A

eBook

Empowering Grocers:
Using Retail Analytics
To Engage Customers
How Shopper Insights Cement Long-Term
Loyalty Through Optimization and Forecasting

Sponsored by
 Table of Contents

The Pitfalls of Current Data Collection...............................................................................5

Understanding The Benefits Of Mobile And Social...........................................................6

I. Assortment Optimization: A Grocer’s Best First Step................................................8

II. Campaign Planning, Marketing And Promotion Get A Technology Boost.........12

III. Pricing Optimization Meets Today’s Challenges....................................................13

IV. Demand Forecasting Supports Optimization Initiatives.........................................15

Conclusion..........................................................................................................................18

About SAS............................................................................................................................19

Empowering Grocers: Using Retail Analytics To Engage Customers 2

“In our experience we
have seen somewhere
between 5% and 10% Grocers are faced with unique that become more shopper-centered,” noted
increases in same- challenges unlike other retail Jim Hertel, Managing Partner, Willard Bishop
store sales rates for segments, and these challenges are LLC.
supermarket retailers mounting. Starting with numerous
Economic downturns and volatility — along
that become more in-store departments, fresh food
with ongoing financial pressures around
shopper-centered.” management, a mountain of SKUs
unemployment, increasing gas prices and
and UPCs and the need for a highly
- Jim Hertel, Managing Partner, a real estate market struggling to rebound
Willard Bishop, LLC optimized workforce, grocers are
— have highlighted the need for grocery
in a unique position in the retail
merchants to uncover better ways to do
marketplace. Pile on commodity
business. Although some retailers and regions
pricing pressures, increased
are faring better than others today, many are
competition, data overload and changing
still faced with consumers who continue to
customer demands — and supermarket
function with a “depression-esque” shopping
retailers need to find a new way to build trusting
outlook, according to IHL Group in its 2011
relationships with customers and effectively
North American Supermarket Report. This
engage them via their channels of choice.
shopper attitude has resulted in an uptick in
Business process optimization, fortified with
coupon use, an increased interest in private
insight-driven analytics, is the answer.
brands, growth in the use of shopping lists and
The results of insight-driven analytics households turning to more home cooking with
implemented in the supermarket industry are basic ingredients. Meanwhile, consumers in
impressive. “In our experience we have seen the top 20% of income levels have had buying
somewhere between 5% and 10% increases in behaviors that indicate they have exited the
same-store sales rates for supermarket retailers recession.

Empowering Grocers: Using Retail Analytics To Engage Customers 3

 “The combination of
cheaper computer power Supermarket retailers also are when it began — with the use of advanced
and great analytical tools facing increased competition technology, grocers will be able to engage with
that can leverage big from traditionally non- individual customers and cement long-term
data is allowing the grocery supermarket merchants. loyalty.
industry to quickly become “We are talking about a lot
more customer-centric. “Back in the early days of launching frequent
of folks who were used to
Retailers can leap forward shopper programs in grocery, I would have
competing only against other
by regularly making customer given my right arm to have the solutions and
supermarkets,” said Hertel.
data-driven decisions.” tools that we now have at our disposal,” said
“Now everybody is getting into
Wanda Shive, Retail Product Manager for SAS.
- Wanda Shive, SAS the food business, including
“The combination of cheaper computer power
super centers, dollar stores,
and great analytical tools that can leverage
chain drug stores and others.
big data is allowing the grocery industry to
The result is that the food dollar
quickly become more customer-centric.
is now more fragmented; it’s being spent in a lot
Retailers can leap forward by regularly making
of different places.”

