Who’s Grabbing The Consumer’s Share Of Stomach?

It’s OK to admit it: The grocery and food business was once rather boring.

Sure, people cannot live without food, but acquiring that nutritional energy often meant frequenting one specific grocery store for decades, coupons in hand and less often calling out for pizza or visiting a fast food drive-through. Graduations, dates and other events might mean a fancy restaurant, with owners who would not even consider delivery because of the logistical hassles involved and the danger of customers receiving below-standard fare, risking the reputation of the business.

Oh, how times have changed — and how they keep on changing, thanks to digital technology and shifting consumer expectations.

That is demonstrated in the new Commerce Connected Playbook from PYMNTS, in partnership with First Data, and in a new PYMNTS podcast discussion that features Karen Webster of PYMNTS and First Data’s David Conroy, SVP and head of national grocery and petroleum industry sales, and Glenn Fodor, the company’s SVP and head of information and analytics solutions.

Consumer Shifts

“Consumer preferences are changing dramatically, and that’s leading to tremendous transformation” in the competition for what industry insiders call “the share of the stomach,” Conroy said. He pointed to such factors as the increasing online availability of grocery items, including fresh food (the Commerce Connected Playbook projected a 13 percent annual growth rate for online grocery sales this year), and consumers’ growing expectations for convenience and almost instantaneous delivery as helping to drive change in the grocery and restaurant-delivery sectors.

Conroy and Fodor said that the grocery retailers, quick-service restaurants (QSRs) and other food providers that are growing the most — and are best prepared to capture more of that share of the stomach — are those with advanced and integrated online, mobile and loyalty strategies. That’s challenging enough, of course. Yet, businesses with a firm grasp on consumer analytics will certainly have an easier time with the task than competitors that do not, especially amid the grocery choices offered by the likes of Amazon and Jet.com, big-box retailers such as Walmart and Target, and even major pharmacy chains such as CVS and Walgreens.

Logistical Importance

Something more is required as food delivery becomes an increasingly lucrative source of revenue and profit: “Delivery and curbside services are becoming table stakes,” Fodor said.

That means, according to Conroy, “having a strong wholesaling and logistical footprint, like Amazon does.” Lest one think that only Amazon and a few other giants can pull that off, he told of a co-op that has its own trucks and other features of logistical power to keep its competitive edge in what is typically a business with very thin margins.

Keeping those margins healthy enough to continue to operate and expand requires a point of view that goes beyond traditional grocery retail. That can include a mobile commerce and payments program that ties in loyalty and makes it “seamless” for customers to claim their rewards, Fodor said. Other examples, at least generally, include the loyalty programs from Starbucks and Dunkin’ Donuts, which have relatively high rates of participation and sales.

Loyalty Edge

Granted, coffee and its associated products are items that consumers buy every day, or even multiple times per day, something that cannot be said for grocery stores, QSRs and other restaurants. However, the technology and seamlessness of those loyalty programs offer guidance for grocery stores and other food providers, he said. “The customer onboarding process is simple,” he said, offering one ideal to imitate.

When it comes to loyalty and discounts, grocery stores and other food providers need to take care and not give too much away. Specifically, that means not “subsidizing” the most loyal customers — the shoppers most likely to make repeat purchases — by wasting big discounts on them, Fodor said.

The Role Of Transparency

On a more general note, “transparency” can play a meaningful role in helping grocery stores and other food businesses to compete more effectively in the digital role, Conroy said. Consumers are interested in where their products come from, and what they contain — though Webster and Conroy joked that too much transparency about calorie counts might indeed serve to make consumers reconsider or resist otherwise appealing purchases.

Transparency also has to do with some cutting-edge digital retail techniques. There is little question that product images and visual search capabilities appeal to shoppers and serve to boost sales. Augmented reality (AR), too, seems very likely to be a revenue enhancer for all types of retailers. For instance, imagine a consumer considering the purchase of a new chair, and checking out how that chair looks within a representation of that shopper’s living room before buying. The same general practice seems certain to come to the food business, with menu items virtually placed before a consumer so they can view the product before buying.

“Technology and apps will drive the consumer experience,” Conroy said.

Grocery and other food retailing may have once been a boring corner of the commerce world in terms of technology, but consumers being trained to shop digitally are ever demanding more in the way of consumer experience. With online grocery sales expected to hit $100 billion by 2025, according to the new PYMNTS Commerce Connected Playbook, consumers can kiss that boredom goodbye as companies strive to gain more of that stomach share.