The Untapped Potential Of Old-Fashioned, Fresh-Food Retailing

Erica Vialardi

“Once upon a time, from the top of a hill, farmer Mario embraced the landscape with a content look. At his feet, plantations, orchards, and cattle reminded him of his flourishing farming business.”

This might sound like the opening of an old-time fable by La Fontaine. Except I met Mario in 2016, when he sponsored “planting day” at my son’s kindergarten to promote his organic products, and it is one of the most successful food business stories I’ve seen recently. Surprisingly enough, it happened 100 percent offline.

New business models for an age-old industry

Before trying his luck in the big city, my farmer friend Mario must have wondered what the future of his business could look like, witnessing the profound disruptions currently affecting the sale of fresh food to consumers. The fresh-food retail industry is indeed popping with new trends.

Next to the emergence of alternative retail store formats, the most impressive development of the last few years has of course been that of the online sale of fresh food – think e-grocery strategies implemented by retailers, or conversely, direct-to-consumer e-commerce sales launched by the brands themselves. In addition, brand-new business models literally sprouted overnight, such as subscription food services.

A small-scale, agricultural entrepreneur less far-sighted than Mario could have felt discouraged by this turmoil, but our hero, unlike Don Quixote, did not mistake all those “windmills” (read: futuristic business models) for unbeatable giants. To find his competitive place, he looked beyond the offering side by focusing on the essential: consumer demand.

Fresh food retailers are leaving consumer demand untapped

All of the above trends sound like “the next big thing,” but they all face the same challenge. In December, I attended a conference on food, and all the executives speakers sitting at the round table agreed on the very same point: Consumer demand is more than ready for new, online food sales models. Paradoxically, it’s the offering that is lagging behind, which means that companies are not providing the services that consumers would pay for.

An Amazon executive at the event had this to say on the topic: “When we launch new services, customers are usually very responsive […] even for the adoption of small, granular services.”

Don’t forget customer experience

Looking at the difficulties that are holding companies back from “making the quantum loop” toward new, online business models in fresh food, we notice that some hurdles do exist, and they all concern customer experience (click here for a free customer experience assessment). Let’s examine three tricky, recurring ones:

Product information. Consumers expect to have the same amount of information at their disposal that they have at the store, also during their online purchase. However, compared with other branches, the amount of information grows exponentially for fresh food. Ripeness, color, exact weight, suggestions of use, combinations… all mean a huge amount of data, high-resolution pictures, and other media to manage and update.

Consumers expect a dynamic purchasing experience that reflects an in-person, one-to-one relationship with the vendor. This involves sophisticated capabilities, from a commerce, marketing, and sales point of view, such as merchandising and product presentation, shelf personalization, or custom-tailored special offers.

The post-sale challenge. The vendor must be able to match the consumer’s expectations in terms of delivery location (home/click and collect), timing (same day, same hour…) and return and service rules.

When old school reminds us how to engage customers

It is exactly by tackling the above areas of friction that Mario identified a very well-defined market opportunity. The day I met him at the kindergarten, he showed toddlers how to plant grains in the earth, then offered us parents a complimentary bag full of fresh produce, grown on the fields he managed, and explained more about his business, which includes not just produce but also organic meat and dairy.

That’s what I call good customer targeting and promotion (parents eager to cook healthy food to their kids). He then gave me a piece of paper printed with “Mario – the farmer – mobile number”. No website, no email, no list of products, and he told me he would call the following week to take my order. He did.

That’s what I call customer engagement.

Mario asked me what I wanted, that I could have anything unless it was not the right season. That’s what I call personalization and added-value service (ever wondered why tomatoes taste like nothing in November?). The two aspects that really stunned me, though, were that no minimum quantities were required and that he would deliver the products to my door. That’s what I call competitive differentiation. One week later, he even phoned me to find out if “everything was OK.” That’s what I call customer care.

Two months have passed, and Mario told me that his business is growing so fast he had to buy two other trucks to deliver to the city. Considering the products are premium price, it is an amazing success for a 100 percent offline business in today’s hyper-connected market.

Clearly, the day Mario will have to scale his business, and he won’t be able to do so without setting up a solid e-commerce, otherwise he will risk to be overwhelmed and lose business.  This whole story made me meditate on one thing—before starting with (sometimes too) advanced business models based on hype, food retailers should secure the basics first, by better analyzing their customer demand. Combining the old and the new, they should see their very own tale end happily.

For more insight on the how digitalization is changing the food industry, see What’s Happening To My Grocery Store?

Erica Vialardi

About Erica Vialardi

Erica Vialardi is the EMEA Audience Engagement Marketing Manager at SAP Hybris.