Many of today’s grocers also are part of a

multigenerational family commitment to the
business and harken back to the days when
store owners knew each customer by name.
Today and in the future, successful supermarket
retailers are embracing a new age of data
analytics and customer insight. The winning
result may look somewhat like the industry

Empowering Grocers: Using Retail Analytics To Engage Customers 4

 “You really need to
augment the POS
information with third-
customer data-driven decisions.” Shive The Pitfalls Of Current
party data so you have
worked for Food Lion and consulted Data Collection
with many grocers across the U.S.
a better feel for what The first step to achieving those lofty goals
and Europe before joining SAS. “Even
the consumer looks like already is in place in most grocery stores: well-
though we were focused on customer
beyond what they are established loyalty programs collect some
analytics back in the early 2000s,
doing in your store.” shopper data and even more is collected
we really didn’t have the solution
- Jim Hertel, Willard Bishop LLC at the POS. “Since 1993 grocers have been
set available that we have today —
collecting information from frequent shopping
tools that make sense of the massive
programs,” noted Shive.
amounts of data and distribute that
knowledge to decision makers across The problem is: “Supermarkets have not
the retail organization.” invested in the means to really make sense out
of all that data,” noted Hertel. Often the data
To successfully compete against the likes of Wal-
is delivered to and used solely by a company’s
Mart, which may be selling food products for
marketing department. “The data is so
20% less, “supermarket retailers absolutely must
compartmentalized and siloed that it is difficult
distinguish themselves,” Hertel added. “They must
to develop a solid picture of what is going on in
find non-price-based reasons to be the preferred
the total business,” he continued. “A group of
place to shop,” including offering higher-quality
people who could make very good use of that
and unique items and better customer service. To
data — the merchants — quite frequently have
that end, a number of grocers are refocusing on
the least access to that information within the
new strategies around marketing and promotion,
organization.”
embracing new technologies in order to update
tried-and-true campaigns. Additionally, that single source of data is
not enough to present a complete picture

Empowering Grocers: Using Retail Analytics To Engage Customers 5

 “Location-based
information is fantastic of the customer and implement Understanding The Benefits
and represents the effective strategies across all parts Of Mobile And Social
most important single of the business, including assortment
Grocers also must embrace the newest
feature of mobile.” planning, pricing, marketing and
channels — mobile technology and social
- Richard Hastings, Global Hunter overall demand forecasting. “You
Securities, LLC media. More than one third of all U.S. adults
really need to augment the POS
already own smartphones as of May 2011,
information with third-party data so
according to The Pew Internet Project, and
you have a better feel for what the
are using them to compare prices, research
consumer looks like beyond what they
products and locate stores. In order to reach
are doing in your store,” Shive added.
this rapidly expanding audience, supermarket
For example, she explained: “Measurements
retailers can access shopper insights to develop
for decision making may be different for
and implement mobile web sites and offer
pricing versus assortment or space planning.”
customized coupons and promotions to their
best customers.

With customer insight information in hand,

grocers can reach out to shoppers at the
most opportune time and place. “Location-
based information is fantastic and represents
the most important single feature of mobile,”
noted Richard Hastings, Macro and Consumer
Strategist for Global Hunter Securities, LLC.
“Mobile is extremely powerful and transparent.”

Empowering Grocers: Using Retail Analytics To Engage Customers 6

Social media may still be in its infancy in the With this complex selling and marketing
grocery business, Hastings continued. “It is a environment in perspective, supermarket
smaller layer of the data cake right now but retailers must make the most of shopper insights
has the ability, eventually, to bridge some and analytics. This eBook will outline the benefits
interesting layers into something of greater offered by insights and analytics in four key
value.” To get there, he said, “We have to areas for grocers:
evolve from ‘like’ to richer and more detailed
data attributes about behavior — transactional
and intentional behaviors.”

I. Assortment Optimization:
A Grocer’s Best First Step
Supermarket

Gourment Healthy
II. Campaign Planning, Marketing And
Items Meals
Promotion Get A Technology Boost
VIEW WEEKLY SPECIALS

