Dot Com to Table: The Future of Retail Grocery

July 31, 2017

Some food for thought; picture a grocery store where you can receive recommendations and offers based on your personal preferences the moment you step into the store, where checkout takes only seconds and you can pay for groceries without ever having to take out your wallet. Sound far-fetched? It may be closer than you think.

Technology has fundamentally transformed the way the retail industry operates and grocery retail is currently undergoing dramatic shifts. Shifts driven by changing consumer market needs and expectations, technology advancements and a fierce competitive environment where progressive grocers will need to continue to transform their business models and tap new ways to attract retail shoppers as they transition to compete in an evolving grocery landscape. 

Online is projected to become a bigger part of the overall grocery shopping equation going forward. In fact, online grocery is predicted that it could grow as much as five-fold over the next decade with American consumers spending upwards of $100 billion by 2025. More and more shoppers will start to shift the mundane task of shopping for regularly replenished goods such as beverages, paper products, packaged nonperishable foods and other household basics to online. 

The convenience of online shopping and grocery delivery has different meanings to different people. For some in densely populated urban areas, getting to and from a grocery store could be a transportation issue. For working parents, grocery shopping could be a timing issue or others may just dislike grocery shopping all together and would do anything just to avoid the store. 

The supermarket giants like Wal-Mart and Amazon have already seen sales from their online efforts, but reports show the online channel is likely to capture significantly more market share from the brick-and-mortar stores in the decade ahead. This has been made clear by Wal-Mart’s intention to escalate its grocery e-commerce game with its acquisition of Jet.com last year. Meanwhile, Amazon quickly followed with the recent acquisition of Whole Foods and plans to expand its AmazonFresh online grocery business. While it could look like a two-player online grocery race, others will not sit on the sidelines. The strategic priority for many grocery retailers in the years to come will be developing an integrated and seamless multi-channel shopping experience. 

Given the low-price positioning of Wal-Mart, dollar stores, Aldi and others, as well as the anticipated U.S. entrance of European value retailer Lidl in 2018, it’s becoming clearer that price is no longer a competitive differentiator. Therefore, retail grocery may be reframed to emphasize non-price factors such as freshness, quality and customer service. In addition, in-store grocery stores may expand their shopping experience by adding a number of various departments such as a coffee bar, wine tasting section or a farmer’s market. For example, in the Lehigh Valley, we have already seen some shifts in the retail grocers by expanding their home and health departments, additions of bars and/or restaurants, expanding their fresh take-out meal selections and adding take-out beer and wine. 

So will clicks replace bricks? It’s not believed to be anytime soon. Although online shopping has a number of benefits, physical stores will remain to have strong key advantages over e-commerce, especially for fast moving consumer goods. Aside from the obvious in-store benefit of fulfilling immediate shopping needs and avoid paying shipping fees, there are powerful sensory experiences that are virtually impossible to replicate online. The web cannot compete with the smelling of freshly baked bread and pastries, seeing and feeling the vibrant colors and textures of freshly ripened produce and the overall power of human interaction and the thrill of unplanned discoveries that physical stores can provide. 

Technology will never be a substitute for the basic elements of a great shopping experience, including innovative store design, ample selection, and exceptional service, however infusing technology in the in-store experience will be an important enabler in this process to ensure the experience is pleasant, efficient and relevant to keep shoppers coming back.

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