KEY POINTS

The Coresight Research team is in Las Vegas this week to participate in Groceryshop 2018, being held October 28–31. The event will cover the transformation of consumer packaged goods (CPG), grocery and related industries, and is being attended by more than 2,200 industry professionals and features over 150 speakers.

In this report, we share our key takeaways from the third day of the conference, which are: 

  • Digital blurs the traditional demarcation between CPG retailers and brands.
  • Retail innovation is happening globally to create frictionless shopping experiences.
  • Brands with missions are the winners.
  • Ocado’s fulfillment solution addresses the challenges in grocery e-commerce. 
  • udelv’s for-hire autonomous delivery vans (ADVs) enable last-mile fulfillment of orders.

Groceryshop 2018

The Coresight Research team is in Las Vegas this week to participate in Groceryshop 2018, being held October 28–31, which is a new Shoptalk program that will cover the disruption of the grocery, consumer packaged goods (CPG) and related industries. The event is being attended by executives from established retailers and brands, startups and technology companies, as well as investors and media professionals.

Below, we note five key takeaways from the second day at Groceryshop 2018.

1. Digital Blurs the Traditional Demarcation Between CPG Retailers and Brands

The relationship between CPG brands and retailers is in flux as brands increasingly seek to create direct relationships with their shoppers while maximizing sales through retail partners. Retailers can be disintermediated as brands go direct to customer (DTC) and we have seen this happen in apparel, accessories and luxury in the past, and now in CPG, food and traditional grocery store brands. 

Retailers, for their part, are creating more private label products as a means of differentiating their market offerings. 

For omnichannel mass beauty brand e.l.f. Beauty, its digital heritage influences its brick-and-mortar strategy with retail partners such as Walmart, Target, Kroger and Meijer, which are working to become beauty destinations. Gayatri Budhraja, VP, Brand at e.l.f, said that the brand launches new products DTC first and takes the consumer purchase and post-purchase data—including reviews and customer service interactions—to mine for an in-depth understanding of their shoppers. e.l.f. maintains a direct relationship with customers and partners with select critical retailers to drive brand penetration through retail partnerships that go beyond sales, into marketing, innovation and operational teams that creates multi-functional relationships. 

2. Retail Innovation is Happening Globally to Create Frictionless Shopping Experiences

Jing Wang, Business Intelligence Manager of Alibaba Group, spoke on the concept of New Retail, a business model launched by Alibaba. Wang said that the core idea of New Retail is “digitalizing and transforming every aspect of the retail value chain”, and it comprises product innovation, consumer acquisition, consumer service, feedback and insights, merchandising, payments and logistics. 

Wang claimed that “Hema is the pathfinder in Alibaba’s New Retail ecosystem.” She said that Hema is not just a grocery store but an example of retail integration as it merges online with offline, store with logistics center, and supermarket with restaurant. 

In addition, Wang mentioned few other retail innovations achieved by Alibaba, including the successful launch of lobster mooncake during this year’s mid-autumn festival and adding a robotic restaurant to the Hema store in Shanghai. 

Benjamin Thompson, Head of Digital Transformation of Endeavour Drinks Group, shared how the company provides online shoppers with an accurate view of its inventory and prices at local stores and makes online orders available for pickup within an hour.

Pedro Santos, Head of E-Commerce and Mobile of Sonae MC, spoke on how the company deploys innovative mobile apps and personalization technologies both online and offline to provide shoppers with a more efficient and enjoyable shopping experience. Santos stated that omnichannel, convenience and experience are the three major aspects of retail innovation.

3. Brands with Values Win 

We attended a number of sessions that addressed the growing consumer demand for brands that have a strong sense of their corporate social responsibilities. Jason Bidart, VP, Private Brands Programs at Fairway Market summarized it thus: “The children of millennials shop brand attributes, and are asking what brands are doing socially and environmentally. How will they use my money for a greater good?” 