III. Pricing Optimization Meets

Today’s Challenges

IV. Demand Forecasting Supports

Optimization Initiatives

Empowering Grocers: Using Retail Analytics To Engage Customers 7

 65% of North
American retailers will I. Assortment Optimization: Using automated assortment optimization,
have implemented A Grocer’s Best First Step retailers can gain insights into customer loyalty
assortment optimization and preferences in order to determine the best
by the end of 2011. Assortment, inventory and space
assortment in each category, down to the SKU.
optimization can deliver impressive
- RSR Research, “Twenty- Combined with Retail Space Management,
First Century Merchandising: results for supermarket retailers in today’s
grocers are able to improve the use of selling
Benchmark 2011”
challenging economy. “Getting space
space and enhance inventory productivity,
and assortment right in stores can result
while more efficiently mapping assortments to
in 5% to 7% gains in same-store sales,”
planograms. These initiatives can be a retailer’s
said Hertel, “and retailers can start to
best first step. SAS is innovating in this area, by
see real movement in 60 to 90 days.”
providing a service to grocers to begin realizing
Most retailers are embracing these strategies, results and the ability to grow.
with 65% of North American retailers (including
A number of leading supermarket retailers
supermarket and other) having already
already are benefitting from implementations of
implemented (47%) assortment optimization
assortment and space optimization. One leading
or are planning to implement (18%) by the
grocer is revamping its brand and leveraging
end of 2011, according to RSR Research in the
advanced analytics from SAS as a key enabler
report “Twenty-First Century Merchandising:
to this strategy. “We chose SAS because of their
Benchmark 2011.” In fact, 100% of retailers plan
strong commitment to retail and analytical
to have assortment optimization implemented
excellence,” said the company’s CIO. “The
at some point, with 35% reporting plans to
partnership will enhance our customers’
implement in more than one year, and 0%
shopping experience with the implementation of
reporting “No Plans” to implement.
SAS technology and resources.”

Empowering Grocers: Using Retail Analytics To Engage Customers 8

 and restaurants using SAS forecasting tools and
business intelligence software. Design work
and project planning for appropriate rollout
continues between SAS and SOK.

The S Group consists of 22 regional cooperatives

and the SOK Corporation, which is owned by
the cooperatives. The S Group has more than
1,600 outlets ($15 billion U.S.). Based in Helsinki,
SOK, part of Finnish grocery chain S Group, is pushing the limits
Finland, the S Group provides services for a
of traditional customer analytics farther in space, price and as-
sortment. SOK is now turning to SAS Retail Forecasting and SAS variety of businesses including supermarkets,
Regular Price Optimization to extend this strategy.
fuel and service station stores, department
A Finnish retail cooperative, S Group, began and specialty stores, tourism and hospitality
with a commitment to analytics in 2004 with businesses and retail banking services. The S
SAS Space Optimizer. In early 2011, as a SAS Group’s purpose is to provide services and
development partner in Space, they rolled out benefits for customer-owners in Finland,
re-platformed Space Optimization solution to the Baltic States and Russia. Cooperative
all stores in S Group Trade Chain Management memberships total nearly 2.0 million – 44% of
(grocery business unit). In Spring of 2011 SOK the grocery market, and S Group employs more
Trade Chain Management grocery began than 39,000 employees.
implementation of Retail Forecasting and
S Group has had the foresight to implement
Regular Price Optimization with plans to go live
advanced analytics to optimize their results
in fall of 2011. A pilot was completed in 2011
since 2004. And, while a 44% grocery market
in conjunction with SOK Human Resources for
share is impressive, SOK is not resting on this
Workforce Optimization for the petro stores

Empowering Grocers: Using Retail Analytics To Engage Customers 9

lead. SOK executives continue to ask questions Today, SOK is expanding what it refers to as
such as: As a cooperative, how can we better its “Value Chain” Optimization strategy. The
serve our customer-owners? What do we have merchant is pushing the limits of traditional
to do to insure our leadership position in our customer analytics farther in each key area
focus markets? ­­­— space, price and assortment. SOK is now
turning to SAS Retail Forecasting and SAS
“We are concerned about sustaining growth
Regular Price Optimization to extend this
three to five years out through traditional means
strategy. These capabilities will allow S Group to
(such as new stores and formats, growing
achieve a number of goals including:
number of products including traditional
supply chain operations, etc.),” said Jukka • 100% product availability on-shelf
Ojapelto, Vice President, SOK Grocery Trade
• Affordable consumer pricing while
Chain Management. “Our vision for continuing
remaining profitable
S-Group success is to develop innovative
methods made possible by predictive analytics • Reduced out-of-stocks and overstocks
and optimization technologies.”
• Availability of shared sales forecasts to
The successful cooperative has enabled trading partners
products space localization with SAS Space
• Improved margins at store and product
Optimization. “Because SAS Space Optimization
levels
is based on store-specific sales, the system
allows us to allocate more space to the • Localized inventory and pricing for
products our local customers want in each individual markets
region,” said Irja Simola, CIO, Grocery Trade
• Greater transparency across the “value
Chain Management.
chain”

