The rise in consumer prices of staple groceries will pinch the less disposable income households the most, pushing them towards discount stores like Aldi and Lidl triggering the price wars with the big four (Tesco, Sainsbury’s, Asda and Morrisons) supermarkets.
Add to this mix of uncertainty, the increasingly health conscious consumer expectations for a healthy lifestyle who demand more options at a lower price. The direct result is that shoppers are now spoilt for choices from both the discounters and supermarkets.
Shoppers influence pricing wars
The mood among shoppers has turned from range to convenience with value more important than ever. The fact is that the continuing income squeeze is altering the retail grocery market even if economic growth is sustained post-Brexit.
While the Big Four are still the market leaders in the retail grocery market, they were completely unprepared for the price wars started by the German “discount” store chains – Aldi and Lidl. According to the Kantar Worldpanel figures, Aldi and Lidl are gaining market share while the cumulative market share of the big four has changed little since 2008.
A similar scenario is being played out with the US – China trade wars. The US tariff imposition of nearly $200 billion on Chinese goods will impact both retailers and consumers. With a mass producer like China, establishing relationships is a long term goal to get quality control right, to make sure the logistics work. Cheap products, labor and manufacturing costs all have a significant role in the trade relationships.
But it’s the small retailers who are likely to go out of business as a result of these tariffs because they can’t absorb the cost, and can’t easily pass it on to consumers.
All this will change as the discounters have low prices built into their business models from the beginning, emphasizing bulk over brand and price over range. The big supermarkets have no option but to either shut their less profitable stores to shore up their balance sheets, or use technology to boost their profits.
Technology-based shopping experience
The differentiating factor for the supermarkets over the discount chains is the quality perception for the consumer, offering fresh foods, introducing new ranges, exciting deals, or selling white label alternatives to established branded stuff.
Only by understanding the customers shopping experiences, needs and expectations, can the retailers figure out where to focus on and what to invest in. They can win the price war with personalization to get the shopping experience right.
For online shoppers, the convenience and time savings is the biggest factor over traditional brick and mortar shopping to pick their own products. They would shop online if they got a more personalized and relevant experience leading to higher baskets values for the retailers.
Digital transformation is not just a new tech for retailers. The focus is on the entire customer experience journey by capturing the right data, processing at the right speed and taking appropriate action. This implies a major shift in the way analytics store, process and generates actionable insights for the retail managers to act on.
Next-Gen retail technologies like Artificial Intelligence, Machine Learning and Deep Learning can help accurately test and measure the customer response and adjust the results to reflect in their bottom line.
Some of the ways we are helping America’s top retailers distinguish themselves from the competition are:
- Provide a 360-degree view of each customer using our proprietary Big Data frameworks
- Plan and deliver for optimized marketing initiatives in real time using deep learning algorithms
- Maintain an optimized logistics and supply chain by delivering Cloud-based systems to reduce time to market and help scale the applications
- Enable dynamic pricing to maximize sales using AI to increase the basket value
- Detect retail related frauds and maintain transparency across the retail value chain using Blockchain
It is clear that there are opportunities for those grocery retailers willing to invest in the right technology to get the customer confidence, behaviors and expectations, competition and right business model.