AMAZON FUTUREHere’s what Amazon’s recent acquisition of Whole Foods Market Inc. means for the future of retail shopping. By Moshe Kranc

Amazon broke the Internet when it announced that it will be buying the upscale Whole Foods supermarket chain for almost $14 billion. The initial result was a torrent of jokes which theorized that the purchase was the result of Amazon's Alexa misunderstanding CEO Jeff Bezos' command to buy some groceries at Whole Foods, and tongue-in-cheek laments about how every trip to Whole Foods seems to end up costing a lot more than you planned. Beyond the humor, though, what does this purchase mean for the future of online and offline shopping?

Amazon has shown an interest in grocery shopping for some time. Back in 2007, it launched Amazon Fresh, selling fresh food via its distribution centers. More recently, in December 2016, Amazon launched a beta version of Amazon Go, a frictionless supermarket with no cashiers – just take what you want, and sensors will make sure you are charged the right amount. Now, Amazon's purchase of Whole Foods and its 431 brick and mortar locations takes this interest to a whole new level.

It's easy to understand Amazon's interest in the grocery shopping segment as the next area for growth after having conquered online retail for durable goods. The total available market is just too large to ignore - Americans spend about 10 percent of their income on groceries, to the tune of over $600 billion dollars a year. But, grocery shopping has unique challenges that make it different than other kinds of retail:

* The margins are razor-thin, at around 2 percent, due to stiff competition.

* Many grocery goods have a short shelf life, so inventory cannot be stockpiled, and spoilage is a major threat to profitability.

* Consumers will not wait until the next day for delivery – they typically need at least some of the products they’ve requested within the hour.

Why Buy Whole Foods?

Let's assume that Amazon's goal is to become the dominant player in all aspects of retail: online and offline, durable goods and groceries. It thus makes sense for Amazon to buy a grocery chain. But, Amazon could have bought any grocery chain, like Kroger's or Safeway for example. Why Whole Foods?

For one thing, Whole Foods shoppers have the same demographic as Amazon Prime shoppers: urban, upper middle class. This provides opportunities for synergies such as:

* Cross-selling, e.g., offer in-store discounts to Amazon Prime members.

* Leveraging Whole Foods' brick and mortar locations as delivery centers to reach Amazon's most dedicated urban Amazon Prime customers. This narrows a competitive gap with Walmart, which complements online retail with in-store pick-up.

* Collecting data about buying habits of Whole Foods customers that can be used to better target Amazon Prime customers with personalized offers.

Another key attribute of Whole Foods is its ability to provide a high-touch shopping experience. Over the past few decades, we have seen the decline of the general purpose one-size-fits-all mid-sized supermarket, in favor of a bifurcated model. On the one hand, there are mega-stores which provide terrific prices in a sterile warehouse atmosphere.

On the other hand, there are high-touch experiential stores, such as Whole Foods and Trader Joe's, where shoppers go not so much to buy specific items as to enjoy the sensation of shopping, to smell and touch the produce, to talk food with other foodies, and to discover products and food categories they had no idea existed.

Where Does Amazon Need Help?

Amazon needs no help in conquering the warehouse-style grocery segment. With their expertise in logistics and automation, Amazon can create a more efficient food warehouse that will ultimately eliminate the consumer's need to visit the store at all.

Where Amazon needs help is in the high-touch experiential shopping segment, because this is far from Amazon's online shopping DNA. While shopping online with Amazon may be efficient, it is not a shopping experience most people would describe as pleasant, engaging or interesting.

To put it another way: You are far more likely to discover a product you didn’t initially intend to buy in a Whole Foods store than on Amazon's web site. Whole Foods provides Amazon with an entry into high-touch experiential shopping. It also provides a laboratory where Amazon can collect data about this kind of shopping, and perhaps gain insights into how to make online shopping more exploratory and engaging.

Final thoughts

If you are a competitor in the supermarket segment, Amazon's purchase of Whole Foods serves as a wake-up call. Like it or not, you are now part of digital transformation, competing against a nimble company that uses software to drive operational efficiencies and derive marketing insights.

You'll have to up your game by becoming a data-driven company, or risk being left behind. If you don't have those technical capabilities, get help from a partner that has experience mentoring companies through digital transformation.

