Episode 24

B2B eCommerce: The Evolution Of Online Grocery

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  • How have customer expectations evolved in the food and grocery industry?
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  • What role do digital and e-commerce play in the selection and purchase process?

Explore these questions and more to gain a better understanding of how we can make shopping an easier and more enjoyable experience for customers.

Digital and e-commerce are quickly becoming important factors in the grocery-buying experience. Jay Scherger, the Director of Ecommerce Accelerator at Kroger, joins us to talk about the fast-growing trends in online grocery. We also talk about the evolving customer expectations that are changing the food shopping experience both online and in-store, affecting B2C, B2B2C and B2B marketers.

Highlights From This Episode:

  • How customer expectations around food accessibility and delivery have changed
  • New challenges and problems customers are trying to solve
  • The role of data in prioritizing innovation in e-commerce and digital
  • Advantages of e-commerce vs. the physical grocery shopping experience
  • Best-in-class examples outside of the foodservice industry
  • How to measure success of digital and e-commerce initiatives

Watch the Live Recording

Full Episode Transcript

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    Tessa Burg: Hello, welcome to another episode of Lead(er) Generation. Whether you realize it or not your expectations around quality, convenience and value have dramatically shifted in the last year and a half. And what we’ve seen at Tenlo across our clients in industrial and manufacturing and food service is that ourselves as people and as consumers and buyers has really bled into ourselves as professionals.

    Tessa Burg: Today we’re going to get some inspiration in our conversation around how that shifting context and how that shift in expectations gives us opportunities to really inspire and engage and give our customers more of what they want and align our products and services with their needs. It doesn’t mean digital and e-commerce is replacing relationships and handshakes and salespeople, but it does allow us to get closer to our customers in every part of the journey. We’re so excited to have Jay as a guest. Jay, thanks for being here. Let’s jump right in.

    Jay Scherger: Hi Tessa, thanks for having me and happy birthday.

    Tessa Burg: Oh, thank you. Yes, I am officially 40 and I have a mug to prove it and just glad I made it to 40.

    Jay Scherger: Awesome.

    Tessa Burg: So Jay, to get started, tell us a little bit about yourself and your role at the e-commerce accelerator.

    Jay Scherger: Sure, so I am Jay Scherger. I live in Bellevue, Kentucky, which is right across from Cincinnati and have largely spent my career in consulting, retail and consumer goods. And today I work for the current company as you know, and have the best job in the world in the e-commerce accelerator. Basically we’re tasked with changing the trajectory of Kroger with digital and technology led innovation, whatever that means across the business. We go after, big changes and try to make a big improvements for our customers and for the business.

    Tessa Burg: That does sound exciting. So I’m sure you’re getting a lot of requests and it feels like right now, the possibilities in e-commerce and in digital are endless. How do you prioritize those requests?

    Jay Scherger: So we do it in a couple of different ways. First we balance really bigger swings with smaller, more incremental type of innovation. We want a good, healthy mix of both. We also focus more on what is the size of the prize and what may be step change. So a meaningful change in our customer’s lives or in the market and how do we make sure we’re going after things that are big enough from a size of prize perspective and meaningful enough to our customers. And then lastly, we just, we work really hard to make sure we’re on strategy. So Kroger is about fresh, Kroger is about food and we want to tie our work and our innovation directly to the themes and the pain points that as a business, we’ve largely agreed to go after.

    Tessa Burg: You mentioned pain points. Can you give us some example of what are the major pain points that e-commerce, and specifically e-commerce at Kroger, is solving for your customers?

