Achieving Ecommerce Profitability.

With Matt Hamory (AlixPartners) and 2 leaders, a brand and a retailer.

Achieving Ecommerce Profitability. This question, while 2023 U.S. eGrocery sales finished 2023 down 1.2% versus prior year, plagues a large number of retailers - and brands, in the marketing investment choices they have to make.

That was the topic chosen by Matt Hamory, Partner and Managing Director at AlixPartners, for his Conference in September at the GroceryShop Conference. To make the debate so candide, rich and constructive, Matt Hamory invited a brand and a retailer to join him on stage, Tiffany Hicks, Vice President of Econ, Food Service, and Specialty Channels at the Bumblebee Seafood (at this time) and Matt Van Gilder Director, Ecommerce and Digital Experience of SpartanNash. Find out an inside scoop on the latest trends, innovations, and insights in the grocery industry in 2024.?

WHAT YOU WILL DISCOVER

• From Matt Hamory

Why is it so important having a successful online offering - and her belief around Retail Media, Instacart, …

• From the 2 panelists

A conversation with a brand leader and a?retail leader who are finding success in making the economics of online grocery work in their favor.

Matt Hamory is Partner & Managing Director at AlixPartners. He advises clients on growth, transformation, and turnaround, from strategy to execution – with a focus on driving significant enterprise value improvements. Matt leads AlixPartners’ food & drug retail practice.

Laurence Faguer: You choose to name the topic of your panel “Achieving Ecommerce Profitability”. Why is this so important to have a successful online offering ??

Matt Hamory: One, it certainly seems to be the case that the most frequent shoppers are, the most high basket shoppers are. A lot of households have really switched weekly trips, so those classic main shops are over. That has two implications.?

One - and it is a good news - bigger baskets, particularly if they have incremental volume to them, have great economics.?

But two, it makes this really incredibly important for retailers to get right, because if you don't, those are the people you won't be getting, and obviously having fewer main shops than you could have had, and fewer accidenty customers than you could have had, is a serious problem.?

What is point two??

Matt Hamory: Point two, pricing is very front and center online.?

Obviously, prices are much more comparable online. You can, from the comfort of your home or your phone, look at Instacart, you can look at multiple retailer sites. There's a high level of price comparability, which means that there's an enhanced impact on customer perception in the way that they make choices. For everyone, pricing is even more important in an online context.?

And finally, obviously, convenience is critically important.?

So getting it right for these online shoppers, pricing and convenience, are three key points to putting this together. There are many things that retailers are doing to evolve and improve their offers, to improve their profitability, their efficiency: different models, a lot of technological investments, a lot of experimentation with whether we pick a store, whether we pick a fulfillment center, whether we create dark stores and pick in them.?

And legacy distributors have new competitors online, like Instacart

Matt Hamory: An actor like Instacart has been doing a lot more of, not just the delivery, but actually taking information from their shoppers and from their platform and feeding it back to grocers to enhance availability, enhance various other operational characteristics to improve the online offering and provide more value to their partners.?

What do you think about Retail media?

Matt Hamory: Retail media, of course, is a very hot topic. There's a lot of momentum in that area but in my view, there's a bucket of trade that manufacturers have, and whether it goes into price promotion or online experience or media or whatever, that pot of dollars isn't gonna get enormously bigger when you start spreading it around, so you need to make optimization decisions as you're doing that as a retailer.?

A conversation between Matt Hamory, Tiffany Hicks and Matt Van Gilder.?

Tiffany Hicks is (at the time of the conference) the Vice President of Econ, Food Service, and Specialty Channels at the Bumblebee Seafood, a company that produces canned tuna, salmon, and other seafoods, with very famous brands Bumblebee, Snow's, Beach Club, and Brunswick.?

Matt Van Gilder is the Director, Ecommerce and Digital Experience of SpartanNash, a distributor, wholesaler supplying products and services to independent grocery retail customers, and a retailer with its own 144 grocery supermarkets.

How Matt Van Gilder’s frames Ecommerce Profitability?