Moshe Kranc is CTO for Ness Digital Engineering.

RETAIL PRICINGRetailers must understand the impact of pricing strategies beyond Every Day Low Price to stay competitive and increase profit margins both online and in-store. By Michael Falck

Retail today is one of the most dynamic industries with a constant flow of new ideas, new products and new ways to entice customers into the store. With the continued rise of online shopping, retailers must be even more creative to understand omnichannel dynamics and how to make the most of their brick-and-mortar stores.

The increasingly complex supply chain means that retailers today can no longer rely on traditional pricing strategies in order to differentiate their brand.

Indeed, today’s retail philosophy is increasingly underpinned by smart technology to help make sense of the myriad of data available and to inform strategies that drive both consumer loyalty and make a positive difference to the bottom line.

To date, price has been the one constant that has been a major weapon for retailers. It is used in many different ways – from Every Day Low Pricing (EDLP); promotional pricing and loss leaders, to the myriad of promotional mechanisms around price of two-for-one, buy one get one free and other variations. They all revolve around price, often supported by advertising, point of sale material and shelf-edge labels.

The Promise of EDLP

Over the past few decades, the impact discount retailers, especially grocers, has had on the U.S. retail industry is significant, challenging other retailers to stay afloat in the competitive market. However, even though these discount retailers market themselves as lower price outlets, the discount sector does not rely solely on EDLP. They too have aggressive price promotions and make it more exciting for customers, attracting repeat visits.

When it emerged, the concept of EDLP was very attractive to the retail supply chain because it meant stable, easily forecastable volumes of the full range products on offer, enabling retailers to enjoy the even flow of each item through the supply chain. Seasonality still came into play but with EDLP, there were no massive spikes in demand caused by promotions and price drops.

As a retail philosophy, it seems very attractive. That is, until someone breaks rank and starts to implement promotions to the point at which EDLP generally breaks down. Why is this? Fundamentally, Every Day Low Pricing loses excitement for shoppers and retailers, in general. It is much more fun for shoppers to pick their way through a retailer looking for bargains and accept that everyone buys things they do not need or want, but simply purchased because they could not resist the temptation of a “good deal.”

A New Pricing Strategy

Now, retail professionals need to accept that while there may be times of stability, retail is going to remain a rollercoaster, especially in today’s omnichannel environment.

Not only do retailers need to be able to predict, manage and react quickly to changes in demand, but they also need to react to dramatic changes on a line-by-line basis.

The ability to accurately forecast the demand of an item before, during, and after the promotional period can have a massive impact on the profitability and smooth operation of a retailer. If not, this can cost retailers to over stock a promoted item, damaging the profitability and operation, particularly in food where shelf life plays an even more important role.

Retailers need an accurate forecast on which to build, that allows for the capability to plan the display and flow of items through the supply chain into retail warehouses and all the way to the shop floor.

This requires the ability to utilize allocation, flow and volume planning of items through the supply chain along with store space planning in the knowledge that they will all come together to create the most successful outcome. If you cannot get this right, performance will always be suboptimal.

By understanding the impact of seasonal promotions and carrying out regression analysis to understand purchase patterns by store, geography and customer, retailers can increase both customer service and profit margins. Forecasting more accurately at the store level, through the supply chain from supplier to store, in a smooth and manageable manner will drive success to both customers and retailers.

If EDLP could meet customers’ and retailers’ expectations, life would be easy and retailers more efficient. However, retail is not like that.

Today, price is no longer the only weapon in the retailer’s arsenal. Today, retailers have to understand how customers will react to the combination of pricing, promotions, availability and seasonality – on a store-by-store basis. That is the key to retail efficacy, efficiency, and ultimately, success.

Michael Falck is the U.S. president for RELEX Solutions.

RETAIL GROCERY SOLUTIONSAs digital devices play a larger role in grocery shopping, retailers are collaborating with trade partners to present accurate data that leads to brand loyalty. By Angela Fernandez 

With digital devices now almost permanent fixtures in consumers’ lives, an abundance of data about the products we buy is easily accessible from anywhere. As a result, consumers now expect companies to be more transparent and openly provide information about the products they sell.

