Following Kroger’s acquisition of most of dunnhumbyUSA (now 84.51°) last week, the building on Fifth and Race streets that will be home to the newly named customer analytics company was opened with a ribbon cutting ceremony, attended by Cincinnati mayor John Cranley as well as The Kroger Co. CEO Rodney McMullen.
"We have the most exciting upstart company in America, and that's the people that are here in this room," said mayor John Cranley to the rowdy, jubilant crowd of 84.51° employees huddled in a space some thirty feet below him. "I would put our energy and this Renaissance of ours up against any city in America."
Also present at the ribbon cutting were city manager Harry Black, David Goodwin, director of the Ohio Development Services Agency, Steve Leeper, president and CEO of 3CDC, and newly appointed 84.51° CEO Stuart Aitken.
The Details of the Deal
The ribbon cutting ceremony marked an important moment for 84.51° and Kroger. While many had speculated that the successful, Cincinnati-based grocery chain would acquire dunnhumbyUSA, until the announcement officially surfaced last week there were still questions about the logistics of the deal.
dunnhumbyUSA was founded in 2003 as a joint venture between Kroger and London-based dunnhumby Ltd. Last year, however, dunnhumby Ltd.'s parent company, Tesco PLC, lost $9.3 billion on sales of $101.3 billion, according to Bloomberg. Tesco PLC announced in January that it was considering a sell off of dunnhumbyUSA, and Kroger became an obvious suitor.
Since 2003 dunnhumbyUSA has matched data on customer transactions and loyalty card purchases with consumer research and online data to advise Kroger on both micro and macro business strategies. This process and the technology platform that underlies it have been credited as the primary factors in Kroger's revenue growth – the majority of which in the last decade has come from increased sales to existing customers rather than new sales to new customers.
"Kroger and dunnhumby revolutionized retailing in the U.S. by focusing on the customer, and we intend to do it again with 84.51°...The ability to combine what we already know with other partners is exciting and will speed up innovation. We expect these innovations to grow our business and deliver a world-class customer experience," said Kroger CEO Rodney McMullen in a news release Monday.
Under the new arrangement between Kroger and 84.51°, Kroger retains licensing rights to dunnhumbyUSA's analytics platform. It gains the 500 Cincinnati employees that now work for 84.51°, all of which will be located at the Fifth street building. The remaining employees will continue to work for dunnhumbyUSA at its existing location on Third street. Moreover, while the previous agreement had disallowed Kroger from seeking out third-party partners in the technology space, the new agreement allows such deals. The resulting collaborations between Kroger and other companies could bring further profits, as data from consumer purchase history has been an important component in ad targeting on platforms, such as cable television, that are non-integrated – or, in effect, where internet browsing history is inapplicable.
The Bargain of Big Data
Though the effects of dunnhumbyUSA’s customer analytics platform are felt widely every day, few customers truly understand what is happening when they suddenly find the shelves of their store abundantly stocked with just those products they most frequently purchase, and often at a discounted price.
But that is what dunnhumbyUSA accomplishes by compiling data on customer purchase patterns and transforming that data into intelligently stocked store shelves and intelligently printed coupons. And that's just one part of a broader revolution in the way we buy the things we use every day, from peanut butter to Swiffers to petrol.
Still, it's hard to comprehend the invisible world of numbers and raw data that now powers much of the consumer economy. It's even more incongruous to imagine that invisible world infiltrating a practice as culturally normative as buying groceries. Perhaps most difficult of all is the image of Kroger, that staple of local life, as an enormously successful national business leading the way to data-driven consumption models that feel like they belong in Silicon Valley.
"I'm not really sure what you do, but it's really cool that you know what I want before even I know what I want," said David Goodwin at the ribbon cutting ceremony, echoing the sentiments of many present. "I appreciate that and I’m a happy consumer!"
The raucous crowd of employees below cheered. It generated an odd mixture of bewilderment and delight from the media members and company executives standing above them. Cheering, after all, were several hundred people who signified the future of an industry and the promise of a city's continued economic renewal. In the latter sense, they represented an object of promise. Yet this brave new world of consumer-focused analytics potentiated by the employees in that space below also recalled the image of a car barreling down the road to which only they, those of the obscurely named 84.51° (a reference to the longitude of the site), held the keys.