Empowering Grocers: Using Retail Analytics To Engage Customers 10

SAS currently is working with another grocery As grocers continue to battle their traditional
retailer using assortment optimization to supermarket competitors — as well as big box
improve store-level efficiency. “When you look stores, convenience stores, discount retailers
at the individual customer’s perspective versus and others — assortment optimization will play
the sheer volume on the shelf it makes a big a key role in tightening margins, improving
difference” in determining store assortments, customer service and loyalty, and boosting the
explained Shive. For this particular client, SAS bottom line.
is leveraging customer purchase history and
integrating it with assortment optimization.

As many as 65% of North American retailers (including supermarket and other) having already implemented
assortment optimization or are planning to implement by the end of 2011, according to RSR Research in the report
“Twenty-First Century Merchandising: Benchmark 2011.”
Empowering Grocers: Using Retail Analytics To Engage Customers 11
 “Retailers can save
2% to 3% of sales and II. Campaign Planning, So, whether digital or printed, weekly grocery
gross profit dollars Marketing And Promotion Get promotions must use shopper data to create
by using shopper A Technology Boost benchmarks for and evaluate marketing
analytics.” programs to understand their customers. Using
Marketing in the grocery industry will
SAS Customer Intelligence and Marketing
- Jim Hertel, Willard Bishop LLC
continue to present challenges and
Resource Management, SAS is able to help
obstacles. Mobile technology and social
retailers understand customers and coordinate
media are bringing new opportunities
efforts in order to reduce costs and time to
into the mix. At the same time, many
market and, in turn, strengthen brand value.
grocers still rely on printed weekly
circulars to deliver coupons and product Marketing Automation helps to improve
information to a large customer base. But, campaign ROI by customizing offers for
as the current generation ages and Gen Y individual shoppers and using analytic insights
becomes the primary target group, the printed to integrate specific business constraints —
circular may eventually become obsolete. such as budget, channel capacity and
contact policies — into the process.
“Ultimately the printed circular will disappear
and be replaced with a digital version,” noted Further, SAS marketing solutions are
Hertel, “but the reality is, whether delivered available on-premise, via enterprise
electronically or via paper, you still need to hosting or as SaaS.
make sure the products you’re promoting and
the prices are appealing to your best shoppers,
to motivate trips and drive incremental
sales.” So in the long run, he explained, “think
about the business need versus the delivery
mechanism.”

Empowering Grocers: Using Retail Analytics To Engage Customers 12

III. Pricing Optimization Meets and $180 depending upon household size. The
Today’s Challenges average transaction size per trip is $26.78.

Pricing in the supermarket industry is By using shopper analytics to determine the

greatly influenced by both internal and best prices at the best times, retailers can save
external factors. Heightened competition 2% to 3% of sales and gross profit dollars, Hertel
and commodity price increases intersect estimated. “That’s literally from just getting the
with vendor collaboration and category pricing right,” he said. With pricing optimization
management, creating a perfect storm of in place, grocers can expect to see
pricing challenges for today’s grocers. improvements within six months and a growing
rate of improvement within 18 months.
According to RSR Research, the top three
pricing challenges facing all retailers today Price optimization helps grocers establish
include: increased price sensitivity of consumers and maintain optimal everyday prices, while
(58% in 2011 vs. 46% in 2010), increased pricing maximizing category margin and volume goals
aggressiveness from competitors (48% vs. 38%), based on a variety of factors, such as costs,
and increase price transparency — the impact
of comparative price shopping (40% vs. 11%).

