Supermarkets are vying to win over shoppers as the supermarket war escalates with the arrival of cut price alternatives in the US, that have already gobbled up market share from the big brand players in Europe. Intelligence Node’s Sanjeev Sularia warns that supermarkets will need to use big data to gain a deeper understanding of shopping patterns to stave off the competition.
The vast amount of big data that supermarkets and grocery retailers now have at their disposal is set to have a critical role to play in who wins out on market share in this highly competitive industry.
Once grocery sales were the domain of grocery stores. Now we have a host of places we can buy food from, from supermarkets and hypermarkets to cut-price stores and online, thanks to the likes of Google and Amazon entering the grocery delivery foray.
The discount model has taken off across Europe, led by German competitors Lidl and Aldi. Their business model allows them to offer good quality products and low prices. They’ve now tapped into more affluent shoppers by offering more high end products, such as lobster and chateau wines, at their typically competitive prices.
Both Aldi and Lidl buy in very large volumes. Enhanced data analytics enable the retailers to make rapid buying decisions to enhance the customer experience. Data mining isn’t just enabling them to win on price, it is also enabling them to build trust and loyalty amongst customers by enabling them to offer the right products to the right customers at exactly the right time.
Aldi and Lidl both have their sights set on a share of US grocery sales. Lidl is setting up its headquarters in Arlington, Virginia and will distribute out of North Carolina. Lidl is no small fry. It already has 11,000 stores in 26 countries. It hopes to have 2,000 stores in the US by 2020. Aldi has 9,600 stores worldwide, of which 1,300 are in the US. Aldi is split into two divisions northern (Nord) and southern (Sued). Aldi Nord already runs Trader Joe’s in the US, which has one over the US professional classes. Aldi is looking to open 600 stores in the next two years.
Aldi and Lidl are set to give the likes of supermarket behemoths Safeway and Giant a run for their money. Their strategy in Europe has been on price, back by sophisticated business analytics, and it has worked. Jointly Aldi and Lidl have taken a 10% share of the UK groceries market in just under three years, according to analysts Kantal Worldpanel. Aldi’s share sits at 5.6% and Lidl at 4.4%.
Both Aldi and Lidl buy in huge volumes. A strategy it uses across the board. Enhanced data analytics enable the retailers to make quick business decisions, improving customer satisfaction and the customer experience.
Business intelligence is the secret weapon
Big data analysis is seen as a key competitive advantage that can bolster razor-thin margins, streamline operations and increase sales. Data analytics can tell you what the competition is doing and enable a rapid turn round in pricing strategies in lines. It can pinpoint trends, enable ordering to keep in line with demand and target promotions and customer preferences.
Take Jet.com, which is already making a name for itself. The company’s model is built around deeper discounts the more that is added to a basket, which keeps shipping costs down. Jet’s software program has been described by its Co-founder and CEO Marc Lore as “like a real-time trading platform”. It basically digs out ways of making purchasing more efficient. So if you order cat food and a cat bowl, the software will find out if you can buy a cat bed at almost no additional shipping cost. Enticing the customer into making another purchase.
It isn’t just the discounters that are investing in big data analysis to better understand and draw in customers. Whole Foods Market has integrated its systems tightly so data is available across all platforms. So as well as pricing details, it includes animal welfare ratings or where foods were sourced. It recently linked up with Instacart to test delivery and pick up in select US cities, Shoppers ordering via a mobile app or website can get deliveries within the hour. This initiative will generate further data for analysis.
Capturing consistent, accurate and in-depth data for analysis is not easy, but the grocers that can best use the data swimming through their systems to retain loyal customers and win over new ones will be the ones that survive.
The author is Chief Executive Officer and Co-founder at Intelligence Node, a firm offering ways to help retail brands make timely, data-driven decisions
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