While this is recognized by the retail grocery community as an opportunity for increased sales and loyalty, companies are challenged to provide consumers with complete and trustworthy information. Accurate data is the key to bolstering innovation in both the digital and physical spaces. Companies simply no longer have the time and resources to accommodate siloed, proprietary systems. With a lack of interoperability with external partners, these processes are becoming symbolic of a by-gone era.

Grocery supply chain partners are applying global standards to better align with consumer priorities. They are focusing on data quality, as well as consistency of product information and images to become more in tune with the emerging “phygital” state of grocery shopping. Let’s examine each and uncover the ways that collaboration through standards will help drive the industry forward. 

A Focus on Data Quality

Consumers rely on online information to make purchase decisions — this includes product descriptions from suppliers, distributors and retailers. Tolerance for incomplete or inaccurate data is essentially nonexistent. According to a Shotfarm study, nearly 90 percent of consumers say they would be unlikely to consider a retailer again if they provided incorrect information for a purchased product.

Until the online data explosion, data inaccuracies were simply thought of as the cost of doing business. Little attention had been paid to product listings that were typically between trading partners. Now, forward-thinking companies realize data is a strategic asset and a powerful tool in today’s marketplace.

To address data quality challenges, supply chain partners from both the supply and demand side of the grocery business have collaborated in neutral working groups focused on achieving a higher degree of accuracy. Companies that leverage global standards for their own internal data quality initiatives focus on data governance processes to support continual, effective product data management. These companies understand the integrity of product data must be maintained throughout the product’s lifecycle and at any point in the supply chain. Through quality data, consumers are provided with the validation they need to feel good about their product purchases.

A Focus on Consistency

While most consumers still prefer to make purchases in physical stores, they do their research online first. A new Food Network magazine study revealed consumers search for recipes (39 percent), check nutritional information (28 percent) and price compare (40 percent) using their smartphones in-store. Another recent study by Market Track noted consumers’ huge affinity for Amazon — 87 percent shop the e-commerce giant, and more than two-thirds said they do so at least once a week.

With statistics like these, it’s up to retailers to convey detailed product information across all channels to stay competitive. Industry leaders rely on a standard set of product attribute definitions so accurate information can be provided for consumers shopping via multiple platforms. These attributes are exchanged through an interoperable network called the Global Data Synchronization Network (GDSN) that allows brands to share product data with their customers and trading partners in real time. This includes crucial information ranging from trading partner details to consumer facing attributes.    

With many partners leveraging one source of the truth, they can more effectively fuel the seamless online experiences that consumers have come to expect. Consistency across all platforms will be key to winning consumer loyalty as the marketplace continues to diversify with meal kit start-ups, click-and-collect options, and other new distribution and delivery models. This includes image consistency and accuracy, as visuals play an increasingly significant role in purchasing decisions.

Looking to the Future

Cultural norms, attitudes and paths to purchase are changing, and food companies recognize that they need to put the consumer’ concerns first or risk losing sales. Analysts predict massive growth in the next three to five years in online grocery shopping, and retailers that embrace food transparency can grow sales up to 25 percent faster than their peers, according to IRI. New commerce options should not compete with traditional success — it is not “digital vs. physical.” The two must work together for a seamless, frustration-free consumer experience. Those with a holistic point of view and standardized approach will be able to capitalize on new opportunities into the future.

Angela Fernandez is the vice president of retail grocery and foodservice for GS1 US. She collaborates with industry leaders and key trade associations to understand industry supply chain challenges, and address how the use of GS1 Standards can help solve those challenges.

WORKFORCE SOLUTIONSHere are several ways analytics can help solve the retail industry’s most pressing workforce challenges. By Ian Cook

Retailers with the right employees see the highest average purchase value, the best customer satisfaction, and the most repeat store visits. However, as employment numbers and consumer spending continue to improve, human resources issues are now seen as one of the top threats to business outcomes. So how can you recruit, develop, and engage the right retail staff in a sustainable way?

HR departments are turning to the business intelligence that their counterparts in other departments have been taking advantage of for years. At the crossroads of the workforce and the business is where HR can have its greatest impact; this is where in-depth knowledge of people dynamics is invaluable in making talent decisions that directly affect the top and bottom line.

Proper workforce analytics should go beyond metrics, and focus on connecting employee data to business data so you can see how workforce programs impact results store by store. This allows HR leaders to, for instance, discover whether improvements in employee engagement increase profit, increases in hourly pay lead to higher sales per square foot, or more training hours boost in-store conversion rates.

