Food Forum: Dissecting Digital Intermediaries

For as long as I can remember, the mantra in the supermarket industry has been “make shoppers’ lives easier.” Nearly every year, someone says something like “convenience has never been more important than it is now.” Who am I to disagree? I am a shopper myself, and I definitely want my life to be easier, and our lives are getting easier in many ways. What I am seeing in the supermarket realm, however, is that it is not necessarily stores that are helping to make shoppers’ lives easier—it is the digital middlemen, or what we are calling digital intermediaries.

IDDBA’s recently completed report, Digital Intermediaries & Their Impact on the Retail Value Chain, produced in partnership with RetailNet Group, defines digital intermediaries as entities that sit between the end consumer and the retailer. Digital intermediaries:

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Operate a digital consumer engagement platform;

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Leverage the platform to aggregate and direct demand;

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Attract and sustain high viewership and audience reach; and

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Have the power to influence consumer purchase decisions.

Years ago there was one basic path to purchase. People went to the store to buy what they needed. If they ordered something for delivery, they did it directly with a retailer, either by phone or mail; the internet was not secure enough for credit card purchase. Obviously, that path still exists, and it is probably not going away, but it is being joined by a number of other paths to purchase. Now, we can research our choices through review engines like Yelp. We can make sure we are getting the best price through offer engines like RetailMeNot or Groupon. Then, we can purchase directly from brands, buy from marketplaces like Amazon, or click on social media sites like Facebook and Pinterest to make a purchase, and we can have it delivered by a service like Uber, Instacart, or Postmates—before we post a review for the next shopper to read.

In short, we can engage pre-shop, while shopping, and post-shop. But are shoppers engaging with the store? In many cases, no. They are engaging with digital intermediaries.

From the shopper’s perspective, it is great. They see fewer friction points. They may not see the hidden costs of convenience that each intermediary adds to the total, but in many cases they do not care.

From the retailer’s perspective, digital intermediaries are helping to meet one of the main objectives: making shoppers’ lives easier. Just like shoppers, however, retailers have a price to pay for the convenience that intermediaries can deliver. Because shoppers no longer interact with the store, retailers may be losing importance in shoppers’ minds. Intermediaries may be helping retailers sell more product, but the retailers are selling more to other businesses and less to individual shoppers. Gradually, that means valuable shopper data is being controlled by intermediaries rather than supermarket retailers. It could also weaken the relationship between a store and its shoppers.

Digital intermediaries can also act as direct competition to supermarkets. There are some subscription service startups that deliver fresh ingredients and recipes direct to customers to meet demand for convenient, fresh home-cooked meals. These businesses might be in direct competition with in-store pre-cut vegetable programs and prepared foods departments.

The potential pitfalls of digital intermediaries emphasize the need for strong perimeter departments. Like we have heard so many times before, it is easy to shop online for center store items because many shoppers do not care who ultimately fills the order. Fresh foods, on the other hand, matter to shoppers.

Given the innovative and relentless competition from digital intermediaries, there may be ways to leverage their power to help the supermarket industry. Intermediaries can offer transparency on product and retailer information, give customers a personalized shopping experience and allow shoppers to be heard.

While we cannot see all of the pitfalls or all of the benefits of digital intermediaries, we know that they are changing the retail landscape—and fast. To get a better picture of the types of intermediaries that are out there and how they might impact your business, I encourage you to visit iddba.org to get a copy of Digital Intermediaries & Their Impact on the Retail Value Chain, free to IDDBA members.     

Alan Hiebert is senior education coordinator for IDDBA. He can be reached at [email protected].