Reimagining Grocery Retail –
Unlocking Value & Growth through
Platform Business Models
THE PLATFORM CONTEXT
While enterprises worldwide are struggling to create a meaningful approach to digital transformation, modern ‘born
digital’ businesses such as Amazon, Airbnb, etc. have been successful in creating tremendous value and disrupting
incumbent business models. It is also evident that ‘Platforms’ are the secret sauce to success of these ‘born-digital’
companies. How can traditional enterprises imbibe platform thinking into their digital transformation journey? Can
incumbent businesses think like digital natives as part of their digital transformation?
PLATFORMS
CREATE EXTRACT SCALE CONNECT MATCH
value by digitizing untapped potential through ways ecosystem players supply & demand
& orchestrating from enterprise that traditional through ubiquitous patterns through
interactions assets & the overall supply chains access to unlock data to create
between enterprise, ecosystem to create cannot, through innovative digital unique insights that
customers, partners, broader, innovative a networked service propositions, can be harvested
& ecosystem digital services ecosystem adjacencies, new back into the
& meaningful services, & business platform
customer models
engagement
REIMAGINING RETAIL – UNLOCKING
We believe platforms can:
VALUE & GROWTH THROUGH
PLATFORM BUSINESS MODELS • Steer the digital agenda, and anchor newer retail
business models by unlocking sources of
Changing consumer expectations, transforming store value creation
formats, disaggregating distribution channels, and
above all ‘Amazonization’, i.e., disruption from ‘born- • Digitize consumer, store, and supply chain
digital’ retail platforms – the retail industry is at the business processes
cusp of a paradigm-next-generational shift.
• Connect consumers, stores, brands, and supply
Are platforms the answer to rapidly changing chains through a networked ecosystem
consumer expectations in the retail industry?
• Help leverage data & insights across the
How can traditional retailers embrace a platform shopping journey to create newer digital
mindset to accelerate their digital transformation? ecosystems, adjacencies, & services
Can they digitize their core consumer interactions into
insights & services? Why do they need to leverage • Scale retail businesses through ways that
their ecosystem and create adjacencies? Finally, how traditional supply chains cannot
can they create a growth playbook, and unlock value
from their ecosystem to enable rapid delivery of
new & innovative digital service propositions
for consumers?
GROCERY RETAIL – PLATFORM value from their ecosystem & strengthen collaboration
to fend off competition to capture consumer wallet
BUSINESS MODELS CAN CREATE share and mindshare.
AN INTEGRATED & COLLABORATIVE
Historically, consumer choices were limited to what
ECOSYSTEM TO UNLOCK VALUE & was available on the store shelf and influenced
GROWTH strongly by brand preference and promotion – but
today, consumers have virtually unlimited choices.
One of the retail sub-segments that is at the cusp of Catchphrases like ‘better for you,’ ‘organic,’ and ‘local’
disruption and presents tremendous opportunities due play more strongly for many products. As a result,
to platform economics is the grocery business. shoppers are becoming more intentional about
In this race to reinvent grocery shopping, what they want to buy, and this creates the need for
everyone (supermarket retailers, wholesalers, CPG retailers, wholesalers, CPG manufacturers, and other
manufacturers, and other suppliers) will need to unlock suppliers to adopt platform-based business models.
RELEVANT TODAY GROCERS ARE INNOVATING
No lag between shopper’s
Convenience is key
motivation and consumption
Customer segmentation One-to-one personalization
Store drives competitive advantage Store as a hub & platform
Enrich with services beyond
Seamless omnichannel experience
experience
Insights, partnerships, and
Merchandising, vendor management, and operations
ecosystems
Source: Adapted from Bain & Company
BEFORE WE DELVE INTO HOW A retaining them. It costs a lot less than acquiring
new shoppers.
GROCERY PLATFORM BUSINESS MODEL
COULD EVOLVE, HERE ARE SIX KEY Take targeted promotions to the next level
DRIVERS WE THINK GROCERS SHOULD This area is ripe for collaboration. Retailers use
their loyalty program data to collaborate with
FOCUS ON AS ENABLERS TOWARDS manufacturers and suppliers to focus on households
CREATING A NEXT-GEN INTEGRATED based on past purchases.
