatically, all the units will be added and charged to your account. Thanks to deep learning, sensors and big data (among many other technologies) this one of a kind experience is not only possible but has the potential to escalate to the first Whole Food stores.
Will we ever buy perishable items online? Will this buying habit ever change? Will the actual supermarket aisle be transformed now that Silicon Valley’s keyboards are pointing its direction?
Some of the ideas we have seen in our HackerEarth hackathons:Algo Retail : Credit: Arvind SundararajanWhat is it: Leveraging Big data/Augmented reality and better choice models such as dynamic stochastic discrete choice models, we are able to predict to a greater accuracy what customers require. DigiPay: Credit: team VoipWhat is it: The App which will help customers to just grab stuff and walk out from Stores without standing in the long queue for billing WalTalkie: Credit: team WalTalkie What is it: Envisions mobiles being used not just online through a retail app, but also at the actual retail outlet through a local voice based assistant app VR Supermarket: Credit: team LeapARs What is it: Enhance customer purchase experience using VR(Oculus) and Leapmotion.
The UK Scenario
According to Kantar Worldpanel, UK supermarket sales have increased 3.1% compared to previous 12 weeks to 8 October 2017. This marks the 17th period of growth in a row for Britain’s grocers.
The 4 retail giants in UK (Tesco, Morrisons, Sainsbury and Asda) are leading in sales but their market share is slowly eroded by smaller operators. Online sales went down but still increased by 6.7%. Ocado’s - one of the leaders in ecommerce - sales increased by 8.7% but even now, only 18% of the population buys groceries online in the last 3 months.
The long term online growth will be one of the main revenue channels to capitalize in the near future.
What does this mean for you?
In retail, the scenario is dynamic and is always wartime. Digital and ecommerce are not only changing buying habits but generating more and more data supermarkets are using to micro target their consumers.
Back in 2010, Tesco introduced self check machines and everything seemed to change; what seemed futuristic for in development countries, is a reality in the UK and many European countries; many jobs were slashed and many transformed into something different as well.
Today, open innovation is trying to improve mobile experiences, ecommerce and how big data triggers fidelity programs.
According Peter Thiel -PayPal co founder- “ competition is for losers” and therefore, retails need somehow to escape the rat race.
Express Business Case on how to escape competition
Bakeries of Manhattan West Village: a saturated market in which one baker escaped free of the pack when you have competition like Dominique Ansel’s Cronut.
Umber Ahmad, owner of Ma Zeh Dar Bakery, started by selling goods online and once she had a proof of concept, she went to coffee shops to distribute with them. The first one? Intelligencia. After she got really low operational costs and great distribution, she took the buisienss to the sky: by selling 22.000 units to JetBlue
The differentiation? Insert specific flavours across all of her products that reminisce childhood memories. Or as she says:
“we want to have whispers of new things in sort of the pillow of something that is familiar”.