The online sphere is grabbing an increasing amount of attention among the food industry’s top executives. And it’s obvious why, both from our own habits as consumers and the forecasts issued by analysts in the industry. UK grocery analysts at the IGD estimate the value of the online food and grocery market will be worth GBP11.7bn by 2017, almost double its current level.
Andy Clarke, CEO at Asda, the UK’s second-largest retailer, is no different to his peers in underlining the importance of the online channel to the industry.
“The fact that some businesses don’t have virtual shops, in my view, I’d be worried,” Clarke told an industry conference in London today (13 March), leaving one wondering whether he was thinking of rival Morrisons as he emphasised the importance of the channel to the future growth of the sector.
“The pace of mobile is upon us,” Clarke mused later in his presentation. “For a businessman, if you’re not in mobile, you’re missing a huge opportunity.” Clarke said 20% of Asda’s online orders are coming through mobile devices. “We wouldn’t have said that 12 months ago,” he said.
The Asda chief also underlined the “huge success” of click-and-collect. “The growth has gone from nowhere to 5% of our online business in a year. Huge growth. It’s not just about small top-ups, it’s weekly shops. We now have collection points in 5,000 locations, think about that, we are only 500 stores. It’s true convenience,” Clarke said. He also revealed the retailer will open a drive-thru click-and-collect service in York this year. “It’s about convenient shopping,” he said.
However, Clarke’s speech contained an interesting message – that trust is more important for a business than technology. Sure, he outlined why retailers must be present in the channel and the potential for growth. But he told attendees at the Retail Week Live conference ensuring consumers trust your business is vital.
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In the context of the fast-developing technology that the food sector – both retailers and manufacturers – is trying to harness, emphasising the enduring importance of trust is a pertinent point. Technology has made the actions of business more transparent; in our sector, those actions include pricing, promotions and brand marketing. “The Internet is driving transparency. Retailers can’t hide. Transparency of our propositions are very clear,” he said.
Of course, the rise of the Internet and social media can have a negative impact on a brand and on a business very quickly.
“The potential for things to go wrong online is far greater,” John Wragg, director of Asda’s multichannel strategy, said later at the conference. And he is right. As brands and retailers have grappled with the promise of online, some have encountered the pitfalls. Think of the problems Heinz had selling ketchup through Facebook. And Kraft Foods’ attempt to rebrand Vegemite in Australia.
Clarke recognises the importance of investing in technology – and Asda is proving that with its recent initiatives. However, he believes a retailer’s physical stores will continue to play a key role in winning consumer trust. “The growth of online would make us believe we don’t need stores in the way we did before. [But] technology can be pretty impersonal. Amazon: is it a threat? Of course. But I think we’ve got an advantage as our proposition is much broader than a pure-play retailer. Technology doesn’t drive trust in my view. Technology is an enabler for a more competitive business. The most important thing is people make businesses succeed and the quality of leadership you have in your organisation,” Clarke insisted.
He also used his speech to talk – as he did at Asda’s Q4 results last month – about how consumer trust had been “dented” by the horsemeat contamination saga. It has been one of the biggest stories in the sector in recent years and it has played out in the new world of social media and the Internet. “I’m sure people saw texts and emails flying around creating humour. It didn’t take long to move from humour to reality on what was happening,” he said.
Again, Clarke said he was “shocked” when news of the contamination first emerged. “Even overnight, there have been more issues that have come to the fore,” he said, referring to the latest recall by Tesco. “The most important thing is we took the decision to be transparent, talk to people very quickly and tell them what we’re doing.” In today’s world of greater transparency and consumers being able to access more information about their products faster, manufacturers and retailers have had to be very open about how they have been affected – and how they will look to change the way they do business to ensure product quality and win back consumer trust.
Tesco, for one, has seemed to be ready to shake-up its business and supply chain, as its announcement last month shows. Asda’s Clarke said his retailer would be more cautious in announcing how it would change the way it does business. “I’m not going to be knee-jerk in terms of telling people what we’re doing before we’re absolutely prepared to commit,” he said. “[However], we are taking a belt-and-braces approach to making sure we have got a robust supply chain.”
Winning – and keeping – the trust of consumers is an age-old tenet of retail and of any consumer-facing business. And, for all the potential and opportunity offered by of the Internet and mobile, that maxim is still true. Perhaps, even more so.
“So what’s the future of retail?” Clarke asked. “I don’t think it’s about technology. That’s only enabler. It’s about trust. Trust goes above retail.”