Albertsons continues to covet the omnichannel consumer

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Move to “location”. Retailers are embracing a new mantra: “Omnichannel, Omnichannel, Omnichannel”.

Albertsons Cos. announced that its digital sales grew 5% for the second quarter of fiscal 2021, ended September 11, resulting in digital sales growth of 248% based on a cumulative two-year period. During the company’s second quarter 2021 earnings conference call and results, Albertsons CEO Vivek Sankaran said the company’s Drive Up & Go and home delivery capabilities are now reaching 95% of its customers, thus contributing to a more than fourfold increase in omnichannel households compared to the second quarter. from 2019.

“Omnichannel household growth is a key initiative, as these customers spend three times as much as any in-store-only shopper,” Sankaran added, according to a Sentieo transcript of the call. “We also continued to drive year-over-year growth in identified households, another key initiative that is fundamental to better understanding our customers through data analytics and enabling us to improve our offerings for generate recurring and incremental expenses. “

The Boise, Idaho-based Albertsons further reported identical sales up 1.5% for the second quarter and 15.3% on a two-year stack. Sales and other revenue were $ 16.5 billion in the 12 weeks of the second quarter, up from $ 15.8 billion in the same 12 weeks ended 2020. This increase is mainly due to the increase identical sales and rising 1.5% in fuel sales, the company reported. Gross profit margin decreased to 28.6% in the second quarter of fiscal 2021, compared to 29.0% in the second quarter of fiscal 2020.

“We are pleased with our second quarter results as we continue to execute our transformation strategy,” Sankaran said in a statement. “The favorable consumer environment, along with our focus on in-store excellence, accelerating our digital and omnichannel capabilities, increasing productivity and strengthening our talent and culture, are driving increased sales. identical and improved performance. Based on this strong performance, we announced today a 20% increase in our quarterly dividend and raised our outlook for fiscal 2021. ”

The company now expects identical sales in fiscal 2021 to be between 2.5% and 3.5%, compared to the previously projected 5% to 6%, which represents cumulative growth over two years from 13.4% to 14.4% (previously from 10.9% to 11.9%).

“We continue to gain market share in food on a one and two year basis,” Sankaran noted on the call. “Once again this quarter, against a backdrop of digital sales growth exceeding 200% in each quarter of 2020, the benefits of our digital and omnichannel investments continue to resonate with our customers. “

Growth in buyer loyalty

Highlighting benefit improvements that continue to “accelerate membership growth,” Sankaran touted the continued success of the Albertsons U loyalty program, which grew 17% year-over-year to 27.5 million of members. Within the program, the number of actively engaged members (those who redeem rewards) increased by almost 9%. Albertsons recorded a retention rate of 93% with these actively engaged members in the second quarter.

“Remember, actively engaged members spend around four times as much with us,” Sankaran said. “We also delivered better-than-expected in-store results as our store traffic continues to increase compared to Q2 2020. We believe the increase in traffic is due to our continued efforts to protect health and safety. safety of our employees, customers and communities; and the higher immunization rates that help customers feel more comfortable returning to stores. ”

‘Transformation’ suite

The grocer’s second quarter results also reflect the momentum Albertsons is enjoying with its “all-channel transformation strategy,” added Sankaran, who often refers to the four pillars of that strategy, including excellence in store, accelerating digital and omnichannel capabilities. , increase productivity and strengthen talent and culture.

As Albertsons continues to open new stores and modernize and reshape existing locations, its next priority is “accelerating our digital and omnichannel capabilities,” Sankaran said on the earnings call. “Digital transformation is imperative in our growth strategy as we aim to deliver a range of convenient shopping experiences to our customers. ”

Later in the call, Sankaran responded to a participant’s direct question regarding the total percentage of Albertsons buyers who are omnichannel customers, with a confession: “We are below our competition in terms of global omnichannel mix in the business, and we’ve said that before and we’re continuing to develop that. We are excited about the growth rate, but we are also excited about the quality and speed at which we deliver it. “

Albertsons has expanded its Drive Up & Go locations to over 1,900 and plans to reach approximately 2,000 locations by the end of the year. The grocer is also working to improve the speed and efficiency of this service. The average wait time for pickup with Drive Up & Go is now three minutes, Sankaran said.

“In delivery, we continue to accelerate delivery times while reducing delivery costs per order by expanding our network of third-party delivery stores, and we have added DoorDash within one hour to all divisions with a catalog of more than 40,000 products, ”he continued. . “And we also announced DoubleDash allowing customers to combine restaurant meal delivery and grocery delivery in one trip.”

Another key piece of the productivity puzzle is the grocer’s micro-fulfillment centers. Albertsons currently operates three MFCs, and although construction of additional centers has slowed due to permit delays related to the pandemic, four more MFCs are expected before the company’s year-end. This will bring the company’s total to seven.

Sankaran shared further insights into the company’s vision for increased MFC efficiency during the question-and-answer portion of the results call.

“We’ve seen MFCs get to a point where the cost of picking becomes about the same as the cost of labor that we have for an order in a store, because of how productive it is. gives, ”Sankaran said. And at some point you start to become indifferent to whether … someone has been shopping in the store or whether they have done their shopping. [the order] via the MFC. When that converges, this thing opens up in an important way for us because you are a little indifferent.

New talents

Albertsons says he remains committed to his fourth pillar, talents, highlighting the recent appointment of Sharon McCollam as president and chief financial officer. Widely recognized as the co-pilot of Best Buy’s Renew Blue transformation, considered one of the most significant omnichannel transformations in the retail industry, McCollam has come out of retirement to join Albertsons on their transformation journey.

“Where I currently spend the majority of my time is accelerating our digital and technology initiatives, strengthening our omnichannel capabilities and advancing our productivity agenda, including identifying opportunities to further streamline our cost structure, especially in the technological field. activating our supply chains and stores, ”said McCollam.

But even accelerated digital and tech initiatives take time, McCollam warned, responding to a question from an investor on the call.

“All of these initiatives that we are working on on the e-commerce side of the business are gradual and incremental. You implement them; customers learn to use them. They see how much more effective they are, ”she explained. “They have a better experience, then they use it more.”

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