Personalization, omnichannel and wellness: Establishing a strong consumer proposition at Safeway
Safeway on Thursday reported a 1.3% annual sales lift to $44.2 billion for its fiscal 2012. The year-end sales lift was driven by increased fuel sales and a same-store sales increase of 0.5% (excluding fuel), the grocer reported.
However, from listening to this last conference call, coming out of a year that has been framed more by Safeway's challenges than Safeway's opportunity on Wall Street, you get the sense that 2012 was 2012 and that this 2013 party has only just begun.
Because coming out of that call, there are three key initiatives to watch out for at Safeway this year — a loyalty card program striving toward greater personalization; the fact that upper management is already savvy to the value of the omnichannel consumer; and an as-yet-to-be-revealed wellness program will be originating from one of the more progressive healthcare thinkers in big business today.
Personalization. Safeway's Just 4 U loyalty program numbers 5.4 million members today. And those 5.4 million members account for 45% of total sales. Safeway is looking to grow that mix to as high as 65% of revenue from loyal cardholders, who both spend more and spend more often. "There's going to come a point where our shelf pricing is pretty irrelevant because we can be so personalized in what we offer people," Safeway chairman and CEO Steve Burd said. "It's pretty hard to compete with somebody whose price [is no longer visible]. You don't even know what [the competition's] prices are to individual consumers." And Burd believes Safeway has got a 24 month to 36 month headstart on optimizing personalization before the competition is able to get up to speed.
Omnichannel retailing. Ever since soccer moms started pulverizing pigs from an Angry Bird slingshot on those first iPads, consumers have become more cognizant of who they're shopping, not where they're shopping. It's become a brand experience as opposed to a store experience or online experience. And, according to Safeway's brass, those iPad-packing shoppers are rolling marketbaskets to the front register that are 40% larger in terms of dollar sales. And they're doing it more often. "So basically we are on all smartphones, plus an iPad application, which is quite different from the pure mobile application. And it's attracting a lot of users," Burd noted.
Wellness. All along, Safeway's still-under-wraps wellness program was expected to be chain wide by year-end 2013, Burd noted. And that hasn't changed even though the initial launch has been delayed by two quarters. "The delay is largely the result of making sure that the infrastructure that's created to support the initiative allows us to go with great speed across the company," Burd said. Later in the call, Burd clarified that it was the infrastructure of its technology partner that needed to be scaled before implementation. So it's the technological infrastructure that needs to be more robust. Remember personalization and omnichannel-savviness? Don't be surprised if this all comes together as a seamless wellness proposition.
And let's not forget Burd's history with implementing health initiatives. Safeway was one of the first employers to create a health program that rewarded healthy behaviors. "At Safeway we believe that well-designed health-care reform, utilizing market-based solutions, can ultimately reduce our nation's health-care bill by 40%," Burd opined in a Wall Street Journal editorial back in 2009. "The key to achieving these savings is health-care plans that reward healthy behavior."
According to that opinion piece, Burd reported that Safeway's healthcare costs remained stable between 2005 and 2009 (they didn't go up), while most companies were realizing increased healthcare costs of up to 38% in that same time period. "74% of all costs are confined to four chronic conditions (cardiovascular disease, cancer, diabetes and obesity)," Burd wrote. "Furthermore, 80% of cardiovascular disease and diabetes is preventable, 60% of cancers are preventable and more than 90% of obesity is preventable."
Now DSN isn't saying Safeway will introduce some revolutionary retail wellness program that will help reduce America's healthcare bill by 40%. We're not even saying this 2009 editorial has anything to do with what Safeway has planned for next quarter. But what we are saying is, Burd has long been a pretty progressive healthcare thinker, and now that thinker is implementing a retail wellness program.
And that should be something worth watching out for.