Realising purpose and profit in grocery retail

“Is maximising profit our only purpose? Or is there more to our business than money?”

For many grocery retailers, it’s a question they face on an increasingly frequent basis. Revenues and margins may continue to be the priority, but they’re no longer the sole criteria on which the “success” of a CEO and a company is judged. Now, perhaps more than ever, the world is focused on how companies contribute beyond just their raw economic pull.

Take the results of two of the latest studies in our RPI Series, for instance. The RPI, short for Retailer Preference Index, is an international research programme that explores the subject of shopper choice. Essentially, the RPI seeks to understand whether a retailer’s ability to meet customer needs translates into commercial success. As you might hope, the answer is usually “yes”.

In the results of our Italian and Spanish studies from the end of last year, we saw something particularly interesting about how shoppers are starting to think about where they shop. Issues that are outside of the “core” grocery experience are now becoming increasingly relevant, with many customers demonstrating heightened concern about a retailer’s impact on the environment and society.

In Italy, for instance, “varietà prodotti salutari” (“the variety of healthy products”) and “prodotti bio” (“organic products”) are seen to be key aspects that govern the quality of a retailer’s assortment. Elsewhere, “impatto su ambiente e comunità” (“impact on the environment and community”) is seen to be more influential than overall quality when it comes to loyalty.

The same trends can be seen in our Spanish RPI, where a retailer’s environmental and societal impact is seen to hold more weight with shoppers than traditionally critical issues like quality, promotions, and even price.  From sustainability to their contribution to the community, shoppers are now just as invested in how retailers behave as they are the actual grocery experience.

These results, of course, reflect a wider trend towards corporate scrutiny as a whole. Businesses of all kinds, and retailers in particular, now find their impact judged both inside and out. Externally, society as a whole is beginning to question the role of large companies and the role they play in the wider world in areas like the environment, health, human rights, and development. Customers and commentators want to know whether there’s more at play than just pure profit.

Internally, employees have begun to ask questions of their own. On the heels of Covid-19 and a period of prolonged self-reflection, many workers are starting to voice their feelings about their own value and purpose. Moreover, they’re keen to know whether the companies they work for can do more for their lives than “just” pay them a salary – particularly in industries where the job may be focused on repetitive manual labour.

These questions matter, and for two reasons specifically. Firstly, purpose pays off; as shown by professor Raj Sisodia, companies that demonstrate a clear sense of purpose demonstrate better financial performance than others[1]. Secondly, the growth of the Quiet Quitting and Great Resignation movements mean that businesses find themselves needing to face in to employee engagement in an entirely new way.

Naturally, there’s a healthy debate in progress about how best a company can realise its purpose. And while it may be slightly simplistic to do so, I believe that the bulk of the argument can be distilled down into two complementary perspectives:

1. A systematic approach, which takes a pluralistic view of a company’s value. This requires a top-down perspective, in which the organisation decides on the value it wants to contribute to society and then empowers its employees to deliver on that purpose.
2. An individualistic approach, which takes a collective view of an organisation’s workforce and puts their shared values at the heart of the company. This is a bottom-up approach, which asks what matters most to employees and how the company can become a vehicle to deliver on their vision.

I don’t believe that there’s a wrong or right answer here. What works for one company may be entirely ineffective for another, and the nature of “purpose” as a concept is sufficiently broad that it requires a more nuanced approach – where the two are both considered – rather than just picking option “A” or “B”.

At the same time, I do believe that there are some key learnings here that retailers that aspire to be Customer First can at least take into account. Let’s start by focusing our scope and moving from “society as a whole” to the two specific audiences that I’d argue matter most to any retailer when it comes to purpose – their customers and their colleagues.

Focusing in on those groups prompts two specific questions. The first is simple: “what do my customers care most about?”. The second is slightly more complex, but no less important: “can we take the issues that our customers care about, and link them with the issues that our employees are invested in?”.

Clearly, there’s a danger here that the answer to the second question is a simple “yes”, one which causes that process to fall into meaningless rhetoric about “doing the right thing”.

Consequently, while companies need to acknowledge the fact that work won’t be the meaning of life for most individuals (and move rapidly away from the illusion that it is), work can still be something that allows people to deliver genuine change in areas that matter to them. Vitally, that can go beyond buzzwords and brand, and result in a lasting transformation.

From a customer perspective, that transformation will take the shape of changes that reflect their values. That’s important because, as shown time and time again by our RPI studies, there is a commercial imperative to delivering on customer expectations. From a colleague perspective, the transformation will present itself as an opportunity to get more out of their role, acting as a motivating factor that ultimately drives greater impact for the retailer and helps them grow as individuals.

So, how does all of this tie in to our RPI Series? In addition to some of the supporting points referenced above, I believe that the main consideration here is that the RPI has always been designed as a mechanism for cultural change. Yes, by listening and revealing the issues that matter most to shoppers, it serves as a blueprint for commercial success. But it also provides a way to track governance, and tells us that companies can strive for something more while they pursue that objective.

More than anything, the lessons of the RPI show that profit and purpose are not mutually exclusive. Retailers don’t need to forego their margins in order to deliver value to the world; purpose is an additive measure, not a trade-off. What they do need to do is implement the right framework to ensure that they have profit and purpose in balance, and I believe that there are three steps on the road to doing that.

1. Invest in the insights needed to learn what it is that customers value and care most about. Being meaningful for them depends on understanding them.
2. Create a clear link between the reasons that employees choose to work for your organisation and the things that matter most to customers. That will help to create a higher purpose for your people, and tangible positive change for your customers.
3. Identify and implement a measurement system that enables you to track those changes effectively. This will enable you to understand the impact of your actions, set the right priorities for improvements, and give your management team the insights they need to govern and direct the organisation.

Making money may still be the main objective, but that doesn’t mean that you can’t do so in a way that’s connected to what your customers and colleagues care about.

[1] Why business must harness the power of purpose – EY, 15 December 2020