by Sylvain Perrier, president and CEO, Mercatus
Over the last 12 to 18 months, the grocery industry has experienced a seismic disruption that’s leaving many retail executives scrambling to figure out the right next move. However, in the rush to respond to new market entrants, mergers and acquisitions, and new technology pairings, perhaps the biggest threat to grocery executives is a lack of a clear-cut and thought-out business strategy. To run a successful grocery business that can compete in the face of a growing list of competitive threats and opportunities, grocery CEOs must have a thorough understanding of the business, shopper preferences and where the future lies in what’s becoming a digital-heavy industry in order to make informed, strategic decisions.
It starts with the CEO
Too often, despite the news we hear every day, grocery executives still don’t realize all the changes taking place within the industry. The traditional focus has been on balancing the status quo against the effectiveness of investments in people and technology. What’s often missing in executive decision-making is a thorough understanding of the state of the industry and how best to approach competitive challenges using a long-term mindset.
First, leaders need to step back and do an honest assessment of how their business is organized. What talent do they have in the organization? Do they really know who their shoppers are? Do they know what their shoppers want? What type of supply chain do they have? What type of technology platform are they leveraging today? How are they running their business today?
Grocery organizations sometimes compartmentalize what the CEO will focus on while other executives control certain areas. Under this approach, there’s not nearly enough internal discussion taking place. People develop comfort zones and the worst thing a CEO can do is maintain the status quo. A CEO should be in the mindset that the company and the entire ecosystem is their responsibility. They must step out of their comfort zone and gain a better understanding of what’s happening within their company. Once they understand the facts, then they can determine the vision moving forward, followed by the discussion of “how do we take this vision and turn it into reality?”
Although it’s counterintuitive, a lot of executives get stuck operating in the vacuum. CEOs should step outside their four walls and thoroughly evaluate what’s happening around them. What do other retailers do? What does General Motors do? Tesla? Boeing? They should really look across industries to learn what other executives should be doing within their companies.
Most of today’s executives grew up in a traditional brick and mortar landscape. They’re still new to the e-commerce game and, as such, don’t have a solid understanding of what it means to truly be digital. Some grocery retailers claim that their business is digital but then describe digital as though it’s a tangible concept that they can point to and touch. The reality is that digital is a mindset throughout an organization and a deep understanding that the business must operate differently.
The grocers of the future that are truly digital will have the technology shoppers want to use within their stores, as well as a connected online platform and apps. Most importantly, shoppers will have a choice of how they wish to engage with their preferred retailer, allowing retailers to achieve true shopper hyper-personalization at the individual level. This will be made possible by CEOs who change their organizations’ vision to embrace digital in every aspect of the business in order to uncover and cater to shopper behavior in a much more nuanced and unique way than today.
Convincing the stakeholders
Like other retail verticals, grocery industry CEOs oftentimes face immense pressure from shareholders, their board of directors, Wall Street and other stakeholders. As a result, they feel tied down and don’t have the level of autonomy necessary to make big changes. They also may be hesitant to express to their stakeholders that they would like to partner with a third-party instead of handling company changes in-house. When this happens, executives sometimes remain in their comfort zone, become risk adverse, and ultimately a level of paralysis sets in.
While this fear is not unfounded, the truth is that now is the perfect time to make a change. CEOs have the opportunity to lay out what is happening in the industry and convince stakeholders why a move towards digital operations is necessary. This may mean moving away from a built-in-house mentality that reduces cost complexities within the company, as well as leveraging new supply chain technology to create new opportunities, or using new vertical technologies and partners. Most importantly, find a trusted partner that can help business grow and evolve in the face of the industry’s evolution, and sell this internally as well as to your investors. Stakeholders will feel more at ease knowing they’re working with a partner who has expertise within the industry, and understands the changing demographics and possibilities.
In the end, it’s up to CEOs to lead the charge towards digital integration and transformation. To do so, they must avoid the status quo and jumpstart the organization or risk being left in the dust of forward-thinking competitors. As grocery continues to evolve, some CEOs will fail, but we will also see present and prepared CEOs digitize their grocery offerings, embrace new digital commerce partnerships and bring their organization into the future in the face of the industry’s challenges.