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04/19/2022

5 Ways Albertsons Is Pivoting to a Loyalty-Based Business Model

Jamie Grill-Goodman
Senior Editor
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Coming off a strong fourth quarter performance, Albertsons Cos. is focusing on developing engagement with its customers beyond transactions.

CEO Vivek Sankaran said the grocer’s business model is pivoting to one that is “loyalty-based,” doubling down on “omnichannel engagement with customers beyond just transactions.” The company operates stores across 34 states and the District of Columbia with 24 banners including Albertsons, Safeway, Vons, Jewel-Osco, Shaw's, Acme, and Tom Thumb.

“We will elevate the in-store experience when they shop with us, expand our services and content-rich offerings, and build a set of competitive and timeless capabilities that create a compelling reason for our customers to seek a lifetime relationship with our team members and our banners,” Sankaran said during the retailer’s Q4 2021 call.

To support this pivot, Albertsons Cos. will invest in the following five strategic priorities, he said:

    • Digitally connecting and engaging customers through the mobile app and website so they can enjoy curated experiences in e-commerce, the community, loyalty, health, and media.
    • Differentiating the store experience by deepening engagement using technology, removing associate pain points to allow them to focus on customer service versus just tasks.
    • Elevating the retailer’s distinctiveness in fresh by expanding own brand products and services, and enhancing product offerings in center store to address customers’ changing needs and preferences.
    • Modernizing capabilities through an improved supply chain, enhanced data and data analytics, and ongoing productivity, all built on the foundation of being locally great and nationally strong.
    • Further embedding environmental, social, and governance (ESG) throughout operations.

     

“Success against these priorities will be measured based on increased digital engagement, expanded merchandise and service offerings, a competitively differentiated omnichannel experience, and an accelerated set of digital and supply chain capabilities,” said Sankaran.

Throughout the pandemic, Albertsons capitalized on the opportunity to attract new customers, president and CFO Sharon McCollam noted. The grocer entered 2022 with 30 million Just for You loyalty members, a 45% increase versus year-end 2019. Actively engaged members, defined as those redeeming coupons and fuel up grocery rewards, also continued to increase. The retention rate of these members remained over 90% at the end of the year. On average, actively engaged members spend four times more than non-actively engaged customers.

[See also: 10 Hottest Retail Loyalty Plans in 2022]

To retain its newfound loyal customers, the company expects capital expenditures to be in the range of $2 billion to $2.1 billion with more than half of spending invested in modernization and digitization in stores. The remaining investment will go to the expansion of digital offerings and optimization of the supply chain.

Modernizing the Store

Albertsons Cos. has been investing in modernizing the store fleet, including adding and upgrading self-checkout, now available in over 1,800 stores, and optimizing the layout and design to improve the customer shopping experience. The company completed 236 remodels and opened 10 new stores in fiscal 2021.

“In our stores, we have accelerated remodels, implemented technology-enabled core processes, and advanced our capabilities in fresh,” Sankaran explained. “Leveraging our store base, we have built a scale omnichannel capability including drive up and go and online delivery that is proving to be sticky with customers who engage across channels. We have developed a robust loyalty platform and a unified mobile app that engages customers and personalizes offers for our 30 million Just for You members. We have learned to leverage our scale in vital capabilities such as pricing and promotions, merchandising and supply chain without compromising agility and local ownership.”

These foundational capabilities, he noted, will help the retailer retain customers for life and enter Albertsons’ next phase of growth.