Here are several ways analytics helps solve the retail industry’s most pressing workforce challenges:

Recruit the Right Team

Attracting talent is difficult in any industry, but when hiring top quality talent is necessary to customer satisfaction and retention, the effectiveness of the recruiting funnel becomes a major focus. When it comes to recruitment, most talent acquisition teams focus on time-to-fill quotas and cost-of-hire numbers, but these numbers tell you nothing about the quality of a hire.

This is where data-driven HR becomes essential. Without the ability to quickly dig deep into all parts of your hiring funnel and track new hires across the employee life cycle, it’s impossible to go back and tell which lead sources are most effective, which new-hire attributes correlate to the best performance and retention, and how diverse talent develops and flows through your organization. A scientific approach will ensure that you are only recruiting and hiring talent that will drive the success of your retail organization.

Retain the Best Workforce

The retail workforce is a unique mix of part-time staff, full-time employees, contract workers in the distribution channel, and more in between, which makes it difficult to determine what retention strategies will deliver the best return on investment and create the best work environment. 

It can be tempting to copy the latest HR fad in order to keep talent, but it’s important to remember that retention programs work best when they are targeted to the specific needs of each employee group.

Too often we decide HR strategies based on gut-feel and hallway conversations. An analytical mindset will enable you to drill down into key business and customer-facing units, geographies, and/or roles to uncover drivers and trends for turnover. Furthermore, predictive analytics enables you to determine what attributes make employees more likely to leave, or who is likely to succeed long-term, so you can take proactive steps to keep and develop the right talent.

Manage Your Workforce Costs

Keeping an eye on company profitability has not traditionally been HR’s forte, yet without a strong workforce on the sales floor, revenue suffers.

A people strategy platform can quickly pull workforce, financial, and other business systems together to create a complete, accurate picture of headcount and the cost of your retail workforce, regardless of the source of labor, so you can track and reduce costs most effectively.

Dive into analytics to get insight into what workforce factors drive absence, overtime, and turnover so you can build programs to decrease their impact on revenue and profit.

Improve Mergers and Acquisitions Outcomes

According to PwC’s 20th annual survey of CEO’s, retail CEOs cited new M&A as a leading way to move the business ahead. When two organizations come together, it’s virtually certain that their HR management systems will be different and incompatible.    

This unavoidable fact triggers a cascade of critical problems that—if left unsolved—can quickly eat up the improved margins that investors expect of the combined company.

The right analytics technology investment seamlessly brings together data from the combined workforces, which makes it easy and effective to create workforce integration plans. With these insights, you can drill down to important people parameters, get a full projection of headcount costs, compare and contrast differing workforce policies and programs, proactively monitor integration KPIs, and more.

Impact the Bottom Line

If your retail organization hasn’t done so already, invest resources into a top-notch HR analytics team and people strategy platform your top priority this year. With talent shortages looming and the global business environment shifting at high speed, companies can no longer afford to make intuition-based decisions about their workforce. Analytics enables you to confidently double down on your strengths, and eliminate the areas where you’re weakest, so you can meet every talent need of your retail organization.

Ian Cook is the head of workforce solutions at Visier.

Fortiva Retail SolutionsTo maintain a great omnichannel customer experience, it is essential that retailers ensure that their second look providers integrate into their various points of sale. By Joseph Ferguson and Judy Munden

Credit programs and branded credit cards have become the norm for major retailers as a means to earn repeat business and sell more big-ticket items. However, these programs are often backed by prime lenders like Synchrony and Wells Fargo, meaning that customers must have prime FICO scores (above 700 to qualify) – leaving out the nearly one-half of all Americans who have less-than-prime scores according to ValuePenguin.

Because it can take seven to 10 years to repair credit, this large population of credit-impaired consumers includes viable customers who have strong cashflow, yet may have taken a financial hit several years ago. To help customers access the credit they need for big or unexpected purchases, retailers turn to alternative financing options like second look financing – wherein a provider is able to approve customers who were initially declined by the prime credit option.