    Jay Scherger: Sure, so I think at large, in total e-commerce at Kroger is really solving for convenience in the core sense of we want to make people’s lives easier and just make whatever it is you’re trying to accomplish, whether that’s meal planning, whether that’s just getting food on the table tonight, or whether that is, you know, making sure you’ve got everything you need for the week, making all of that as easy and as thoughtless as possible, but it’s still fun and a bit interesting. Within the e-commerce accelerator, we focus on a couple particular areas at the moment. One is around food quality, convenience, and price, and what we call the trade-off triangle. So it’s really difficult to get great food quality, conveniently at a good price. You can usually sacrifice or really dial up one or two of those or dial down one. But it’s tough to get all three. We look a lot at moving from personalization to prediction. So we know all the things you’ve bought in the past. We know how to show you things you’ve previously bought, but how do we get that much better at predicting what should already be in your basket? When do you already want a delivery? How do we preempt the things or decisions that you’re going to make with all the great data that we have? And then lastly, it’s just finding ways to continue to improve the digital experience so that we can, like I said, use all those different assets that we have at our fingertips to make your experience better than it would be in store, potentially.

    Tessa Burg: That’s really interesting. The phrase you use with the trade-off triangle reminds me of the cheaper, better, faster.

    Jay Scherger: Yeah?

    Tessa Burg: And I feel like, working in e-commerce or even in B2B commercial, which is where we focus a lot, that always is the aspirational goal. And a lot of people believe that we should be able to achieve it every time. Has that expectation of wanting cheaper, better, faster, and having it as a standard, has that evolved since the pandemic or as we’re I guess, trying to come out of the pandemic.

    Jay Scherger: Yeah it definitely has. At some point, people just were accepting during the peak of COVID that your order would just show up, like historically that wasn’t an issue, but given how challenging it was to get folks to deliver orders and just the overall challenges with COVID and the surge in grocery purchasing that became a real struggle just to execute and deliver on goods that people had ordered in the first place. So expectations on the cheaper, faster, better conundrum is starting to, I think, while it continues to push forward and accelerate it also, in some ways, is pulling back when customers realize that faster may not always be better or that the cheapest way to get something isn’t always the best way for them or vice versa, right? I may be able to, you know, maybe I don’t need my items today, but I really care about it being free and therefore, okay, if it’s a couple of hours later, I could get a free delivery versus within 30 minutes, I’m going to pay, you know, maybe seven, eight, $10 in fees.

    Tessa Burg: So people are beginning to recognize these trade-offs and that it’s really maybe about value and not always about the cheapest price. Have you like outside of grocery, any businesses that have done an awesome job, responding to these new expectations, maybe even higher expectations around convenience, quality and value outside of grocery.

    Jay Scherger: Outside of grocery. You know, my favorite that is a bit of a cop out, I’ll say, but I think Starbucks has done a really good job of just saying I’m going to make something that is really convenient, that fits into my business model. And so it isn’t as convenient as delivery it’s still pickup, but if you want it for free and you want to just pop in and grab something, we make it super easy for you. We make it super seamless, but we’re also cognizant of how the model works in that we’re not going to deliver it to you for free because, from a cost perspective and some of the breakage there. We want you to have a great quality product, which comes fresh off the line of coffee being made versus, you know, sending it out in delivery if you will. So I think they’ve set a really good standard of balancing those outputs and costs and still creating something awesome for customers.

    Tessa Burg: Yes, I agree. And I feel like personally I’ve begun to take what I experienced as a consumer into my professional life. So now, if I can’t find what I need at my fingertips or really on my phone, while I’m on the go, it feels like a draft experience or you know, that the business sort of missed the opportunity to engage me in a way that was meaningful to me. Tell me a little bit about why, and you mentioned digital experience improvements, and maybe even making e-commerce experience just as good, if not better than the offline experience. Why is that important moving forward, especially as we try to drive towards, like a state of normalcy post pandemic?