GROCERY PLATFORM ECOSYSTEM
Make digital an integral part of
Virtualize the category how you do business
Make the category easy for shoppers to access both Align the people doing the work, build a robust
online and in-store. Present products the way that contact database, analyze loyalty program data, and
shopper insights say people want to see them. accelerate learning and optimization through testing
and sharing.
Simplify the buying experience
Shoppers are increasingly looking at replenishment Go after new need states &
purchases differently from first-time or occasional shopping occasions
product purchases. How can you accommodate them? Shopping occasions used to be defined in terms of
interaction with the store and basket size. Now digital
Focus on core consumers and be ‘loyal’ to them influence and new options like subscriptions and
These are your most valuable customers. Identify delivery have opened the way to serve many more
them by name or email, and devote resources to shopping occasions.
SHAPING THE GROCERY PLATFORM THE SHOPPING JOURNEY –
BUSINESS MODEL REIMAGINING THE STORE AS A
PLATFORM
Let’s look at how the platform business model can
unlock value by digitizing consumer touchpoints and While it is true that a majority of grocery sales still
creating ecosystem interactions along the Pre-Shop, happen through the store, the concept of a store is
Shop, and the Post-Shop consumer journey. transforming to a whole new meaning for consumers
today. The millennial shoppers’ grocery journey more
often than not is initiated on a mobile app or online,
REDEFINING THE NEXT-GEN PRE-SHOP and can transcend to the physical store at any point in
the shopping journey purely guided by self-mandated
JOURNEY – CONVENIENCE, CHOICE, & choices, convenience, experience, and service needs.
CONTEXT Be it a traditional online store by ‘born digital’ grocers
or physical stores by brick-and-mortar retailers, we
Digital influence during the pre-shop journey has believe that the concept of a grocery store is fast
made a profound and foundational shift in where being reimagined into a ‘Phygital Platform’ that can:
grocery shopping happens. Gone are the days of
winning the sale at the shelf, but increasingly shoppers • Orchestrate an open ecosystem of the shopper,
are making decisions about where to shop and what brands, grocery and food services, third-party
to buy outside of a store. This means that grocers labels, and partner brands & services
need to be present when shoppers are making
those decisions. • Create differentiated & value-added services across
categories and assortments – be it food, recipes,
Personalization has taken a whole new meaning today. farm-fresh produce, bakery, beverages, health and
Shoppers are empowered with choices. The deluge of wellness, etc.
data manifests the opportunity to tune their choices
and own the shopping experience well ahead in the • Connect the retailer, consumer, brands, partners, and
journey before their actual shopping. agri-ecosystem through context from the pre-shop
journey. Seamlessly orchestrate the store ecosystem
A case in point is, how millennials, especially during through an omnichannel experience across physical
their grocery shopping, would like to have insights / digital stores, mobile, online, and downstream
about product ingredients and their wellness index post-shop distribution, warehousing, and inventory
– what’s in and what’s not? Where and how was it management
produced? How fresh & healthy is it? What choices do
I have – ready-to-cook, prepared foods, pre-chopped • Create a ‘Connected In-Store Experience & Services’
veggies, meal kits, etc.? What are the value buys and by seamlessly creating an internal store ecosystem
bundled offers? When can I buy from which grocer? of the shopper, in-store associates, brands, expert
advisors such as nutritionists, pharmacists, event
Platform-thinking can help grocery retailers create specialists, etc. A robust digital store platform will
connections and digitized interactions with consumers bring together various technology platforms across
well ahead of their shopping journey. Platforms can entire business apps, shopper data & analytics, AI,
help create value-added grocery services that can IoT, and customer experience platforms, to name a
foster insights about the brand / product, choice, few, and provide relevant / contextual digital services
and convenience. to the shopper & insights to the grocer & in-store
ecosystem in general
Traditional grocers can leverage historical and real-
time shopper data captured at PoS, brand, supplier- • Infinitely scale product assortment through ways that
and partner-related content, digital marketing, and traditional supply chains cannot, cross-leveraging
promotion initiatives to create ‘Know your Shopper’ online and physical store inventory. Virtualize
insights and deliver value-added services at the categories and merchandise by bringing third-
point of decision-making through online and mobile party grocers onto the digital platform across niche
channels. The ‘pre-shop ecosystem’ that the grocer categories and unlocking value from the services
can orchestrate through a platform can empower they can offer shoppers
millennial shopper profiles, create targeted promotion
and smart decision-assistance apps and services. Well, • Leverage data & intelligent insights to capture
the Connected Grocery Platform journey has truly shopper micro-moments along the store journey.
