VOL. 11 | NO. 19 | Saturday, May 12, 2018
By Andy Meek
For a typical consumer, a trip to the grocery store might mean little more than a quick run to pick up essentials like bread and milk. Cart filled. Self-checkout. Back out the sliding doors. So mundane, none of it is given a second thought once you’re back in the car with your purchases.
On the other side of that transaction, meanwhile, is something else entirely. It’s the retail industry equivalent of war – the combatants involved are living on low margins and are expected to offer low prices, which makes this a pitched battle in which no prisoners can be taken. Giants like Kroger, Whole Foods, Walmart and others will either win or lose this war one customer, one shopping trip at a time, based increasingly today on things that have not always been associated with the business.
Apps, handheld scanners, loyalty programs, accumulated points and providing a way for consumers to pick up purchases made online are all today as much a part of the experience as pushing a cart down aisles.
Kroger’s store in the Trinity Commons shopping center, at 676 N. Germantown Parkway, encapsulates several of the new realities in this high-stakes, increasingly high-tech and expensive scramble to grab and hang on to market share.
Kroger customers at Trinity Commons can take advantage of the chain’s “Scan, Bag, Go” technology. There’s a rack near the cash register where you can pick up a handheld scanning device, or you can alternatively download a smartphone app and use your phone as the same thing.
As you fill up your grocery cart, you scan each individual item. When you’re done, all you have to do is go to the self-checkout area, scan a bar code and pay, and then you’re out the door. Essentially, you’re replacing the time you would have been standing in one place checking out – scanning your items at the register – by scanning everything you choose walking the aisles.
Kroger will bring that technology to its 1230 Houston Levee store next, possibly in June, but there is no firm date as of yet.
“This landscape is continuously changing, and we expect to see more innovation and technology in 2018 and beyond,” Scot Hendricks, president of Kroger’s Delta Division, which includes the Memphis market, told The Memphis News. “The grocery business is very competitive and it operates on slim margins.”
Brands like Kroger are also under pressure to keep a tight lid on prices. To that end, Kroger in recent weeks announced it’s making a “multimillion-dollar investment” to permanently cut prices on more than 3,000 products in grocery stores across Memphis and its multistate Delta Division.
Customers are met with a message to that effect even before they step inside a Kroger like the Trinity Commons location, as signs announcing the new low prices cover the entrance doors.
Kroger also started rolling out its ClickList service in 2016. With ClickList, customers can buy their groceries online and schedule a time to come pick them up. Employees bag it all up and bring it out to the waiting customer at the appointed time.
All of this, Hendricks said, is about working to continuously improve the customer’s shopping experience. The unsaid implication: Kroger is in something of an existential fight and can’t afford to not pursue initiatives like this.
NATIONAL BEHEMOTHS GETTING MORE NIMBLE
One reason is the competition from deep-pocketed retailers like Walmart and Target that are also spending big to make their own grocery offerings as attractive as possible.
In early April, Walmart announced it expects to spend about $31 million over the next year in Tennessee remodeling nine stores, and by rolling out several in-store and online innovations. Those remodels include stores in the Memphis area – at 7525 Winchester Road, 577 N. Germantown Parkway, and 8445 U.S. Highway 51 North in Millington.
Walmart customers in Tennessee, meanwhile, can also order their groceries online and arrange to pick them up later. The retailer currently offers grocery pickup at 45 Tennessee locations and plans to bring the service to more than 30 new locations this year.
Some Tennessee Walmarts have also started offering the retailer’s Mobile Express Scan & Go service, which lets customers scan items with a mobile device while they shop and pay instantly and skip the checkout line. That service is currently offered at all Tennessee Sam’s Club locations and 13 Tennessee Walmart stores.
Later this year, Walmart will be bringing its so-called Pickup Tower to its Cordova store. Similar to a high-tech vending machine, those towers let customers pick up online orders by scanning a bar code that’s sent to their smartphone. To use the tower, customers chose from items available online and select the “Pickup” option at checkout.
