The Disruptive Power of Digital Ordering and the US Consumer Base in Retail

From the 6th to the 8th of May, Midtown Manhattan (in New York City) hosted the fifth annual Retail Innovation Conference.  The conference brought together over 600 thought leaders from across the U.S. retailing industry. With topics ranging from creating successful loyalty programs to optimizing product assortments to best practices in customer relationship management, the Retail Innovation Conference left all of those who attended it feeling better informed about the future of retail in the U.S. than when the conference began.

Hershey adroitly capitalizes on innovations within the U.S. retail space

Although most of the speakers and panelists at the Retail Innovation Conference hailed from the realm of retailing, there were also a handful of representatives of consumer packaged goods companies on hand to provide their perspectives on the changes currently rocking the retail landscape.

One of the most informative of these individuals was Tony Southard, the senior director of e-commerce sales for the Hershey Company, who sat in on a session titled “When the Digital Shelf Informs the Physical Shelf.” Southard discussed the ways in which Hershey was partnering with on-demand delivery services that cater to consumers with “sudden cravings.” Southard was particularly impressed with goPuff, an app-based, on-demand delivery service that can provide delivery times of between 15 and 30 minutes in the markets in which it operates. Southard stated that he believes that goPuff is one of the few companies to have successfully figured out the economies of on-demand delivery – although he pointed out that a similar service recently launched by 7-Eleven, dubbed 7NOW, had the potential to cut into goPuff’s share of this market.

Additionally, Southard commented on the impressive success that Hershey has had in capitalizing on retailers’ recent embrace of “BOPIS” (i.e. “buy online, pick-up in store”) services. Even though customers were not frequently ordering Hershey products as part of their click-and-collect orders, the placement of the racks devoted to Hershey products in BOPIS pick-up areas of the stores helped spur customers to add Hershey products to their baskets in-store when they came to pick up their orders.

As a direct result of this move, Hershey saw its sales at the grocery chain increase by 250%. This anecdote shows the immense transformational potential of click-and-collect ordering across the U.S. retail landscape. Even brands that do not benefit directly from the rise of BOPIS can capitalize on the service simply by staging their products near to BOPIS pick-up areas.

Striking a blow against conventional wisdom regarding US consumer demographics

Perhaps the most interesting session of the entire conference was a panel discussion titled “The Consumer is Changing, but Perhaps Not How You Think.”  The panel was moderated by Kasey Lobaugh, principal and chief retail innovation officer for Deloitte.  At the outset of the session, Lobaugh presented a series of data points, obtained through surveys, that threw into doubt much of the conventional wisdom surrounding consumer demographics in the U.S.

The most important point made by Lobaugh was that consumer preferences are far more likely to be dictated by income level than by age group.  For example, all of the chatter about how members of the Millennial generation prioritize spending on experiences over spending on things actually obscures the fact that, while higher-income Millennials in the US do allocate a relatively high percentage of their consumer spending towards experiences, lower-income Millennials do not.  As a result, in their spending habits, lower-income Millennials in the US resemble lower-income Baby Boomers or Gen Xers much more than they resemble higher-income members of their own demographic cohort.  

Although retailers and brands often generalize consumers based on their age group, it is really income level that should be considered as the starting point when entering into any discussion of segmenting US consumers based on demographics.  At this time, however, it is often treated as a footnote.  In presenting his data to the assembled attendees of the Retail Innovation Conference, Lobaugh will hopefully help to transform the way in which many of these individuals view the US consumer base.