begun here by digitizing the interactions at consumer, Create personalization at scale resulting in a 360°
supplier, and partner touchpoints during the pre- view of the shopper, and other participants in the
shopping journey. store ecosystem
hat could be a platform specifically for segmente
• Create a hub & ecosystem of Growth Stores that The store can also connect to share data and
could be a platform specifically for segmented predictive insights with other grocery stores,
millennial consumers. Growth store ecosystems can leverage third-party grocers to create an extended
become local data hubs targeting millennials with set of digital services to millennial consumers
pilot assortments, categories, food, and services.
REIMAGINE GROWTH STORE AS A
DIGITAL PLATFORM
Ibeacon 2 for pushing Internal ecosystem:
personalized promotion business functions
Customer-scanning
barcode Extensible digital
technology backbone
Store associate clienteling
ML-based recommendation Retail store
operation
Ibeacon 1 for welcome
message on entry ;
POS 2 360° view
In-store staff of inventory
seamlessly integrate
with systems
at store
HQ / Warehouse
Customer
service / Loyalty
POS 1
Queue busting
Open
Scalable
Local farmers can
transact directly Connected
Community
cookery classes Intelligent
THE POST-SHOP JOURNEY – THE grocery services, and create shared promotions,
cross-leveraging partner services at point of delivery –
EMERGING DELIVERY ECOSYSTEM providing a plethora of choices to end consumers with
a bouquet of services beyond groceries.
An array of fulfillment possibilities to fit the needs of
the moment are redefining the post-shop journey The fulfillment journey of traditional grocery retailers
convenience for grocery shoppers today – from slow are besieged with several unique changes characteristic
& economic, and same-day delivery, to increasing use to the grocery business models. Given the mandates to
of click-and-collect, and on-demand unlimited delivery deliver fresh produce to the last mile on a daily basis,
packages for a fixed fee – to name a few. the pipe-based conventional fulfillment supply chain is
being disrupted by a platform business play like never
However, the disruption in the post-shop journey has
before. This also manifests an opportunity for grocers
been the emergence of third-party platform players
to orchestrate a core fulfillment ecosystem that can
aggregating groceries and other products, and
unlock value-added services from extended partners
complementing them with adjacent service models to
that can be delivered to shoppers in an aggregated
provide last-mile delivery services to consumers.
fashion during last-mile delivery. We see this model
Grocery retailers can significantly take out cost evolving to grocery retailers co-opting with an extended
from their delivery capex by bringing third-party & integrated grocery ecosystem that can create new
fulfillment partners into their delivery ecosystem. services for shoppers, around food services, events,
This can help lower investments in delivery capex & entertainment, health & wellness, etc., and can be
& grocery infrastructure, deliver rapid e-commerce delivered omnichannel.
THE BRASS TACKS – HOW CAN assessment should encompass dimensions across
customer-centricity, business models, leadership,
GROCERY RETAILERS EMBARK ON A talent, and execution. The technology assessment
PLATFORM JOURNEY? might include readiness or maturity across data,
architecture, and other characteristics of
Taking a cue from several ‘digital-born’ platform platform technology.
companies and traditional retailers who have
embarked on adopting a platform approach to • Reimagine the business, products, and services by
accelerate their digital journey, we recommend the taking advantage of the ecosystem & environment
following stepwise approach for grocers to accelerate – focus on newer sources of value-creation and
their platform-enabled digital transformation journey: meaningful consumer & system engagement, to
create innovative service propositions.
