Digital Transformation in Groceries
The two big national grocers in Boulder are King Soopers (Kroger) and Safeway. Over the past 30 years, across multiple addresses, I’ve generally preferred King Soopers. That is, until recently. During the pandemic, I’ve discovered online grocery shopping, and for the first time, I prefer Safeway.
Safeway undid some 30 years of my brand loyalty to a competitor by offering a better online experience.
Soopers and Instacart provide an acceptable but weak experience. It really didn’t occur to me to try Safeway until Soopers pushed me too far. Soopers was just taking too much of my time and effort with text messages about the order, delivery, substitutions, and more.
Safeway’s experience is slightly better. They allow me to specify substitutions on a per line item basis. They text much less frequently. The delivery price drops if the customer specifies a larger delivery window. And, they offered more of their catalog for sale.
Neither store has nailed online shopping and delivery, and supply shortages made the whole process harder than it will be post-pandemic. Neither is good at tying selection to inventory, so I waste time first picking the item and then repicking it. There’s really no excuse for this problem. After all, before I put the first item in my virtual cart, the vendor knows my address and which warehouse (store) they intend to use.
My previous posts on digital transformation, the June Oven and Amazon T-Shirts, focused on the product. This one is about the service. Digital transformation creates a powerful new opportunity to build loyalty.
Part of the grocery shopping experience is preordained (the shopping list) and part is serendipity. This is why grocers put so much effort into store layout, product placement in general, and bright yellow “sale” tags, and why some brands pay for eye-level placement. None of that matters online. 
One of the biggest factors in grocery loyalty is probably familiarity with the physical store — being able to find things. But that doesn’t matter in an online experience.
The digital transformation opportunity for a grocery store is huge and indeed disruptive. Everything that made a grocery store great (location, size, friendly staff, parking, and layout) gets diminished, and entirely new factors become critical.
What matters online? I think we learned some of this from other brick-and-mortar-to-cloud migrations: Detailed product information, detailed delivery information, and a frictionless experience. Trust me, the grocers have a long way to go, and they better figure it out soon because Amazon isn’t limiting its grocery business to Whole Foods.
The pandemic caused many of us to discover online groceries, but this shopping experience is here to stay. It’s a bit odd at first, but so was buying books online in the ‘90s. We will all get used to it, and the experience will get better. Let’s look at what they’re doing right — and what moved a different store up in my loyalty.
Online grocers do make repeat purchases easier, although even this feature needs improvement. I would like to remove mistakes/regrets/substitutions from the history-fueled suggestions.
What I really want is more information. More product information, and I want to be able to share more instructions with the shopper. For example, Soopers doesn’t let me specify if substitutions are OK on a per-line-item basis. Or to coach the substitutions. I want Coke Zero, but if not available then Coke Zero Cherry. Whatever you do, don’t buy any of that Coke Zero Vanilla crap.
I also want much more product information, maybe even customer reviews (this generic is as good as the name brand). Lots of factors go into a purchase decision beyond just the item itself. For example, I should be able to specify hard or soft avocados (do I want to eat them right away or with a meal in a few days?).
The discovery process needs significant improvement. Amazon and Netflix have sophisticated, AI-powered recommendation engines, but grocers lack the online equivalent of end caps. For example, if someone buys hot dogs, why not immediately suggest buns and mustard? The AI should be smart enough to never suggest ketchup with hot dogs (unless it knows there are kids in the house).
The whole online shopping process is being adapted from physical stores. They pay one person to stock the shelf and another to put it in the cart. I imagine grocers will move from a retail to a warehouse model (pick, pack, and deliver). Also, they tie fulfillment to a single location instead of sourcing items from wherever they happen to be. They tell me they are out of a product, rather than source it from a separate store (at least offer to mail it to me, or let me specify the store).
The search function creates an opportunity to make online shopping better than in-person shopping. I hate wandering around the store trying to find something. Grocers make it particularly complex because they hide things in odd places. You won’t find the better cheeses by the regular cheeses. My local Soopers has salsa in four different locations.
Placing products in aisles is surprisingly controversial. Does soy sauce go in the condiment aisle or the international aisle? How about Vietnamese peanut sauce? Search solves these problems.
Search can also be improved with more advanced options such as low carb, low fat, locally sourced, nut-free, lactose-free, fresh, and more. Monitoring what customers search for can identify items that should be stocked. Online stores don’t have to restrict their selections like physical retail locations.
I expect we will soon see ghost grocery stores (or perhaps I mean we won’t see them). I don’t know if that’s the term, but ghost kitchens are what they are calling delivery/pickup-only restaurants. The concept isn’t particularly new; there’s a Domino’s Pizza nearby that’s never had any tables or waitstaff, but thanks to Uber Eats and other delivery services — and perhaps the pandemic — the concept of ghost kitchens is a category now.
Ghost grocers will be stores without customers. They won’t have wide aisles and big parking lots. They will be satellite warehouses designed to accommodate fast delivery.
I digress. Digital Transformation gets applied to many things. Records to CDs? Hard phones to Softphones? Signatures to Docusign? The term really means simply the application of new technologies. This can be disruptive or not. But it applies to the service as much as the product and always represents an opportunity for competitive disruption.
New locations, new websites, new approaches, it’s all occurring now, and as far as I can tell, leadership of the online grocery business is up for grabs.