Expert: How Independents Can ‘Win’ With Technology

Ross Ely, president and CEO of ProLogic Retail Services (PLRS), a provider of loyalty and customer relationship marketing services for the grocery industry, attended this year’s FMI Midwinter Executive Conference, held recently in Miami Beach, Florida, and he came prepared to share his technology expertise with conference attendees.

A growing concern for independent retailers is how to compete in the fast-paced and increasingly important technology sphere. As large grocery and retail chains drive leading-edge technologies, PLRS is dedicated to helping independents keep up, and many of its clients, said Ely, are succeeding.    

Personalization is the key

How can independents stay profitable—and grow—in the face of big chains that benefit from cost advantages they can pass down to their customers and that have a much bigger marketing budget (an advantage that was especially apparent as the Super Bowl drew near)? The key, according to Ely, is providing a personalized shopping experience, and in that arena, independents can have the edge if they’re smart. Assortment, services, community involvement and the “overall feel” of a store are all important, noted Ely, who believes the ability to tailor the shopping experience of a store to the local community is the core value proposition of an independent grocer.

“It’s really all about creating a local, personalized approach that makes shoppers feel like they have some affinity for that local, independent store,” he said.

But effectively utilizing the technology available to them to “emphasize and enhance” that core value can go a long way toward helping smaller retailers compete in the grocery arena. Borrowing a phrase from an independent, Ely calls technology “the great equalizer,” noting that technology has become cheap and accessible enough that independents can utilize it as effectively as large chains—even without the additional expense of a dedicated staff.

“Technology has the potential to transform stores into this idea of digital magnets, where they’re using digital technology to really draw in shoppers and make them, even more, have a higher (likelihood) to come into their stores and try them out and utilize the technology,” he said.

One way independents are excelling at this is by using customer data to take advantage of “quid pro quo shopper marketing.”

“Shoppers today are saying, ‘you can use my data—not sell it to a third party—but you can use it yourself, and in exchange for that, I want you to give me very compelling, exciting offers for products that you know that I care about,’” said Ely.

Independents can use that information to identify their top shoppers and increase their basket size.

Busting the myth: Where does store growth come from?

Using customer data to target loyal customers is the best use of technology for independents, Ely noted, because contrary to popular belief, a store’s growth comes from increased sales to existing customers—not from attracting new customers. That revelation comes from a recent presentation by Kroger, which does business under a number of banners, including Food 4 Less, Fred Meyer, Fry’s, Ralphs, QFC, Smith’s and Foods Co., and its data and analytics partner dunnhumby.

“The first thing they said was, for us, a loyal customer, i.e. a customer that takes advantage of their promotions and takes advantage of their offers…is worth up to eight non-loyal customers, which is somebody who just buys transactionally,” said Ely.

That’s not surprising considering data previously released by dunnhumby indicates that 95 percent of Kroger’s growth has come from existing customers. The company achieves that growth by identifying loyal customers, and targeting them with offers for both items they buy frequently at Kroger and for adjacent categories. For example, Kroger may notice that a customer frequently purchases peanut butter, but not jelly, or fish, but not potatoes, said Ely. Kroger can then provide offers for that peanut butter and fish, as well as incentives to encourage those customers also to purchase those items they’re obviously buying elsewhere.

“So they’re pulling us in, and with targeted, personalized offers, they’re getting a bigger share of our wallet overall. And we’re spending more with them because they’re obviously meeting our needs and thinking about what they can provide us that we obviously want,” he said. “The antonym for that is just rifle shot coupons out to everybody. And the sense today is that if you’re a dog lover and dog owner and you’re getting cat food coupons, that retailer doesn’t understand you and they’re not doing enough to intelligently win and grow your business.”      

How can independents compete?

Ely offered conference attendees a number of suggestions for how independent retailers can use technology to provide personalization in ways that can emulate Kroger’s success:

Rethink your print circular. Many of PLRS’s customers who are striving to compete in the digital arena are “trying to be smarter” about how they use print circulars. According to Ely, they are scaling back and reducing circulation in order to funnel those cost savings into digital initiatives. They are doing this by targeting circulars and offers to top shoppers rather than the general population—and by reducing circulation to only the zip codes where those shoppers live.

Develop personalized, digital circulars. “Everybody has an online circular today,” Ely said. “But ideally, the circular that’s online is personalized to the shopper.” Websites or applications that can recognize a shopper and offer a personalized circular based on purchase history—similar to Amazon’s targeted homepage—is starting to attract attention among independents, although Ely noted it is a more leading-edge approach than other strategies.

Tailor your emails. “By this, what I don’t mean is email blasts that are the same, that go out on a schedule rotation and are just rifle shots out to the entire subscriber base. What I really mean here is specific emails with specific offers out to specific customer sets…This is kind of part and parcel of a loyalty program.” Ely noted that retailers using targeted email see better response rates, open rates, click-through rates and redemption rates compared to regular emails.

Offer a mobile-friendly website. In reviewing the websites of some of PLRS’s independent clients, Ely noted that some are still not mobile friendly. With the increase in mobile phone use by customers both before entering the store and while shopping, offering an easy-to-navigate website is a way independents can interact with their customers. Alternatively, some independents are beginning to offer mobile apps, either in place of a mobile-friendly website or in addition to it.

*Editor’s note: Find more coverage from the FMI Midwinter Executive Conference in the March 2016 print editions of The Shelby Report.