With an average number of close to 39,000

items carried in supermarkets in 2010, according
to the Food Marketing Institute, item pricing
can be a margin-killer. Additionally, unlike other
retail segments, customers shop in supermarkets
1.7 times per week and spend between $60

Empowering Grocers: Using Retail Analytics To Engage Customers 13

 The best demand
forecasting engine
will use shopper regional demand and competitive why we need more intelligence in our pricing
pricing information. This solution also operations. We are looking forward to building
insights to forecast
allows merchants to predict the impact a new generation price optimization system.
responses to changes
of proposed pricing changes. We are proud to carry out this challenging
in different aspects of
development process as a strategic partner of
the business, including To continue to improve efficiencies,
the world leading business analytics company
pricing, promotions and SOK is starting with SAS Regular Price
SAS.”
assortment/inventory. Optimization in 2011. The goal for
price optimization is to maintain an
Every Day Low Price (EDLP) strategy
while balancing the goal of increased
monthly dividend payments to their “customer
owners” based on profitability and revenue
growth. “Some use it to increase prices; we
use it to decrease prices,” said Ilkka Alarotu,
Director, SOK Trade Chain Management -
Top Three Pricing Challenges
Assortments and Pricing. “As a market leader
Facing Retailers:
in Finnish grocery business we are constantly
challenged by price competition,” Alarotu Increased Price Sensitivity (58%)
continued. “Our market share has increased Increased Pricing Aggressiveness (48%)
from 15% to 45% over a 15-year period. In the
Increased Price Transparency (40%)
future it will be ever more difficult to count
Source: RSR Research
on continuous growth. Profitability will be
the key factor in our future success. That is

Empowering Grocers: Using Retail Analytics To Engage Customers 14

 “With the help of SAS
we have been able to
IV. Demand Some of the key benefits of SAS Retail
reduce stockholding
Forecasting Supports Forecasting include:
by at least 8% and
Optimization Initiatives
reduce wastage by 3% • Create a quick return on investment (ROI)
to 4%... SAS is very good The ability to predict consumer
• Maximize stock coverage while minimizing
at providing visibility of demand is the ribbon around
costs
forecasts, to measure the gift of optimization. The best
accuracy.” demand forecasting engine • Increase inventory turns

- Gail Richmond, Waitrose will use shopper insights to

• Model future prices and promotions
forecast responses to changes in
different aspects of the business, • Forecast the effect on a whole category
including pricing, promotions
• Forecast space more accurately
and assortment/inventory. This solution also is
designed to forecast demand for both long- • Upgrade path to SAS Revenue
and short-lifecycle products and analyze the Optimization Suite
effects across product categories.
With SAS Demand Forecasting, UK grocer
Waitrose achieved faster and more accurate
demand forecasts in order to improve stock
ordering, delivery and replenishment. “With
the help of SAS we have been able to reduce
stockholding by at least 8% and reduce
wastage by 3% to 4%,” said Gail Richmond,
Manager, Branch Ordering Development for
190-store Waitrose. “We’d originally estimated

Empowering Grocers: Using Retail Analytics To Engage Customers 15

a 2% drop in wastage, so this is far better than “With SAS predictive analysis and inventory
predicted. In addition, we can look at past optimization, we can keep inventory at the
events and see if mistakes were made, at right level at the right time,” said Raymond
Christmas say, and put them right next time. Hui, Amway Greater China Distribution
Or look at successes and try to replicate them. Vice President. “When business or customer
SAS is very good at providing visibility of the demands change, we can quickly adjust via
forecasts, to measure accuracy.” the flexible inventory optimization system. With
the IOS, Amway China can not only reduce
Using predictive modeling and inventory
logistics costs, but also enhance customer
optimization technologies from SAS, Amway
satisfaction and improve its competitive edge.”
China has improved operational efficiency and
shortened replenishment time from the logistics In order to improve productivity and drive growth
center to retail outlets by 20%, in addition to at its more than 900 SOK supermarkets in Finland,
boosting customer satisfaction to 97%. S Group recently implemented SAS Retail
Forecasting. SAS Retail Forecasting helps retailers
For Amway China, SAS achieved
predict demand and shape consumer response
four specific goals:
across a marketing-driven, multichannel retail
• Multilevel prediction of product enterprise. The solution analyzes consumer
demand response to price, offers for S Group, marketing
and operational activity to assess impact on
• Intelligent transport schedule
demand. In addition to price and promotion,
• Optimal inventory replenishment SAS can also assess cannibalization and halo
effects, and causes for lost sales, as well as
• Key Performance Indicator (KPI)
forecast new product sales.
reports and analysis