While the well-known store credit card programs are natural fits for retailers’ online and physical points of sale systems, it is crucial that retailers demand the same from alternative financing providers in order to protect their continued investment in omnichannel excellence. With an eye on ensuring a great customer experience, retailers must ensure that all financing providers offer a seamless integration into their sales systems, as well as the various financing options their customers need.

Value and Importance of Alternative Financing

The benefits of making financing accessible to credit-impaired customers are significant as these consumers span all ages and demographics. In fact, 43 percent of millennials, 33 percent of Generation X and 20 percent of baby boomers are considered less-than-prime, according to TransUnion.

To reach this diverse audience, retailers turn to alternative financing approaches like second look financing. For example, Fortiva Retail Credit uses a proprietary underwriting system that analyzes data beyond a FICO score to determine a customer’s credit-worthiness, which enables the company to instantly approve 30 to 50 percent of applicants who were initially declined by a prime lender.

“When 50 percent of all applicants are declined (for furniture and mattresses) by primary lenders, second look financing plays a vital role in serving a significant volume of our customer base,” Charlie Malouf, president and CEO of Broad River Furniture - a licensee of 18 Ashley Furniture HomeStore locations - says. “If you are relying strictly on prime customers, you are missing out on business, especially on big ticket items.”

Malouf emphasized the importance for retailers to do their due diligence to find the proper credit or financing options for customers, especially given the myriad of options that may fit depending on the customer’s credit status. While some retailers may offer rent-to-own options to fill the void of prime financing declinations, Malouf notes that a substantial proportion of declined customers prefer the flexibility second look finance terms can offer, such as deferred interest plans on lines of credit – which are great for promoting repeat business and brand loyalty.

Malouf added that retailers who do not offer second look financing might consider reviewing their data related to approved prime credit applications versus declined to identify whether there is a missed opportunity for business. “As retailers, we need to solve for every aspect of the complex continuum of credit needs for our consumer base,” he added.

Ensuring a Fit for Customer Satisfaction

The emergence of omnichannel retail stems from the need to meet diverse client needs and preferences. In fact, Pew Research found that while approximately 80 percent of Americans are now online shoppers, 65 percent of Americans generally prefer buying from physical outlets if given a choice. It is important that retailers act accordingly to ensure a great customer experience – whether in the store, online or using a mobile device. For example, Macy’s profit margin grew more than 250 percent after initiating an omnichannel transformation, according to Centric Digital.

A part of that multi-channel approach involves integrating alternative financing into different points of sale through which a customer may engage. Credit-impaired customers often know they risk not qualifying for credit, and to avoid any embarrassment, they may prefer to shop privately online. Or they may want the ability to become pre-approved for financing before they begin shopping (in-store or online) to make better informed decisions. Eliminating customer anxiety by streamlining operational and credit processes goes a long way towards building consumer brand loyalty.

As retailers begin seeking financing providers to build out their alternative financing programs, Malouf urges retailers to consider the ease of applying, integration with existing payment systems and round-the-clock lender accessibility. This seamless integration is vital for customers at the point of sale – whether it is in the store or on the go.

What Retailers Should Look For

When evaluating financing programs, it is important to make sure they fit into customers’ diverse preferences related to the customer shopping experience – whether in a physical store, on a desktop computer or via smart phone. Key details to consider include:

* Online Integration. Retailers must ensure the financing provider has demonstrated the capabilities to work with the various digital portals they use, including PC portals, mobile devices and the online shopping cart. This is essential for customers who prefer to shop on-the-go and privately.

* POS Integration. Different retailers use different in-store systems. Alternative financing providers must demonstrate the ability to adapt their processes to meet these diverse terminals.

* Strategic Partnerships. Financing providers often form strategic partnerships to better position themselves to fit into different sales and e-commerce systems. This can include relationships with POS providers like Verifone, e-commerce payment solutions or even technology companies focused on bringing financing and retailing companies together, such as Vyze, Storis, Versatile and Lendpro.

* Prime Issuer Integration. With prime lenders often already engrained into retailers’ payment systems, some alternative financing providers integrate with the prime financing process such that, if prime credit is declined, the second look application is automatically processed. This cuts out a step for the customer and the sales staff.

Joseph Ferguson and Judy Munden represent Fortiva Retail Credit, the only second look consumer financing program serviced by a publicly traded company with decades of experience servicing credit-challenged consumers.

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