    Jay Scherger: Sure. So I would say that the improvements that are coming in that space are really around sustainability and the experience, right? So making sustainability, meaning making it profitable, but also making it sustainable in all the other ways, when you think about environmental and just the cost structure for your carbon footprint and whatnot, it really is the offering of creating something that I can give you every day, day in and day out that doesn’t require me to lose money to some dramatic extent. And then how do I use all those different pieces that I have at my fingertips to make what you’re doing with me digitally so much better? You know, convenience is always going to be there, but people don’t want to have to make trade-offs today. They make a lot of trade offs when they go into digital. Most of the time in grocery, you trade off your loss of control over the experience. Oftentimes you trade off control over the substitutes or the choices that you’re making. And so we’re trying to really use what we have to help people know that it will be more convenient, but it also gives you more control, more information, more of whatever it is that you feel like you need to make it not just about the price, but also it becomes a better value.

    Tessa Burg: I love that, so you mentioned sustainability. I know that in both the consumer world, and even in the professional world, as we’ve moved to more online ordering, there seems to be this box fatigue. And even commercial buyers are asking like, can we condense this down? Or give it to me in one shipment? Cause boxes and taking things out of packages takes time.

    Jay Scherger: Right?

    Tessa Burg: What are some improvements or opportunities do you see to sort of make that a better experience?

    Jay Scherger: Yeah, so I think our goal is always how do you re-imagine or recreate a model so that the sustainability is a part and an integrated aspect of making your outcomes or your experience better? So the great example that I love is, electric cars have been around for a long time, hybrid cars, things like that, what really, I think, made the difference to get people to really love and want them is that Tesla created a car that is way better than the cars that are out there on the road, the gas cars that are out there on the road. Now you look at the electric Hummers and some of the all electric F-150’s and they’re more powerful. They can do more things. They’ve got all these different features and functionality that you didn’t have in vehicles before. And so I think that’s really the benchmark of the target for us is that how you create these business models that don’t make the customer sacrifice, but still create the benefits that you’re looking for from a sustainability perspective. And so an example I’ll share in the product or the consumer goods is the idea of those detergent pads, if you will, or sheets, which I think is really interesting when you look at the weight that’s required to ship, or even to handle the larger packages of detergent, liquid detergent are heavy, right? And so the idea that you can still get great laundry outcomes with these pads that you just tear off and throw in the wash is an idea that is re-imagining. How do we do the core functionality without sacrificing the outcomes?

    Tessa Burg: I love that. So I use the detergent sheets and I think they’re fantastic. And it, the statement you said, sustainability is a part of making your outcomes better, I think is so critical for companies that are looking to invest in sustainability. Sometimes they’re looking to just jump over the bar and hoping someone has a requirement. And on the other side, if you’re only looking to meet a requirement, if you’re only looking to say, I want to do my part than it’s not a scalable solution. It truly does have to make the outcome better and rise to the expectation of quality. I never thought of it that way. We’ve been working with the client on sustainability for a while, and I had a chance to go to Columbia and taste the coffee that was being sustainably sourced.

    Jay Scherger: Wow.

    Tessa Burg: And it really did taste better. One, being there was amazing and context is so important. And I think that’s two, what’s affecting how people purchase today. We are coming at things with a different context that sort of shapes our expectations around the product consumption and product discovery. So with that being said, when we’re looking at these new innovations and we’re looking at how we’re rising to the occasion of meeting higher consumer expectations, how do you measure if you’re delivering successfully?

    Jay Scherger: For us, it really depends on the hypothesis. And what is it that we believe we’re trying to create as an outcome and being super specific about that. Because if you think about the design thinking the theory there around the three big thing, desirability, do customers want it, the feasibility of can we deliver on the promise to create what it is we’re offering and then viability, can we do it in a sustainable profitable way? We try to be very specific across which one of those three is most critical at this point. Is it something new that we just want people to, to want? Do we know people want it, but can we offer and operate it in a way that actually delivers on the promise? Or are we already at the state where we know people want it, we know we can operate it, but can we actually do it and make money. It’s being really specific and purposeful in your measurement planning to say, what is most critical to learn today, now? And then what metrics or, and hurdle rates, right? So the amount or the extent to which you achieve that metric is what would tell us that we’re achieving it or not. And then under all that, or behind and underline, double emphasize it, is the understanding of why. So the what will happen if this hypothesis is correct? Why does it make sense from a financial model or from a customer model perspective and knowing how it all fits together with what your overall offering is, is really important as you look to bring innovation to life and scale it.