• A well-articulated digital agenda and structured
approach – start by assessing your current platform • Start by digitizing your core processes across the
& digital maturity. pre-shop, shop, and post-shop journey, then create
adjacencies that can subsequently help expedite
• Conduct a readiness assessment across business newer growth and business models by leveraging
and technology attributes. The business maturity the co-opting ecosystem (both internal and external).
PRE-SHOP Initiate Innovate Next Reimagine
Customer Segmentation
Loyalty Management
Promotion Effectiveness
Customer 360o & Insights
Consolidated Data & Automation
SHOP
E-commerce & Mobile
Omnichannel Experience
Demand Forecasting
Store Innovation & POS
Workforce Empowerment
Assortment Mix & Category Management
Insights – Store, Product Mix, & Shopper
Enterprise Refresh – Digitizing Business Applications
POST-SHOP
Omnichannel Fulfillment & Warehousing
Smart Inventory
Demand Forecasting
Intelligent Automation
Enterprise Decision Support
• Adopt industry-aligned grocery digital business
processes, but curate and contextualize them to
help orchestrate interactions in your environment
and consumer shopping life cycle.
• Create a grocery-market-aligned platform
architecture including the orchestration of the
ecosystem that can help realize the digital business
processes and platform business characteristics. A
typical market platform architecture highlighting
the platform ecosystem and interactions between
participants in the ecosystem has been indicated in
the exhibit below:
PRODUCT PRICING PROMOTION LOYALTY
MERCHANDISERS
DISTRIBUTORS
BACK END
Managing Assortment Demand
Product Mix & Planning Forecasting
CORPORTATE BUYERS
Brick & Mortar Marketplace
Relationship
Experience
Customer
Vendor
MANUFACTURERS
SUPPLIERS
Kiosks
FRONT END
Online
Personalization
BACK END
BUYERS
Clienteling
RETAILER
Catalog Pop-up Store
Selection
Customer
Vendor
Service
CONSUMERS
Call Center Special Events
BRAND OWNERS
Inbound Outbound Purchase Order Accounts Payables /
Operations Operations Management Receivables
BACK END
SUPPLY-CHAIN ENABLERS
PROCUREMENT TEAM FINANCE TEAM OMNICHANNEL LOGISTICS TEAM
WAREHOUSING TEAM
• A shared vision followed by a road map with quick
wins and mid- & long-term strategic platform
initiatives are critical success factors for hastening
platform initiatives.
• Needless to say, to build a truly digital enterprise
anchored around a platform business, a holistic
change-management philosophy across talent,
processes, systems, and the encompassing
environment is essential.
ABOUT SONATA
Sonata is a global technology company that enables
successful platform-based digital transformation
initiatives for enterprises, to create businesses that are
connected, open, intelligent, and scalable. Sonata’s
Platformation™ methodology brings together industry
expertise, platform technology excellence, design
thinking-led innovation and strategic engagement
models to deliver sustained long-term value to
customers. A trusted partner of world leaders in
the Retail, Manufacturing & Distribution, Travel, and
Software industries; Sonata’s solution portfolio includes
its own digital platforms such as Brick & Click Retail
Platform©, Modern Distribution Platform©, Rezopia
Digital Travel Platform©, RAPID DevOps Platform©,
Kartopia E-commerce Platform©, Halosys Mobility
Platform©, and Commodity CTRM Platform©; best-
in-class capabilities on ISV digital technology platforms
such as Microsoft Dynamics 365, Microsoft Azure, SAP
Hybris, Cloud Engineering, and Managed Services;
as well as new digital applications like IoT, Artificial
Intelligence, Machine Learning, Robotic Process
Automation, Chatbots, Blockchain, and Cybersecurity.
Sonata’s people and systems are nurtured to bring
together the depth of thought leadership, customer
commitment, and execution excellence to make a
difference to business with technology.
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