We are back at it with our recap of Day Two at Shoptalk after an action-packed first day.
Here is what we observed, with the important caveat that we are not able to make all sessions, so we cherry-picked among the Las Vegas-sized buffet of options.
1. Grocery is in a state of transition post-pandemic with new challenges (and opportunities)
For the last few years, grocers played catch-up with consumers. This occurred in two primary ways: 1) keeping up with inventory to stock shelves amidst a surge in customer demand and supply chain issues and 2) expanding digital service options to offer alternatives to COVID-conscious shoppers or those seeking greater convenience.
Now, as supply chain issues subside and rising prices are top of mind for customers, grocers are addressing a new set of challenges that includes higher costs (both products and labor) and elevated customer expectations.
This new period might well be defined by grocers that can win on the fundamentals in the modern age: leading with convenience (both digital and in-store) for customers while offering a wide assortment with great prices.
As we highlighted yesterday, larger players have the advantage in this market by using both technology and automation to redefine convenience and reduce supply chain costs while maintaining a tangible advantage in purchasing power due to economies of scale.
2. Retail media networks (RMNs) are top of mind for many grocers throughout the customer’s shopping journey
With the shifting media landscape – and the benefit of closed-loop measurement through customer data – retail media networks are top of mind for many retailers. Add in the fact that net margins from RMNs are much higher than the core grocery business and you can understand why RMNs are paramount.
Retail media networks have been priorities for larger retailers in the past, but it is becoming clear how these businesses – many of which are now over $1B in revenue – are integrated into a grocer’s long-term strategy.
For example, Sanjiv Karani from Kroger talked about how the grocer can send real-time offers to customers using the store’s app based on what aisle they might be navigating. Kroger has found that customers engaged in its personalized offers have a 98% retention rate and spend almost double a regular customer.
What Kroger has unlocked is a big opportunity for so many retailers: connecting the digital world with brick-and-mortar to drive greater engagement with customers (and monetization with vendors) since most shopping still takes place in stores.
This is a space to watch, as they say.
3. Walmart’s John Furner provides some insightful updates on the business
Walmart’s U.S. CEO, John Furner, held an informative discussion with Melissa Repko from CNBC where he offered several noteworthy pieces of information.
First, he confirmed Walmart’s underlying intent in offering fulfillment (Walmart Commerce Technologies) and media network (Walmart Connect) services as a way to offset the company’s large investments in these areas. He noted, though, that these offerings have the benefit to “lower costs for everyone” – not just Walmart.
Second, though he did not directly address inflation beyond what was cited on recent earnings calls, Furner did not seem overly concerned looking ahead (something to the effect of “we like where we are”). At the risk of inferring too much from the lack of commentary, we view this as a positive indication.
Given Walmart’s view into the overall health of the U.S. consumer, the lack of concern seems to be a good sign that inflation is coming down from its summer peak even if the macro-level consumer price index (CPI), which grabs all the headlines, may take a bit to catch up.
Lastly, Furner discussed the retailer’s aspirational customer step-up strategy in relation to its subscription program, Walmart+. He noted that the aspirational journey for customers starts in-store then migrates to pickup, followed by delivery, then to Walmart+ and, finally, to the retailer’s new in-home delivery service.
The trade-up journey is not earth-shattering but again shows the power of omnichannel retailing to win over customers and how Walmart is positioning its subscription program as a growth opportunity by continuing to add features (most recently, Paramount+). Walmart+ had reportedly been underperforming to internal expectations, but it is clear that the company is committed to making it a success similar to what Amazon has with Prime.