    Tessa Burg: So I think it’s interesting that one of the things you ask is do people want this? And sometimes it seems like we should know what our customers want. But how, and a lot of our clients and we source like a ton of research, you know, qualitative, quantitative to see how are expectations changing? What are the priorities of pain points? But how do you know, or what are the KPIs for measuring if people actually wanted something?

    Jay Scherger: Well, we do it in a number of different ways and it is, is very iterative, right? So we’ll start with the most basic sense of we’ll put low fidelity drawings out of what this new thing is. And we’ll put them in front of 10 or 50 customers. And if 80% of the people say, “Well, this is nice, “but I don’t know why I would ever use this.” Or “I wouldn’t use it or I don’t think it’s valuable.” Then that’s a good first sign without ever having spent a real dime on development or trying to create something more physical or tangible. And then from there, once we’ve gotten a fair amount of feedback that customers like the idea of something, then we use more of the traditional concept testing method, where you’ll put more of the details on a piece of paper and put it in front of more of your target customers to say, okay, not only here’s what it is, but here’s some of the trade-offs and the nuances around where it is, how it’ll come to life, what’s the cost structure, et cetera. And then you could really get to dig into closer details around where people like the trade-offs or don’t, that is inherent in this thing that you’re creating. And then lastly, it’s about that all mighty, will someone get their wallet out and buy it? And so we believe that final frontier is putting something into market and whether it’s low fidelity, whether it’s high fidelity, and it’s awesome, it doesn’t matter. It’s just, can you get someone to actually either commit and sign up for a future purchase of this thing or actually make the purchase at that moment for the item is the end proof that really, all that matters in the end.

    Tessa Burg: Yeah, and I think that now that we’re coming out of this phase of constantly pivoting, it’s an important point to go back to testing and making sure that you have some actual real world feedback before investing in development. It was amazing to see businesses pivot so quickly when everything shut down. But now there is a lot of data from which you can draw some hypothesis and sort of take a step back and say what, like what you’re doing in the accelerator, where do we have the opportunity to make the digital experience better and align our priorities to better outcomes for the customers or for our buyers?

    Jay Scherger: Right. Tessa, hand sanitizer is a great example of what you just described. Where people pivoted, they saw a need, and they did no customer research, but just said, you know, we could create hand sanitizer and there’s so many hand sanitizers out there that are like the worst thing. It either smells like pure rubbing alcohol, or it dries out your hands worse than like putting gasoline on them. It’s just like really bad, you know? So some people were thoughtful and, oh here’s a need and I know I could fill it, but I think that’s a great proof point of people pivoted not always with the best intentions, but not always really thinking about, do customers want what I’m going to pivot to?

    Tessa Burg: Yes, no, I agree. That was a great example. So one of the things that I really love about going to the grocery store, and I live like a black and a half walking distance from my nearest store, is just sort of being inspired. Like I love to cook. I love to see what’s new. I actually really like the sample cards, so do my kids. How is e-commerce or improving the digital experience solving for some of those softer touch points where some people might never want to go back to doing as much as they did at the grocery store, or they just love the convenience that you’re offering them now, but are they missing out on then sort of that new product discovery?

