Speaking at the National Confectioners' Association (NCA) State of the Industry Conference in Miami, Dan O’ Connor, president and CEO of insight and advisory firm RetailNet Group, said: “Technology will be the gateway for consumers on their retail trip.”
Already around half of retail transactions are made outside the traditional checkout. 15% comes from out-of-store digital sales, 10% from store pickup and 25% from mobile point of sale, that’s click & buy transactions on a mobile device in-store including scan & go.
No confectionery in the bagging area?
O’Connor said that further advances in digital technology were likely to lead to fewer in-store checkouts, a key zone for impulse confections.
He said that in-store scan & go technology featured no merchandize in the scanner payment zones, unlike the confectionery-laden traditional checkouts.
US East Coast c-store chain Wawa is already using scan & go technology, and Walmart is currently trialling mobile checkouts.
“One day you will be able to pay – there will be no checkout,” said O’Connor.
Confectionery’s place at the checkout-zone has already come under threat from health advocates. In the UK, Lidl this year removed all confectionery, except sugar-free gum, to make way for healthier tills, while Tesco is currently trialing healthier checkouts.
Emerging technology may further challenge the relevance of the checkout zone.
“This is the year of low energy Bluetooth,” said O’Connor.
iBeacon is a Bluetooth Low-Energy (BLE) technology by Apple that can push notifications to nearby iOS 7 devices and pinpoint customers’ precise locations in store. It may also enable payments at the point of sale without customers pulling out their wallets.
O’Connor said that the GPS locator could allow for targeted communications and offers.
He added that emerging technologies such as Google Glass and smart watches could also be used in the retail environment of the future to facilitate automatic payment. Tesco, Aldi and Carrefour are already selling low-cost (under $200) tablets at checkouts that consumers can use to shop in-store.
Robert Swaigen, vice president of marketing at Jelly Belly, told ConfectioneryNews after O’Connor’s presentation: “Digital marketing, social media and technology is here to stay and you have to adapt with it. There is some truth to the fact we are still an impulse category and the less chance you have to bump into us, the harder we have to work to find ways we can bump into you.”
For example, Mondelez International is trying to use technology to its advantage with video display units near checkouts that estimate a person’s age and gender to deliver targeted advertising.
According to O’Connor, out-of-store digital sales, those made online, would be less profitable for food companies than in-store sales. “It’s really hard to make the same return on invested capital that you do in the store,” he said.
The retail expert added that confectionery companies may struggle to manage the mix in the digital environment as consumers tended to have shopping lists that they stuck to. “Getting new items on that list is very difficult.”
“Holidays and promotion are very difficult to do on the web,” he added, which could prove a stumbling block for seasonal-reliant confectioners.
‘Less profitable journey’
O’Connor stressed that the emerging technology and e-tail would not mean greater sales for retailers and manufacturers.
“The digital platform does not create greater consumption. It’s just a different channel of distribution – it’s shifting volume.”
“For most retailers this is going to be a less profitable journey. Most of the large retailers in Europe and North America, few are going to be able to compete with Amazon.”
He said that smaller retailers would move to platforms such as Google, Alibaba or eBay for e-commerce. “I believe that Google will become one of the largest retailers in the world.”
The RetailNet CEO said that e-commerce platforms would eventually operate through third-party spot delivery systems to deliver the same day. He said the confectioners would need to adapt to a rapidly changing retail space.