Matt Van Gilder:

• Individual channel : it is important to consider each one individually, and the efficiency of operations, to impact the bottom line of the business. But…
• Holistic Approach to E-commerce: Instead of viewing e-commerce in isolation, it's essential to understand its broader impact on the customer journey. Customers aren't just online or in-store shoppers; they engage across multiple channels, and e-commerce should enhance the overall customer experience. And…
• Focus on Return on Incrementality: Not just driving incremental trips, but driving incremental dollars. Recognize that incremental buys can also be achieved online, beyond what's traditionally possible in physical stores (end cap or? display)
• Focus on incremental customers in total. SpartanNash does that by also working with many marketplaces, to access a wider customer base. The goal is not just profitability within the channel but using e-commerce to attract new customers and drive them toward more frequent engagement and higher spending across all channels.

“ I think it's less about how profitable I am in this channel, but how I can leverage this channel to bring my customer into our stores and into our channels more often, more frequently, and spend more money”.

Matt Van Gilder

Matt Hamory: So incremental ads and baskets and incremental customers sounds like something of a lot of interest on the manufacturing side as well.

Tiffany Hicks, how do you think about driving those things?

HOW, as a manufacturer, Tiffany Hicks drives incremental baskets and incremental customers

Tiffany Hicks:

• Difficulty with metrics: Questioning the sole reliance on ROAS (Return on Advertising Spend) as the best metric.
• Additional complexity with Instacart and others similar. Doubtful if ROAS truly reflects impact, if the shopper was already inclined to buy through platforms like Instacart.
• Cost implications: Feeling burdened by having to pay for metrics and services.
• Challenges as a brand and manufacturer: Facing requests from retail partners to buy data, fund new items, and invest in digital shelving.
• Financial constraints: Struggling to allocate funds across different channels while aiming for consistent market presence and experience both online and offline.
• Integration issues: Unable to seamlessly combine online and offline strategies due to limitations in cross-channel marketing.
• Incrementality challenge: Difficulty in proving the incremental value of online actions translating to in-store displays or sales.
• Importance of partnerships: Acknowledging the significance of collaborations and partnerships in navigating these complex challenges.

?

Matt Hamory: Matt, do you have other things that you either have seen manufacturers do that are helping you enjoy the growth of business or that you wish that they would do?

Matt Van Gilder:

• The solution : Holistic customer approach. Advocating for a comprehensive view of customers across all channels
• Need for integrated promotional plans shared by retailers to their manufacturers : aligning various promotional strategies across online and in-store
• Difficulty in attribution: Struggling to attribute the impact of investments across channels, so attribution becomes fuzzy
• Digital attribution vs. in-store challenges: Easier to track and measure digital campaign ROI compared to in-store displays?
• Challenge of weaving plans together

Tiffany Hicks:

“ Structural organization is a challenge”?

• Organizational structure challenge: Facing issues with both internal and external organizational structures.
• Continuous retailer restructuring:? Retailers shifting organizational strategies every few years, oscillating between unified and siloed divisions, online and offline. This periodic shifts in how divisions are organized, causing instability and inefficiencies for the manufacturers.
• Bumblebee's business too:? this billion dollar company, of 125 years still struggles in finding the right organizational structure.

MATT HAMORY, on organizational structure challenge

“With all kinds of retailers, whether they be traditional grocers or discounters or drugstores or whatever, there's certainly been an evolution, but not necessarily in one direction. So we'd see companies that were traditional bricks and mortar, they wanted to establish their own online business. The best way to do that is to get people who understand online. They put them in here, it might be in a different building, it might be in a totally different P&L. And then five years later, they realize that that's actually a pretty big business now, and it's really complicated to be buying in two places and sort of splitting up so they can merge. But I still see others diverging and sort of splitting up organizations as well. So I would say from my perspective, I don't see a single right answer that's emerged”.?

Matt Hamory: Matt, how is SpartanNash dealing with this? Is this something that you guys have had any trouble with, or is it pretty clear?

?

