Kroger charts path to digital transformation

Kroger (NYSE:KR) is rapidly evolving from a traditional brick-and-mortar supermarket chain into an omnichannel and digital commerce retailer.

The company, which is the second largest retailer in the U.S. after Walmart, generates more than $100 billion in annual revenue and continues to grow the Kroger brand's digital presence while exploring how to connect and serve customers in a digital world.

This transformation is being led by Shashank Saxena, director of digital and e-commerce at Kroger. Saxena was interviewed for the Huffington Post Tech Blog this week, and the article followed from his appearance on the streaming video program CXO-Talk. In the article, Saxena discussed six trends that are shaping the digital transformation of retailers, including Kroger.

One growing trend is to use customer feedback for evolutionary change, but not for innovation. Feedback helps Kroger understand customer needs, but "innovation is pretty different in my opinion," Saxena said. "Innovation and digital transformation generally can happen in one or two ways. Either you innovate through evolution, which is step features and functions, or through revolution. We've seen the industry do both."

The second trend involves paying attention to macro-economic patterns. The rise of value shoppers, millennials and health-and-wellness concerns are macro-economic trends that are starting to shape the digital transformation in retail, he said. But there's also the explosion of data, the emergence of platforms and the rise in mobility that is taking place across all industries.

"As important as customer feedback is, it's not going to explain the trends," Saxena said. "Companies need to understand the macro-economic trends and start using them in a very focused way to add value to the life of the customer."

The third trend involves evolving business models to meet customer preferences. Airbnb and Uber are examples of effective business model innovation, Saxena said. These are not hard-core tech innovations since the technology behind them is relatively simple. The innovation is in the business model and how it is funded with low infrastructure cost, low start-up costs and crowdsourcing economies, he said.

"At Kroger, we think about business model innovations pretty often and we are starting to see that emerge more and more. But we also think about it in terms of how do we personalize our offerings, because personalization is a key differentiator," he said, adding that another emerging trend affecting the evolution of business models is understanding changes in customer preferences.

The fourth trend involves driving value instead of features. Driving customer value is very different from overloading customers with information about features, which turns them off, Saxena said.

"We are so focused on what our customers want and what they buy often that we just want to help them buy more of what they want and not have them brand switch," he said. "That's one thing I believe that Kroger does really well. We believe in the customer, which is why we keep track of what competitors are doing, but are not obsessed with our competitors."

The fifth trend is to "bring on the data." Today's connected customer is much more informed, so Kroger supports that behavior by driving analytics and insights around customer behavior and purchases, Saxena said.

"Internally when we try to decide what to launch for the customer and what should go next on the product roadmap, the quote we rely on is: 'In God we trust. Everyone else must bring data.' We want to be a very data-driven retailer, and we try to leverage insights in terms of what the customer is asking for and what we should be catering next to the customer," he said.

The sixth trend involves staying true to the core brand. "When a person chooses to buy a brand, what you really need to understand from a customer mindset is they are opting for security over the unknown," Saxena said. "There may be a product offering on the same shelf right next to your preferred brand for half the price, but when you are willing to pay the price premium, what you're opting for is security. You're trying to mitigate the risk of the unknown."

This is why trying to experiment with a core brand may or may not be productive. It could work, but if it doesn't, you've lost a valuable customer, Saxena said.

For more:
-See this Huffington Post blog post
-See this CXO-Talk YouTube program

Related stories:
Kroger logs 45th consecutive quarter of growth
Kroger to add an additional market, focus on urban-format stores
Kroger buys digital coupon provider You Tech
Kroger investing $100M in Michigan market
Kroger earnings rise on consumer confidence bump

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