Symphony RetailAI’s 2018 Xcelerate Conference: Good News For Grocers
To the casual observer, retailers have far more things in common than what separates them. But it’s a thin veneer; for example, merchants of fast moving consumer goods and fashion merchants may both have stores and departments called “Merchandising” and “Marketing”, but the similarities tend to end there. Most of the buzz in the industry in the last decade has been about advances in the digital domain that were more focused towards fashion and specialty merchants, who adopted rich CRM and digital marketing capabilities, eCommerce and distributed order management, augmented reality apps for consumers, and direct-to-consumer fulfillment strategies. It wasn’t until Amazon acquired Whole Foods in 2017 that grocers seemed to finally get religion about consumers’ new digitally enabled shopping behaviors.
Many retail technology solutions providers have tended to focus on fashion and specialty retailers, and then try to figure out if and how and if their solutions will work in fast-moving-consumer-goods (FMCG) and general merchandise (GM). But here are some substantive differences between the verticals that make it virtually impossible for solutions providers to develop one-size-fits-all solutions. For starts, FMCG and GM merchants have big assortments of products that have long lifecycles that sell through very quickly. Fashion merchants plan seasons and collections, while FMCG and GM merchants plan categories. And let’s not forget that grocers sell things that rot. Grocers may spend as much as 40% of their total store labor on POS checkout clerks, while fashion and specialty retailers focus their instore labor on selling. According to various studies, about 45-50% of everything consumers buy is a commodity (think “milk and eggs”), and so consumers are VERY sensitive to price and their switching costs are very low. Therefore, margins on commodity items such as those that FMCG and GM retailers sell are razor thin, and that translates into not having much to spend on nice-to-have enhancements to the shopping experience.
Saying that FMCG and GM retail is a brutal business is an understatement. Technology companies know that the one thing that FMCG and GM retailers do better than anyone else is “buy smart” – they are tough negotiators and will squeeze every last penny out of a deal that they can. In other words, selling to FMCG and GM retailers is a “revenue” game – solutions vendors not going to make much margin on the deal. So, selling to those retailers is not for the faint of heart.
Symphony RetailAI’s Xcelerate 2018 Conference
But there are a few solutions providers that start with FMCG and GM, and then try to expand their market from there. One of them, Symphony RetailAI, had its annual user conference in Boston earlier this month. Quietly, the company has gained momentum in the U.S. (its origins are in Europe), and now boasts such interesting retailers as Dollar General, Heinen’s (an Ohio-based upscale grocer), Lidl (the German discount grocer that has recently made inroads into the U.S.), Ahold, Longos (the Canadian-based grocery chain), Trader Joe’s, and Southeastern Grocers (the parent company of BI-LO, Harveys, and Winn-Dixie). The solution provider also works on the “other side” of the trading relationship, with consumer goods companies such as SC Johnson, Mars (who at the conference gave an excellent presentationon applying design thinking techniques to achieve 67% unit sales growth in its biggest category, Pet Care), and Nestlé Purina.
The fact that Symphony RetailAI works both sides of the FMCG supply chain is important; one of its chief areas of focus is on Category Management, a collaborative approach to managing assortments in-store that dates back to the early 1990’s. The process is arduous and has been largely spreadsheet based. But at the conference, the technology company showed how employing AI-enabled analytics and virtual reality technologies can help category partners reduce the category review process from over a year to a matter of months, vastly improving retailers’ and their partners’ ability to respond to quickly shifting consumer tastes.
Another important aspect of Symphony RetailAI’s footprint is its AI-enabled and cloud-based forecasting engine. RSR’s own research has shown that retailers are very interested in modernizing their forecasting capabilities to analyze new data (such as competitive price and promo data, market data, and even the weather), enable far more frequent “what if” analyses, and make it possible to re-forecast in-season to stay on top of shifting demand patterns. The company’s software-as-a-service forecasting capabilities were on prominent display at the conference. The forecasting engine is something of a “trojan horse” solution; companies that have no other solutions from Symphony RetailAI can take advantage of its service-oriented capabilities to drive their merchandise planning processes.
But for Symphony RetailAI, it’s not just about improving established processes with new technology. It is trying to help FMCG retailers and their partners respond to changing consumer behaviors. Dr. Pallab Chatterjee, the company’s Chairman and CEO, talked about those changing behaviors in his keynote address. Pallab pointed out how consumer buying habits continue to change while retailers struggle to keep up. For example, the chairman quoted a recent survey that showed that 75% of consumers want “click-&-collect” while only 25% of retailers support the feature. He also pointed out that while online shopping continues to grow at a healthy rate, 80% of that growth is coming from consumer products categories – in other words, FMCG and GM merchants are certainly not immune to the threat of Amazon.
Dr. Chatterjee also underlined changing consumer attitudes about how they buy food. For example, he shared recent research that indicates that 83% of people don’t know in the morning what they will have for dinner that evening. According to the company chairman, that is the result of the pervasiveness of two-income families – people who don’t have the time to think much about or prepare dinner. This in turn has given rise to prepared foods and meal kits in stores. It has also given rise to “grocerants” (in-store dining) – sales from “grocerants” have been growing at 10%/year, and last year delivered $35B in revenue to retailers. At the conference, the company showed off this fresh item management capabilities, which include in-store food production capabilities.
The most compelling presentation of the conference was given by Maryann Correnti, the CFO of Ohio-based grocer Heinen’s. The finance executive resurrected the “Discipline of Market Leaders” model first posited by Fred Wiersema and Michael Treacy in the 1990’s. The authors made the argument that companies had to be good at three disciplines (Product Leadership, Customer Intimacy, and Operational Excellence), but had to choose which one of those disciplines to be great at. According to Correnti, retailers can no longer be merely “good” at two of the three disciplines – they need to strive to be great at all three. Said the CFO, “in order to afford customer intimacy, you must be operationally efficient!” For example, in consumer surveys and focus groups, Heinen’s learned rated “product availability” as the top driver of customer satisfaction. To that end, the company implemented Symphony RetailAI solutions to improve operational efficiencies. The result was to grow the chain from 17 to 23 stores without adding any labor to the D/C’s. Correnti said that in the context of grocery, “customer intimacy” means developing awareness the local market – events around the store, what products the locals want and what level of service yields the highest customer satisfaction. Heinen’s is using Symphony RetailAI’s AI-enabled analytics to predict the effect of merchandising decisions on sales and labor.
Good News For Grocers
RSR’s recent research has shown that FMCG retailers are finally getting on to the omnichannel “change train”. The good news for them is that they don’t have to settle for disconnected point-solutions or home grown code, as they had to in the past. Now, there are solutions available for them too. Symphony RetailAI is an example; the company is taking advantage of the latest in technology innovations (AI, cloud-computing, augmented and virtual reality) to deliver needed functionality to a retail vertical that really needs the help.