Data, after all, no longer reads as benignly empirical. Data is big data, or government collected data. Perhaps most threateningly, data is that which perpetuates the self-similar datum, encouraging future purchases that merely replicate past purchase patterns for the sake of predictability. Thus the essential disconnect between the image of Kroger as that hometown staple and the image of Kroger-84.51° as a grocery store that is in some sense more than just a grocery store.
This isn't necessarily a bad deal: the more responsive companies like Kroger can become to customer purchase behaviors, the greater the influence the customer has in supply-side strategies and, ideally, the more efficient the market becomes. If, for example, you're a vegetarian and hope that your purchase habits can influence the market, then this is all good news for you because every time you buy a veggie burger over a beef burger you know your purchase is being registered somewhere. Someone, or something, is noticing.
Still, it's uncanny to imagine someone, or something, noticing. And the downside, of course, is the same as the upside: the beef-burger purchaser will be increasingly locked in to his or her beef-burger purchase. Important questions thus arise about the system’s allowance for recursive iteration.
But, for the sake of the plot, that's the world these days. More to the point, that's Cincinnati these days.
Cincinnati Benefits
84.51° is one of Downtown Cincinnati's fastest-growing employees. While 500 employees will move into the new Fifth street building on Monday, when fully staffed the building will be home to more than twice that number.
This rapid rise in employment is complemented by Kroger's own rapid growth at its downtown headquarters, fueled by a burgeoning reliance on technology. Accordingly, the jobs being created are high-paying, new-age jobs that typify the new millennium's data-driven economy. The average 84.51° worker is 31 makes nearly $100,000, some of which, no doubt, he or she will spend downtown.
That, at least, is the hope of downtown officials, who predict that the urban core of Cincinnati will benefit as 84.51° workers patronize area businesses, generating revenue, tax dollars and demand for new eateries, bars and clothing stores.
"These are the kind of positions you dream of for economic development," Johnna Reeder told The Enquirer. Reeder is president of REDI Cincinnati, a regional economic development organization. "This is not your grandfather's grocery chain – Kroger has realized the customer comes first but technology is key to figuring out what the customer wants.”
Moreover, 84.51° (we’re talking about the building now, not the company, because nothing is more alluring than the enigmatic) was a boon to the construction economy. The $140 million project, which includes the 280-square-foot building, 1,000 parking spaces and 30,000 square feet of commercial space, took two years to complete.
84.51° the building will offer space for fledgling entrepreneurs to build out their innovative startups, requiring only that they pay for their share of utilities. More, the commercial space will be available for locally owned restaurants and retail installations. In fact, three restaurants have already signed on, including a new concept from Jose Salazar, whose eponymously named Over-the-Rhine restaurant has proved successful.
The discrete economic impact of these additions to Fifth and Race, combined with the multiplier effect of having so much disposable income in one place, will likely furnish the backdrop for a new neighborhood in Cincinnati’s urban core with a character as unique as that of Over-the-Rhine, The Banks or Lytle Park. In the end, it’s that promise of diversity that proves most exciting, at least in terms of the socio-economic impact implied by 84.51°'s location in the area.
An Impressive Structure
Any evaluation of 84.51°’s new digs will likely have to wait until those commercial spaces are filled and the area attains the ‘feel’ for which it will later be known. As for the present, the building sort of… looms. It’s imposing, certainly impressive, and a bit like a Christopher Nolan-era Batman film. Its windows reflect brilliantly in the daylight, but its matte-black walls are muted and sombre.
The interior is exactly what you’d expect: refined, minimalistic and functional with a few artistic flourishes – a splash of color here, an installation there. The cumulative effect of the building, both its interior and its exterior, is similar to the cumulative effect of listening to those employees yell with glee after every adulatory line: there’s undoubtedly cause for excitement, but there are also indisputable tradeoffs, and we’ll have to be patient in order to see whether the bargain is Faustian or benign.
But that’s the world these days. And, for better or worse, that’s Cincinnati, too.