    Jay Scherger: Yeah, it definitely seems like the discovery and just the innovation and the feeling of community is one thing that is sorely missing when people stop going into the physical store. So we’ve looked at a couple of different ways of trying to solve for that. One, we’ve just looked to create an even closer integration with our corporate and individual content partners. So we know that grocery isn’t always the first place people go to say, what is the most interesting meal I should cook, right? It’s typically chefs and other, food and wine magazine or places like that. And so we try to get even closer integrations with those folks so when they create awesome content, how do we make it super easy for you to get that, get those items at your local store? And then also just knowing and sending you the right content, whether it’s ours or someone else’s, that doesn’t matter, it’s that we know enough about you to know who you are and what you typically like and so we send you ideas that are relevant for you just to help you in that journey digitally, even if you’re not in our stores, seeing it. And then lastly, it’s really about trying some new things. So we we’ve tried virtual environments that allow you to walk around a virtual grocery store and look at products and pick up products and go to the new section or the what’s hot section. And, you know, surprising, we’re finding a lot of passion around people just like the idea of being in these social environments and how can we bring that to life more, not to necessarily replace the store, but how can you just, every once in a while feel like you’re a part of it, if you will, and feel like you’re in there without actually physically going. So I think you’ll see a lot more innovation in that space as well.

    Tessa Burg: Yeah, I always think it’s interesting when there’s a virtual experience and the lack of cannibalization to the physical experience. There are, you know, like second life, there are some people who enjoy that, but I don’t think that took away from people who preferred the more physical experience that just wasn’t for everyone. So that’s interesting that digital can really give you another tool to serve more diverse audiences in the way that they want to experience grocery and food. On the business side, has e-commerce or digital given you any opportunities to offer different types of maybe paid programs to your food manufacturers and suppliers to either bundle things together or suggest new products or food and in new and creative ways on digital.

    Jay Scherger: Yeah, it definitely has. It’s opened up a lot of different doors. When you think about the basic way of paying for placement, if you will, at shelf, you can replicate with paying for the opportunity to be in search results, right? So we have paid search opportunities and that’s kind of what I think is that, and the coupons or sending samples is really the basic way that you can do it and it just goes up and gets more creative from there. And so then we’ve got ways that people can buy out a whole category or buy out a whole theme and say, they’re going to be the sponsor of this theme, whether it’s Superbowl or whether it’s parts of Easter, or it’s a made up holiday, whatever it is. But you get to create this theme and all the fun and activities and engagement that goes along with it. You can create that as a CPG or manufacturing partner to build your own thing, if you will. And then lastly, I think that there’s people getting really creative by connecting the social elements with the influencers or personalities or content creators and their brands, and then tying that all back together to the shopping experience. So saying I’m going to create something that’s even more interesting because it’s not just me, it’s this experience out here that this influencer, whoever is creating, that’s just really cool and fun and different, and it’s tied to my brand. And then we can relate it directly back to Kroger and purchasing at Kroger. And so there’s definitely getting to be more innovation, and more creativity in that space when you tie all those pieces together. And the good thing for us is that we’ve got a really tight integration with a number of those both platforms and content areas outside of Kroger. And we can tie much of that back to purchasing at store, which makes the whole measurement loop and the feedback loop for manufacturers all that much more valuable.

    Tessa Burg: That’s really impressive. I admire that you recognize that even though you’re the point of conversion that by reaching farther into the customer journey, you’re able to see and influence the journey in ways that are more meaningful to customers. Because when you pair with influencers and more of the creative and more inspirational, that’s what sort of generates the warm and fuzzies for what I’m going to do. And food is so emotional and it’s such an intimate part of people’s family life that I love that your not just focusing on, how do we get people to put more in the cart? How do we get people to convert faster? But you’re saying, and recognizing if we can inspire them and if we compare with where they’re already at and what they love, they will put more in the cart and we can give our suppliers and food manufacturers more opportunities to be a part of our customer’s lives. It’s really cool, Jay.

    Jay Scherger: Thank you.

    Tessa Burg: That’s a bit ahead of where I’ve heard other people, other businesses that I’ve talked to are just, they focus a lot of effort on conversion optimization and doing tactics that really try and get people to just add as much in there without as much recognition for, you know, where is that inspiration coming from?

    Jay Scherger: Right, and we’ve been on this journey for a long time at Kroger, but we definitely have a great, great team, great leadership that focuses on what’s the best thing for our customers and how do we better serve them and in doing so we’ll be rewarded.

