What Does Digital Transformation Mean for Grocery Retail Business?

From selling, payment systems, delivery, and operations, everything is going through a considerable change. Using digital technology as a tool, retailers are infusing more diversification and flexibility in how they serve their customers. From click and collect, speedy checkouts, kiosk ordering, and more, buyers have more options to interact with grocers than ever before.

Here is an example grocery transformation happening mentioned in the book Digital Transformation Game Plan.

A grocery store opened near your place. It offers prepared food, staples, and other items. When you enter the store, you need to scan a QR code from your mobile phone. When you finish your shopping, you can walk right out without queuing up at the cash counter. You do not have to pay at the cash counter; the amount is automatically charged from your account for the items you buy.

You must be wondering how does the store know which items you take from the shelf? The moment you walk into the store, a network of cameras and sensors begin to capture your shopping actions. These are not the simple security cameras we usually see in stores; they are computer vision, weight sensors, motion sensors, radio-frequency identification (RFID) tags, and more. For example, when you take a sandwich from the shelf and put it in your bag, a variety of digital footprints related to this action will be collected and sent to a system. Artificial intelligence (AI) and deep learning crunch this data, identify the sandwich, and add it to your virtual cart. When you change your mind and put the sandwich back onto the shelf, the system is smart enough to recognize this and remove it from your virtual cart.

This store is Amazon Go, the next-generation cashless grocery store. More such stores will be opened in the near future. We believe this is just the start of innovation in the grocery retail business.

Digital transformation does not happen overnight. Retailers need the digital tools, including messaging apps, AI, ML, security, digital payments, and visual builders that support e-commerce, especially for groceries and prepared food. However, some retailers lack robust strategy and sufficient funding for this digitalization. Key areas that are certainly taking hold include:

1. Transform Purchase Channels
The shift to digital buying was already happening pre-Covid era. The pandemic has accelerated the transition to digital. Global retail sales declined in 2020, but the e-commerce adoption rate has increased onwards. Now consumers demand the choice of both online and offline experiences. Grocery retailers cannot simply ignore this trend. They must think about transforming their purchase channels (web, mobile, and social) by keeping their consumers at the core.

2. Transform Customer Experience
Rising consumer expectations are forcing grocery retailers that were heavily reliant on offline and high-touch in-person experiences to rethink how they engage with consumers and provide buying experiences. Given the trends, it is pretty evident that the winners in the grocery business are going to be those that put significant investment in consistent, seamless, and personalized customer experience. Retailers must offer customers a greater sense of discovery, choice, and trust in their brand— whether they buy online or offline.

3. Transform Operations with Automation 
In the grocery retail business, e-commerce is now the backbone of the industry. And for e-commerce fulfillment, pickup and last-mile delivery are the key pillars. Both demands tremendous resource efforts, and if we continue to execute them manually, it will add significant operating costs to an already low-margin business. This is where automation can help manage operating costs. Digital transformation of operation could help eliminate manual effort, minimize error rate, and speed up the process. But you need a holistic strategy to justify the demand and scale of automation.

4. Innovate Consumer Loyalty Programs
This is one particular area this is being continuously explored to bring more innovation and win consumer trust. The way new shopping behavior is emerging, grocery retailers adopt different strategies such as pursuing community building, focusing on consumer lifetime value, and enhancing the value of exclusive benefits to certain members/consumers. The latest technologies used in loyalty programs are mobile wallets, apps, and rewards, and AI/ML to better predict behavior based on spending and demographics.

Digital transformation in the grocery retail business is a thoughtful and long-term strategy to improve the odds of business outcomes. So, you must focus on all capabilities rather than just a few components. Then, after a go-live, grocery business leaders must embrace the change thoroughly and adopt it sustainably and consistently across teams and departments.