January 2019 | Commentary | Checking In

When Worlds Collide

Tags: E-commerce, Logistics, Supply Chain

Keith Biondo is the publisher of Inbound Logistics magazine.

In retail there are two worlds or approaches: online and traditional. It appears the online retailers have been winning in the market with all types of consumers, even in manufacturing and industrial products.

But don't count the traditional retail world out yet. Good supply chain management practices, along with blended approaches to serving the customer, such as omnichannel, have helped traditional retailers compete. They can supply the convenience and delivery speed today's consumers increasingly demand. They also use many tools to efficiently match inventory to what's being scanned out the door. Demand driven. Another advantage is that traditional retailers avoid last-mile costs; the in-store consumer picks up the tab.

While traditional retailers try to compete in the e-commerce world, many online retailers seek to build out a brick-and-mortar footprint. When Amazon dove in whole hog and bought Whole Foods, it instantly established a large physical footprint as well as a traditional retail beta test in a very competitive market. It injected the online shopping experience into the offline model.

But trying to combine those two worlds quickly and with blunt force resulted in early casualties. Press reports detailed inventory issues combined with workforce and customer dissatisfaction.

Grocery on the Front Lines

As Amazon's foray shows, the grocery business stands on the front line of the two colliding retail worlds. Amazon's Whole Foods plan to conquer the segment was to mash-up the best e-commerce practices with good traditional retail operations and brand loyalty.

What's enabling the collision of the online and offline shopping worlds? Technology.

Walmart, perhaps Amazon's strongest competitor, is working to connect the two worlds for its customers by signing a new agreement with Microsoft for "a broad set of cloud innovation projects " called Retail as a Service, or RaaS. The massive retailer has a good handle on e-commerce, a clear market advantage, and "amazing presence in offline" stores, says Microsoft CEO Satya Nadella of the partnership.

Redefining the Grocery Customer Experience

Grocery and retail giant Kroger is entering a similar partnership. While Kroger is a different kind of monster than Walmart—with 30 brands across grocery retail, supermarkets, department stores, warehouse stores, fuel stations, even jewelry stores—it has also partnered with Microsoft to "redefine the grocery customer experience."

Kroger is using big data to provide personal customer pricing, discounts, suggestions, and personalized "smart shelf" ads to make in-store experiences more like online experiences, with all the benefits that bricks can offer modern consumers.

Both Walmart and Kroger are using and investing in Internet of Things, artificial intelligence (AI), and robotics technology. Crowdsourcing Amazon competition? Kroger is even building a new business wrapped around the success of its customer experience practices.

Kroger plans to sell its new retail recipe to other retailers around the world. "Some of the most sophisticated AI technology being deployed around the world is actually in offline retail," Nadella says.

"Kroger is building a seamless ecosystem driven by data and technology to provide our customers with personalized food inspiration," says Rodney McMullen, chairman and CEO of Kroger. "We are identifying partners through Restock Kroger who will help us reinvent the customer experience and create new profit streams that will also accelerate our core business growth. We are excited to collaborate with Microsoft to redefine grocery retail."

Clearly, consumer habits are driving change, not just in retail but in all businesses. Whether you use AI, big data or robotics, focusing on the demand point will bring success. That's the lesson learned when worlds collide.






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