Anyone who questions whether the primary battleground for the world’s top retailers has shifted from brick-and-mortar stores to the omnichannel realm would do well to consider the series of significant developments that has unfolded in recent weeks. The lead story in the last edition of Mass Market Retailers was about Walmart’s $16 billion investment for a 77% stake in Flipkart, the leading e-commerce player in the booming Indian market. Other stories reported on a deepening of ties between Amazon and struggling Sears Holdings, as well as a presentation by Stuart Aiken, a group vice president at Kroger and chief executive officer of 84.51°, the supermarket operator’s precision marketing arm, during which he talked about the imperative for merchants to leverage technology to deliver a personalized shopping experience.
Since that issue went to press, retailers have continued to escalate the ongoing arms race in the digital domain. Kroger made a potentially transformative move in the fight for the allegiance of online grocery shoppers by forging an exclusive partnership in the United States with Ocado, an online grocery and general merchandise retailer that has more than 580,000 active customers in Great Britain. Under the agreement, which calls for Kroger to increase its stake in Ocado to more than 6%, the former will deploy the Ocado Smart Platform, which facilitates online ordering by customers, automated fulfillment and home delivery, as a key part of the ongoing Restock Kroger program.
“We are actively creating a seamless digital experience for our customers,” says Rodney McMullen, Kroger’s chairman and CEO. “Our partnership with Ocado will speed up our efforts to redefine the food and grocery customer experience — creating value for customers and shareholders alike.”
The two companies are already at work selecting real estate for three automated food distribution centers, a figure that will increase to 20 during the first three years of the partnership. The new facilities will rely on Ocado’s proprietary robotics and physical infrastructure, which allow for the picking of individual products, and software applications for user interfaces, warehouse operations, logistics and delivery route planning.
“Our success as a retailer shows that we can offer customers unrivalled choice, quality and convenience, efficiently and profitably,” Ocado Group CEO Tim Steiner notes. Implicit in Steiner’s comment is the fact that the company’s primary strength is technology, not the marketing and merchandising of consumer products, an idea borne out by the implementation of the Ocado Smart Platform by Sobeys in Canada, Casino in France, ICA in Sweden, and Wm Morrison in the U.K.
Ahold Delhaize, whose U.S. holdings include online grocer Peapod, is another major retailer that is ramping up its omnichannel capabilities. Last month the company launched Peapod Digital Labs to accelerate innovation in technology and e-commerce and hone the customer experience. “We are excited about this new company, which will serve as the engine that powers our U.S. e-commerce and digital strategies,” says Kevin Holt, CEO of Ahold USA.
“As one of the largest grocery retailers and a market leader in home delivery on the East Coast, the great local brands of Ahold Delhaize USA have a strong heritage of innovation. The creation of Peapod Digital Labs and the appointment of JJ [Fleeman] to lead the new company and serve as chief e-commerce officer will enable us to sharpen out focus on leveraging the size and scale of the U.S. brands to provide customers with a personalized and effortless shopping experience.”
Albertsons Cos. has also taken steps to bolster its digital arsenal. The supermarket and food/drug combination store operator last month hired Gautam Kotwal as executive vice president and chief data and analytics officer. In that position, Kotwal, whose is credited with building the Big Data team at Kohl’s during the past two years, will be charged with fostering innovation that creates value, delivers personalized shopping experiences in-store and online, and sets Albertsons Cos. apart from competing retailers.
“Our omnichannel platform is something our organization is deeply committed to,” says Albertsons Cos. president and chief operating officer Jim Donald, “and to best serve our customers who shop each channel, we must begin to look at data not only across our customer base but also within our company to further innovate within our industry. … I’m excited to have Gautam join our company and formalize our data and analytics efforts under his leadership so we can better engage our customers, no matter where they shop with us.”
Those are just some of the technology-based initiatives undertaken by supermarket, drug and discount chains of late. Brick-and-mortar stores certainly aren’t going to disappear anytime soon, but the recent actions of mass market retailers make it abundantly clear that the contest for supremacy in the sector going forward will, first and foremost, involve omnichannel capabilities. With Amazon and Walmart setting high standards for the industry — standards that they are working relentlessly to further elevate — it’s incumbent on other major retailers to develop ways to compete in the digital age. Failure to do so will mark the beginning of a long, slow process of decline like the one that led to the demise of A&P and may finally be entering its final stages at Sears Holdings.