Goldman: ‘baby boomers and retirees have money to spend and time to spend it’

In the fourth installment of this multi-part miniseries, Goldman Sachs’ head of retail investment banking, Jen Davis explains that retailers recognise that baby boomers and retirees are a large and growing demographic that will continue to populate. Davis says:

“That demographic has dollars to spend and time to spend it. And so, I think not only in thinking through online investment, we’re seeing retailers making investments into services.

“So, one example of that is Best Buy, the consumer electronics retailer, buying a company called GreatCall last year, which basically provides in-home emergency services to senior citizens. And that’s a focus for Best Buy, to try to get more of their services in their home. And so more connectivity with their customer overall. It’s been an area of acute focus for a lot of retailers today.”

Retailers’ investment in logistics and technology

Today over 90 per cent of ecommerce orders are bought with free delivery, according to stats shared by Davis, leading customers to now always expect free delivery.  This expectation has implications at the operational level. Davis explains:

“Traditional players are first investing in ‘ buy online/pick up in store’ (BOPUS) capability and making sure that they can fulfill that. The second is in terms of backend speed, and where they can invest to fulfill that much quicker. And obviously, Amazon has upped the ante in terms of what we all expect in terms of days.

“A good example of this is Kroger, the grocer, made an investment last year in a UK company called Ocado that focuses on the automated warehouse. They bought five per cent of Ocado, and in turn, entered an agreement where they would build 20 automated grocery fulfillment warehouses across the United States over the next three years. And so, Kroger is trying to confront the Amazon threat in the grocery space in terms of having a very automated fulfillment in terms of online grocery delivery.

“It’s been less on the pure M&A side and more on the investment and/or partnership experience overall.

“More broadly, aside from just logistics, where retailers are focused today is leveraging the kind of troves of customer data and loyalty programs that they have. If you think about going to Costco and using your membership card to buy your products and purchases, they have an enormous amount of data on what you buy every month, and what you’re focused on. Using that customer data and analytics to hyper-personalise the experience, both in terms of marketing and what they are pushing out to you from a promotion standpoint, is another area that retailers are very focused on.

“And I think it’s interesting, in consumer survey work, they say that 80 per cent of consumers are more likely to do business with a company if they offer a personalised experience.”

Davis was speaking Goldman’s Jake Siewert, in the firm’s latest Exchanges at Goldman Sachs podcast.

james.wallace@realassetmedia.com