The Branded Pantry

Part 4 in this series looking at fictional business models involving Digital Powerhouses encroaching on traditional, physical grocery business.  These models are submitted for your consideration.  They are taken from full,  free case studies which are available  by emailing mike.spindler@shelfsnap.com.  If you would like help in using these case studies in your  corporate  strategy  sessions please  contact bill.bishop@brickmeetsclick.com   

Still finding it’s way in the  revenue  generation  world, Facebook develops  an approach to  the  Every  Household,  Every  Week world  that  sneaks up  on traditional  grocery,  multiplies  Facebook  revenues and  reinforces the  importance  of the Facebook community. 

The play here capitalizes  on the very real move  toward  Health  Through  Better  Lifestyle.  This  amalgamation  of  individual efforts by many different shoppers is  custom  made for any  online  community   with that shopper, represented  through their Facebook page, as its center.  The market is quite  fragmented with “solutions” ranging from nutritional supplements, low meat, no dairy, high plant, locovore, vegan, anti-toxin, lo sodium to any combination of these with or without exercise, yoga, health-care professionals and more.  It includes the very real and difficult to serve dietary needs of allergen and disease sufferers such as diabetics and celiacs.

What is it:

A service aggregator, built around the private needs of each consumer or family, is a viable approach to this business, and very much lends itself to the Facebook model and strengths.  Facebook leverages it’s consumer centric power by focusing the commerce/content and community on meeting the unique “stated needs” of each individual who is looking to gain some control over their eating and other habits in an effort to become a bit healthier.  Facebook calls this the Facebook Health Network.

1. Facebook participants are given the opportunity to develop a private, Health Page.  It includes goals, conditions and metrics.  The user details currently used solutions (products and providers) for both consumables and for services.  The application allows for multiple types of input including scanned bar-codes or photographs of products.  It includes services such as yoga or weekly blood pressure check results at the local Firehouse.  It encourages editing to reflect changing needs and tastes.  
2. Facebook then aggregates users along many different needs criteria from the very specific (“Uses pharma statins, looking for natural alternatives in Rosewood neighborhood of Austin, TX) to very general (wants to learn more about the relationship between animal consumption and disease.) 
3. Facebook builds a network of Health Marketplace providers of both services and products to solve for its user base.  Some of these are national (GNC, Walgreens or CVS, Whole Foods, The Fresh Market) others are regional or local (local produce coop, the hatha yoga place in town).  Both home delivery and store pickup products are included but in the case of store pickup only very local stores are included in the options. (more in the case study).
4. Facebook also aggregates service and product offerings for the user. (more in case study).
5. Facebook also arranges content for the user based on their stated needs.  Included are articles that should be of interest, books, seminars and the like. Once it had aggregated enough common interests, Facebook would also organize sponsored webinars or seminars by authors and experts for the user base.  
6. As important as this very personalized Facebook Health page is for the user, it is private.  Facebook protects the user from peripheral or meaningless content and absolutely respects any “remove me” instructions from the user. 

What it would look like to the Consumer:

·         All Facebook customers receive an invitation to participate in the Facebook Health Network thru the construction of their private Health Page.  Benefits are fully described.  One of several “health goodie packs” (more in case study).

·         A second chance opt in will be shipped to customers who did not take advantage of the initial offer.  As popularity builds “people in your network” solicitations will be added to the communication.

·         As customers sign up content heavy updates begin to be published into their Health Network Private Pages.  Three tier offers begin to appear for products and services: (more in case study)  

·         Customers avail themselves of other generalized services (recipes) or sign up for fee-based customized services (recipes based on what I like, don’t like.)

·         Customers also join specialized groups (dealing with celiacs in public schools, heart healthy running tracks in Manhattan, reviews of vegan meals in non-vegan restaurants in Chicago) and input into any of the content, groups, offerings or ratings directly.

·         All current Facebook customers are be located on a grid overlayed with product and service suppliers (local), once they have opted in on their Health Networks Page.

·         All local, regional or national suppliers of products will be invited to participate in special offerings to meet the aggregated needs of the users.  (more in case study)

·         New product offerings (perhaps with samples) are made available for applicable Health Network Page Participants. This and other “inclusive” offerings feed the virtuous circle of membership benefits.

·         Continuous communications, fed by customer reactions to prior offers and rejections, look toward enlarging the basket of products purchased through the Network.   If you buy your supplements from us, why not your aspirin?  As a customer I decide how many or few of these types of offers I receive. (more in case study)

·         Facebook also supplies a price comparison mobile application so I can compare in-store prices with network prices for items not yet on my list.  Network product providers are expected to match or beat the price checked. 

What it would look like for the Players: For Facebook:

Facebook generates revenues by participating in the Every Household, Every Week business.  A large and growing group of the EHEW marketplace shows more interest each week in the subjects offered by Health Through Better Lifestyle.  This fragmented Lifestyle market does not lend itself readily to general merchants such as grocers.  Even grocers such as Sprouts and Whole Foods cannot meet all needs (product, price or convenience for instance) especially for services.   A service aggregator, built around the private needs of each consumer or family, is a viable approach to this business, and very much lends itself to the Facebook model and strengths.

The revenues stem from:

• Product and service advertising revenues
• Product sales referral commissions
• Product and service promotion dollars
• Customer participation fees for special services or events

The buildup and refinement of Big Data capabilities to serve aggregated markets, the infrastructure to enlist Network Partners, the outbound communications refinements and the tracking capabilities will all serve markets in addition the Health Through Better Lifestyle market.  The Health Through Better Lifestyle s market is already huge and is becoming a much bigger rapidly.  In the U.S. alone the FMCG product market is one Trillion dollars.  Modest success in this market will more than double Facebook revenues is a short time.