Matt Van Gilder

“ No, I wouldn't say it's clear. It's something we're still trying to figure out. And it's like, as you mentioned, the teams are shifting and the responsibility for things is constantly shifting. And I think because digital e-commerce was such a specific and huge thing at first, it was kind of like that team was really responsible for doing everything, right? The merchandising, the planning, the promotions, the technology, the operations, all of it, right? When in fact, throughout the organization, there are many teams, and that is their specialty, but just not digitally. So, how do you take back that, excuse me, that discipline of digital and kind of include that in holistic planning, and thinking of the customer holistically, not just starting with traditional brick and mortar, but including digital in that when you're thinking of your base level plans to begin with. And that's a hard thing for us”.

Matt Hamory : Matt, different retailers are experimenting with different ways to pick up, to do fulfillment, and you've tried a few things. What have you learned about that aspect of the business???

SpartanNash has experimented with centralized fulfillment a few years ago.?

For fulfillment, it is important to look at e-commerce P&L: how can we be more efficient with our labor?

As volume has come back down to “normal”, years after Covid, SpartanNash reverted back to the store fulfillment for their customers, for a variety of reasons:

• Value: A centralized fulfillment approach make sense when there is a very high concentration of stores within the market and have a high number of orders going through the stores to support?

Otherwise, it is really hard to offer the customer the full assortment (35,000-skew assortment)that they would have if they were picking it from the store (especially for fresh and prepared foods)you can't have a full?

• The customers are losing out on things they're used to:?- The two-hour lead times they have with the pick-up in store- The real relationship “with Sallie that's your personal shopper every week, every other week that knows you, knows how you want things picked, when you need it ready’.?

SpartanNash tries to differentiate itselves on service. “That's what we think is different from our competition. And that level of service is really what I consider to be like true personalization. That's real, and that's really going to keep that customer loyal and sticky to you. And it was important for us to get back to that early and drive our differentiation.?

WORKING WITH MARKETPLACES?

Matt Hamory : Matt, what do you think of the marketplaces?

Matt Van Gilder

?Works with a variety of marketplaces, including Instacart. “That's really helping drive business”?

“These marketplaces allow us to be more nimble and reach more customers in different ways than we can on our own”

But the question (not answered yet) is: “Whose customer is that e-commerce, is that our customer, is that the marketplace's customer??

?

?

REPEAT PURCHASES, SUBSCRIPTIONS.

Matt Hamory : Is it a mechanism that you've had any success with or have experimented with?

?Matt Van Gilder thinks about subscriptions in two different ways:

1. A membership “a-la-Prime Amazon”: a lever to drive stickiness with customers, specifically through groups that pick up /home delivery. Perks of shopping in-store as well, in an holistic view of the customer : helping him/her to get more convenience out of shopping through SpartanNash (discounts on delivery, discounts on the private-owned products, on specific brand products that SpartanNash partner with CPGs)

“That has worked really well for us, a very high percentage of our shoppers are subscribers, and repeat shoppers”.?

1. Product subscription : How to make sure that products that customers buy a lot, or items that we think customers should buy a lot, get into their cart on a recurring basis. (It makes the life of the customer easier and “ they're maybe less likely to go get that and fill the shop somewhere else instead of doing the cart, and they know they need to go just place the order with us”. ?

A MAGIC HAND

Matt Hamory: Tiffany, what are things that you really wish the retailer could do to really enhance your ability to build the business online with you?

Tiffany Hicks

• Partnership between retailers, brands, and manufacturers,
• Planning well in advance together. “If I have a finite budget, if I can be transparent, show a few and then we can together work out what levers we want to pull”
• Better in the organizational structure

?

Matt Van Gilder

Same as Tiffany

• Figuring it out together, “ because it's a revolution”.?
• Thinking “not just traditional brick and mortar, not just e-commerce, not online, but how do we do it together to make that a meaningful experience for the customer, no matter what chain you're on?”

Thank you, Tiffany Hicks, Matt Van Gilder, Matt Hamory !

About Laurence Faguer

My job is to identify Retail Tech innovations in the U.S. to help French groups transpose them successfully.

Laurence Faguer, Founder & RetailTech Strategist ??.