What's a supermarket for?

There’s a great story from the American Civil War where the usually even-keeled General Ulysses Grant was asked by one of his staff officers, “What do you think General Lee means to do?” It is said that General Grant became irritated and answered, “Oh, I am heartily tired of hearing about what Lee is going to do. Some of you always seem to think he is suddenly going to turn a double somersault, and land in our rear and on both of our flanks at the same time. Go back to your command, and try to think what are we going to do ourselves, instead of what Lee is going to do.”

When I go to the supermarket, I make my way among the many, many carts pushed by store employees, filling online/pickup orders, and wonder whom this business aims to serve. By the volume of carts being filled, there is no question that there is demand for the online order/pickup service. But it begs some interesting questions.

Offering this service out of regularly operating stores (as opposed to dark stores) has a major negative effect on the shopping experience. It can feel as though the number one obstacle to being able to navigate the store and access the products you want to buy is store employees. Now, I’m a simple guy, but it seems to me that giving customers a reason to dislike shopping your store might just be a bad idea.?

Let’s look at the other side of the proposition. By having a robust online ordering business a store may be gaining or retaining business that might have gone to another outlet. Nobody likes to see that happen either. As I look at that business, I’m left wondering a few things. Have retailers captured all of the incremental costs associated with their online ordering program? I don’t know, but I am feeling a little skeptical. Retailers don’t have the margin to create costs without off-setting them, so I wonder if there is a shoe to drop and where it will make contact with the floor. If you spread the costs across the entire business, doesn’t that risk a premium price perception and possibly a sense that in-store customers are subsidizing out-of-store customers? And, if the transaction to order online comes down to a functional user interface, accurate order fill, and easy pick-up, haven’t we transformed an in-store shopping experience that could, in principle, be differentiated and an online experience that may be too easily replicated? What is the loyalty of the online shopper vs the in-store shopper? What is the average size of purchase or order frequency? Is there a segment of shoppers who visit one store for online orders and a different store when they shop inside (maybe because they don’t like shopping when all of the carts are in the way)? Is that a good trade for the retailer?

The drive to nurture the online business is driven by competitive pressures or anticipated competitive pressure from other business models. That makes sense enough. But how much energy should a retailer invest in trying to be another business model? Maybe the right answer is to consider your value proposition to your customers. How do you make it so the experience of being in your store is such that you can attract customers to what you are: a supermarket. What is a supermarket? A place where you can access 40,000 SKUs right now. A place where you can gain inspiration for meal ideas. A place to engage in a social experience, so many of us were denied during the pandemic. It just seems like an odd thing to do to degrade your core value proposition to second-guess what General Lee is going to do. Maybe we should just worry about what we’re going to do.

Is the online bordering model sizable, enduring, and worth figuring out? Of course.

Is degrading the shopping experience a good idea? Of course not.

I keep coming back to the questions that might help us make better decisions about these competing models:

What is the value of the in-store shopper vs the out-of-store shopper?

What are the trade-offs in terms of potentially lost impulse sales?

What are the implications for loyalty as retailers try to balance these service and value propositions?

I think there are some basic category management-type questions that need to be answered before anyone decides, “I have to be this because they’re going to be that.”

Let’s not be unduly swayed by what we imagine competitors may do. Let’s use our understanding of our competitors to help us refine our value proposition and execute that.?