For the Network Product and Service Providers:

The Health Through Better Lifestyle market is fragmented. It is difficult for providers and manufacturers to reach consumers via almost any media and it is difficult to make products avialable to consumers.  (more in the case study)

For Competitors:

The Health Through Better Lifestyle market gets a good deal of attention in traditional supermarket, drug and mass environments.  Walmart has announced major commitments to a product assortment that will encourage more healthy lifestyles and Walgreens offers similar encouragement and adds a variety of advisement services.  However, (more in case study)

For Manufacturers:

Very similar list as for providers.  If manufacturer has e-commerce abilities this is one way to move customers from Network-Provider, to Network-Direct.  (More in case study) Could others do this?

Potentially Google, Yahoo and eBay.  Certainly Walmart, Walgreens or CVS could attempt.  Getting a network of other retailers and service providers would be a hurdle for the retail entities.  

What: There has been much speculation on how soon big etailers or emarketers will dominate the CPG space (see http://brandedpantry.com/2011/09/02/making-a-list-checking-it-twice/).  These companies will make it happen, as the Every Household, Every Week (EHEW) consumer is just too enticing to ignore.   

How: In the next four blogs we will position a few models using real company examples.

•          One with a combination of Google and a select group of traditional retail including grocery at its core.
•          One with Amazon in collaboration with an interesting set of very hungry retailers.
•          One with Facebook holding center stage and creeping up on the market in a way you might least expect.
•          And finally….well one that has not yet been written but if I have my way will be based on a factual reporting rather than educated speculation.

The Challenge: How would you react to these threats to your customers?

Competitors do not have to take all of your customers to drive you into decline and probable demise.  They just have to bleed off enough customers, shopping trips or remove an item from enough baskets, to move your store from making a little money to losing a little money.   Once that is done, you will adjust costs somewhere in your organization which puts an additional chink in your armor.  If the competitor can identify that chink…they can attack and bleed off just a bit more business…and the spiral continues.  

 Traditionally, this attack is obvious.  Mariano’s opened a store in the Libertyville, IL area where our offices are located.  It is half a mile south of a large Jewel store.   Now every day, if Jewel watches Mariano’s parking lot, they can see their former customers frequenting the new store.  They can look at the Mariano’s flyer and see what the special prices are, they can visit the Mariano’s store and see what assortment and in-store promotions are in place and if they have the wherewithal and the desire Jewel can fight back and try to recapture some of the business using those same tools.

The onslaught from this list of digital competitors, will still bleed off customers, trips or most probably basket items, but the activity and the result won’t be obvious at all.    The tools, the pricing, the promotion, the assortment will all be behind the scenes in emails, web visits, personalized offers and mobile connections.  These competitors will see your moves and your efforts with great clarity.  You won’t see theirs at all.   

Gather your team and use these case studies to map out how you will react….and then evaluate how well each action might work.  Additional details are available from mike.spindler@shelfsnap.com  For additional hands on facilitation you schedule time with  Bill Bishop’s BrickMeetsClick  BlackBelt team in person or online at bill.bishop@brickmeetsclick.com.   

I have written numerous times about the growth of Walmart and Amazon and the juggernaut of big numbers.  In the latest quarter Amazon grew Y/Y more than DeMoulas Markets, the number 41 North American Grocer generates in a year. 

This is not to say that Amazon’s growth is coming from grocery, it is not.  As a matter of fact they have had remarkable success in gaining, every week every household business despite by their own numbers generating FMCG purchases from only 4% of their customers.   So they have not turned their sights on grocery in a significant way…yet.

The point is that consumers have been much more willing to change their purchase habits and channel preferences than any of the experts have predicted across the consumer products spectrum from shoes to sugar.  

The amount of volume switching channels and seeking benefits other than those provided by their traditional retailers is staggering.  Over 3 billion dollars shifted out of traditional book, electronics, music and other outlets in one quarter.  

And so for our next few blogs we are going to concentrate on two issues: 

1.    A few key areas that FMCG retailers should concentrate efforts in order to position themselves to at least keep pace and potentially win in the shift in consumer shopping habits. 

2.    A couple of hypothetic models of how some of the big digital based interlopers might come after your grocery customers.  No inside knowledge here, just speculation. My purpose is clear…to give the grocery retailer of the day a foil against which she might counter strategize. 

Much has been said about Apple and their control of the tablet marketplace via tying up: component suppliers, suppliers and transportation.  These moves effectively limit the amount of quick turn reverse engineering and production for me-too I Pad products.  The moves give Apple a brilliant advantage coinciding with their product life-cycle strategy.

Folks like Target Stores are hinting at emulating this “exclusive” product strategy for different reasons and coming at it from a different angle with less control.

Perhaps most interesting is the move by Amazon to purchase Kiva Systems.  Kiva is at the forefront of warehouse fulfillment automation.  It provides a system featuring robotics which intelligently locate and transport needed products to “pickers” in warehouses run by Amazon companies such as Zappos and Diapers.com.    Controlling; this set of technologies, the patents protecting them and the scientists who continue to tinker with system improvements give Amazon control on which of their would-be competitors will have access to these capabilities …and the low-cost, fast pick results that come from them.