    Tessa Burg: Yes, that’s awesome. So we talked a lot, I mean, kind of along those lines, I imagine that when you’re so focused and customer centric, you are creating that loyalty and stickiness. Are there any other things that you are doing to sort of deliver on that promise of better experience and better for you in digital and e-commerce?

    Jay Scherger: Yeah, I think we stick to, I would say, a fairly standard script, if you will, or a fairly standard way of looking at the way of creating that loyalty, especially in our world in e-commerce and digital, the first is just by creating a meaningful promise, right? It’s the quality that you would expect it is that unique selling proposition for us, it’s really about the fresh food and creating super fresh experiences that are at a really great reasonable price. And you feel like you’re getting the value and the experience that makes you feel good to be shopping there and then second is delivering on that promise consistently without fail, right? So it’s what you expected with a little bit more, and you’re delivering on it with an easy and kind of fun interaction. And so it tries to take a bit of the chore out of it, if you will. And then lastly, we try to make it more memorable with what are those special or unique offerings or exclusive experiences if you will, that allows people to say or brag to their friends a bit, if you will, right? It’s always evolving, it’s always changing, but it’s something that is a new offer or it’s always something fresh that says, fresh in the sense of being new, fresh in, you know, no one else can do this, or there’s a very small subset of people that have ever tried this and you’re one of the first people. So how do we continue to find new ways that are really meaningful to customers and offer those? So you wrap all those together and that’s what we think in the digital sense, will continue to breed loyalty for the longterm.

    Tessa Burg: Yes, I agree. I love those qualities to save focus on especially consistency. I feel like one of the biggest reasons people leave is because the output just is isn’t consistent. I’m willing to pay more If I know I’m going to consistently have it, it’s going to be consistently in stock and I’m going to have it when I need it. So that is critically important. So we are out of time, but we covered so much, I just want to summarize a few things. One, I love the point you made about, where we’re at right now. We have a different context and that context of wanting to get closer to that cheaper, better, faster, and Kroger’s, trade-off triangle is going to stick around. People are going to want quality at a great value and have it be convenient. And whether we are talking about customers shopping at a grocery store online or commercial buyers buying, we have to recognize that there are opportunities for us to make that experience better. And it really starts at the top of the funnel. Are you a part of inspiring your buyers and customers, and are you creating value for them in a way that they can see? And that will lead to that ultimate loyalty. So, Jay, thank you so much for being our guest today. If people wanted to reach out to you or find you, what is the best way.

    Jay Scherger: You can find me on LinkedIn, Jay Scherger on LinkedIn or email me J.scherger@kroger.com.

    Tessa Burg: Awesome, and the way you spell Scherger, S C H R E G E R.

    Jay Scherger: Close.

    Tessa Burg: Close? I didn’t get it right. How do you spell it?

    Jay Scherger: S C H E R G E R.

    Tessa Burg: Sure, I know, I’m looking at it. No, I should’ve been looking at it, I was not.

    Jay Scherger: It was a good guess.

    Tessa Burg: Yes, cause it’s not sugar, but it’s Scherger, S C H E R G E R. And if you want to get in touch with us at Tenlo, you can visit Tenlo.com. Tenlo is T E N L O.com or email me at tessa@tenlo.com. Well, that’s all we have for today and thanks for listening. You can subscribe to us on Apple podcasts or wherever you get your podcasts and podbean. And we’ll look forward to another episode on more of digital marketing and e-commerce evolutions.

Jay Scherger

Director of Ecommerce Accelerator at Kroger

Jay Scherger is the Director of Ecommerce Accelerator at Kroger. He leads a digital and technology team that’s dedicated to rapidly designing, developing and launching integrated and stand-alone e-commerce concepts. new customer and commercial concepts. Jay has spent 15+ years developing data-driven vision and strategy for a wide range of retail and consumer packaged goods. His experience includes leading innovation at companies such as 84.51˚, McKinsey & Company, dunnhumby and more.

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