“Walmart is making shopping quicker and more convenient than ever before for Tennessee families with the newest innovations in shopping and beautifully updated stores,” said Sean Riley, regional general manager for Walmart in Tennessee.
Target, meanwhile, touts a similarly robust grocery section in its stores and has likewise been positioning itself to be more competitive in Memphis and beyond.
A Target fulfillment center in southeast Memphis closed in April, resulting in 486 layoffs. That comes as Target is making a major shift in its business, moving online ordering capacity from facilities like that Memphis fulfillment center to Target facilities and stores. It’s about speed and efficiency.
Thanks to Target’s $550 million purchase last year of internet-based delivery service Shipt, shoppers in Memphis have since February been able to get same-day delivery on orders they make from Target. In a way, the service leapfrogs Target ahead of rivals like Amazon, which currently does not have a same-day delivery option available for Memphis shoppers.
Kroger, for its part, is also competing in other ways. Kroger’s Midtown store on Union Avenue looks almost like a mini-mall inside, with non-grocery elements like a sushi bar, Starbucks and Corky’s BBQ area, among other things.
“The customer experience is always our top priority,” Hendricks said. “That experience includes convenience, rewards, the freshest products and of course, low prices.”
But all of the companies are competing on customer experience.
Take Whole Foods, which is now connected to significantly deeper pockets since being acquired last year for $13.7 billion by Amazon. In recent days, for example, sources told the financial news outlet CNBC that Amazon is apparently planning new Whole Foods benefits for members of Amazon’s Prime service – perks that could reportedly include offering Prime members an extra 10 percent off of already discounted product.
Whole Foods’ competitive advantage also extends to something a little less tangible – more along the lines of the theater of retail, the way the stores look and are arranged. It’s one reason shoppers like Cara Greenstein are fans.
“For me, grocery shopping is part of the creative process,” said Greenstein, PR and social media manager for advertising and communications agency DCA in Memphis. “The sensory experience of a store dictates my flavors and recipes, even the centerpieces of dinner parties I discover for my blog, Caramelized. I think it’s crucial for grocery stores to engage the customer’s experience in a way that complements the products on the shelves and the values of the shopper. An ideal grocery shopping experience — which tends (for me) to be at Whole Foods Market or Target on a weekend afternoon — inspires more than a purchase but, instead, a moment shared with someone across the table or in the kitchen.”
And these are just the big names. Competition and investment locally in the grocery space is really proceeding down two tracks. The biggest names, mostly national, are spending big on perks and technology.
But local grocery operations are fighting in their own way for a piece of the pie.
The Memphis area is home to a bumper crop of grocery stores with one or just a few locations, from Curb Market to Cash Saver, City Market and new locations like a Save-A-Lot that opened in Binghampton earlier this year. A grocery store called The Stock Market, being created by Jeff Burkhead, owner and CEO of Cash Saver in East Memphis, is planned for Gilad Development's multimillion-dollar Lake District project in Lakeland.
At places like these, competition is less about bells and whistles and more about the kind of buy-local, personalized touch commonly associated with small, neighborhood businesses.
For entrepreneurs like City Market co-founder Hamida Mandani, the goal is to be part of the community. She and her husband have two City Markets, one on Cooper Street in Midtown and their original location Downtown at Main Street and Union Avenue. It’s not a race for technology or to sink millions of dollars into perks and other benefits, it’s an old-fashioned attempt to win customers one by one.
“It’s a great feeling,” she says. “Downtown, for example, we rely on local people who work and live here. We rely on people walking into the store since day one, when we opened. We still have a lot of customers who are the same. We know their names and they know us. They know how old my daughter is.
“It’s different from a regular grocery store,” she says. “It’s more being part of the community. It’s the feeling you get when you first open the door in the morning. Someone might have a coffee. Being Downtown, we meet a lot of tourists. Our taxes are going back into the community. It’s a great feeling.”