Empowering Grocers: Using Retail Analytics To Engage Customers 16

“S Group tends to gain the best customer segments and work to “surprise and delight” the
satisfaction scores among Finnish grocery best shoppers. “The starting point is understanding
retailers,” said Sanna Timola, Director, Space the critical decisions you need to make to satisfy
Management and Forecasting at SOK Grocery your very best shoppers,” noted Hertel. “That is
Trade Chain Management. “To maintain and a big culture change for a lot of supermarket
improve our customer satisfaction, we need retailers — they want to be all things to all
to ensure shelf availability continuously. At the people.” But once these grocers see the math
same time, we have to improve supply chain around the benefits of meeting the needs of the
productivity. The most important processes are best shoppers, they understand and appreciate
store replenishment, procurement and retail demand forecasting.
pricing. The best results can be achieved by
Faced with the current reality of pricing and
sharing sales forecasts between business partners
competitive pressures, many retailers “need
within the value chain and building transparency
to reinforce their knowledge of key consumer
in the trading ecosystem. Implementing SAS Retail
segments and better integrate marketing and
Forecasting will be one of
merchandising strategy,” according to NRF in
the most important and
the 2011 Retail Horizons report. More than 70%
challenging development
of retailers in all industries surveyed in the report
programs we have ever
currently use demand planning (50%) or plan to
started.”
implement in the next 18 months following the
When considering how to survey (21%).
start with analytics around
customer demand, Hertel
suggests that retailers
identify different shopper

Empowering Grocers: Using Retail Analytics To Engage Customers 17

 Conclusion
A unique and complex selling environment has created equally unique and complex challenges
for today’s supermarket retailers. An uncertain economy and a morphing multichannel
environment, among other factors, are motivating grocers to adopt advanced analytics and
optimization solutions in order to capture the best customers for the long term.

By incorporating shopper insights into business processes — including pricing, assortment/

inventory, marketing/promotions and demand forecasting — supermarket retailers can increase
revenue and build loyalty. Grocers also are wise to incorporate third-party shopper data into the
decision-making process, in order to acquire a complete view of shoppers beyond their activity
inside one retail store.

Savvy supermarket retailers including S Group and Waitrose have embraced insight-driven
shopper analytics and are finding success by optimizing a variety of business practices.

Mobile technology and social media also are making inroads in the supermarket business, albeit
a bit slower than some other segments of retail. Many grocers are building mobile web sites
adopting location-based technology; and for the most part, grocers are in an investigative phase
regarding the best use of social media

Empowering Grocers: Using Retail Analytics To Engage Customers 18

 About SAS
World Headquarters
SAS Institute Inc. SAS helps retailers and grocers spend less time crunching numbers and
100 SAS Campus Drive
Cary, NC 27513-2414, USA
more time growing revenue with key technologies customized for today’s
multichannel merchants. Built around a powerful core of market-leading
P: 919.677.8000
F: 919.677.4444 business analytics, our comprehensive suite of retail solutions tackles
the industry’s greatest challenges, including customer insight (customer
intelligence and social media analytics); price optimization (regular,
promotion and markdown); size optimization (size profiling and pack
optimization); assortment planning; integrated merchandise planning
(allocation, space management and optimization); forecasting (across the
enterprise and across market segments); and loss prevention. With more
than 35 years of experience working with leading grocers and retailers, SAS
helps retailers make better decisions faster. Learn more at [Link]/
retail.

About Retail TouchPoints

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P: 201.257.8528 Tapping into the power of the Web 2.0 environment, the Retail TouchPoints
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Empowering Grocers: Using Retail Analytics To Engage Customers 19