In his mainstage session titled “The Next Wave in Grocery–Why (and How) Conscious Consumers will Disrupt Everything”, Thrive Market Cofounder and CEO Nick Green spoke about his mission to make healthy living easy and affordable for every American family.  For $5 a month, Thrive Market members get access to the top natural and organic products in the world—from snacks and supplements to health and beauty, through cooking ingredients and home products—at wholesale prices (25%–50% off retail prices), which are shipped anywhere in the U.S. for free. And for every paid member, Thrive Market sponsors the membership of a low-income family.

Green is building a community of conscious consumers who want to eat better and trust the brands they choose, along with breaking down the traditional barriers to healthy living. He told the audience that 60% of the US population does not live within driving distance to a health-food store. Thrive Market’s members are a value-aligned, and not geographically bound, community.

Thrive Market’s private label program took the best from Costco’s Kirkland’s model and made it the highest expression of value- and supply-chain transparency. Thrive Market’s range of approximately 300 private label products is differentiator and the company generates and retains customer loyalty with its mission of democratizing healthy living.

4. Ocado’s Fulfillment Solutions Address the Challenges in Grocery E-Commerce 

In a keynote presentation, Luke Jensen, CEO of Ocado Solutions, debunked common myths about grocery e-commerce and discussed Ocado’s strategy. Ocado Solutions is taking its technologies to retailers around the world. The company is in a partnership with Kroger to build a national network of automated warehouses in the US. 

Jensen started his presentation by debunking two common myths, which are:

  • Nobody buys fresh food online: In the UK, Ocado has the highest penetration of the sales of fresh food, which, at 48%, is significantly higher than the national average. 
  • Online grocery is niche, and only meant for millennials and not the mass market: “More than 50% of households in the UK shop for groceries online from time to time, and the highest penetrated group is families,” said Jensen. 

Retailers must develop an economically viable proposition, said Jensen. In a slide from his presentation (shown in the pic. below), Jensen compared Ocado’s pricing with store-based retailers and app-based grocery retailers. For a $100 order and delivery, on average, the customer pays $102 total to Ocado, $115 to store retailers selling online and $130 to app-based grocery retailers. 

Jensen said the three keys to developing a strong online proposition for grocery customers are service, products and prices. He elaborated on these points by saying that: 

  • for service, retailers must offer item accuracy and on-time delivery in convenient time slots. Ocado has achieved 99% item-picking accuracy in orders delivered to customers, said Jensen; 
  • retailers must offer a range of high-quality products; and finally, 
  • prices must be competitive, with compelling offers such as delivery deals.

Jensen claimed that compared to traditional in-store and manual picking techniques, Ocado’s automated fulfillment solution saves an hour of labor time. On average, it takes 15 minutes of labor per order at Ocado while in-store and manual picking takes an hour and 14 minutes. “That’s $15–$20 of labor saved per order,” said Jensen. 

5. Autonomous Vehicles Enable Last-Mile Fulfillment of Orders 

Grocery order delivery using autonomous vehicles was a hot topic at Groceryshop 2018. California-based udelv has built an autonomous delivery van (ADV) that can be used in grocery e-commerce for last-mile delivery. udelv CEO Daniel Laury unveiled a video demonstrating how customers can track their orders and get a text-message alert when the ADV arrives at their homes, and then use the text message or the udelv app to unlock the compartment(s) holding their orders. 

udelv provides the following benefits compared to other last-mile delivery solutions:

  • Added delivery window flexibility; 
  • A reduced carbon footprint; and,
  • Reduced costs and increased speeds of deliveries. 

udelv’s ADVs have 20-kWh battery packs that power 8.7-hp motors to give them an estimated range of 60 miles and a maximum speed of 25 miles per hour. Laury envisions a future where autonomous delivery is the norm, rather than the exception, in grocery e-commerce. Currently, Udelv is delivering across The San Fransisco Peninsula.


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