The grocery industry is overdue for technological advancements. With changes like these, brands have an opportunity to become more present in the home (not just while the shopper is out) – providing meal plans, curating shopping lists, and auto-ordering household products before they run out.

The grocery industry is on the cusp of disruption. The millennial worker, the mobility-impaired, the stay-at-home parent, and the coupon-clipper all have something in common: wandering the aisles and waiting in line on a weekly basis isn’t working for them. Fortunately, better options are just around the corner. Digital storefronts and automation first came for supermalls, and now they’re coming for supermarkets. Big box grocery stores must change to a more experiential and convenient model, or face the same wave of closures that hit big department stores in 2016. So how can grocery stores avoid the same fate?

Farm to Foodie: A Changing Cultural Landscape

Between 1963 and 2012, women’s participation in the labor force increased by 53 percent, and that number is growing fast. Fewer women are home during the day, and that has impacted cultural expectations for home-cooked family meals. A recent study found that less than 50 percent of dinners served at home were actually home-cooked. Just 30 years ago, it was 75 percent. While studies show that both men and women still like to cook, the number of minutes spent in the kitchen has decreased by almost 30 percent since the 1960s. Young foodies are alive and well (cooking shows, anyone?) but their eating rituals are changing.

Future-of-GroceryStores_2-Kitchen-Inline

Grocery Shopping: The Convenience

The “convenience store” is no longer truly convenient. Delivery services have stolen a large share of grocery shoppers. Many big brands offer online grocery shopping and home delivery – but for a big price. AmazonFresh, Safeway, and Google Express are competing to create the grocery delivery product of the future, but the delivery fee is too high for many potential customers. Alternatively, ingredient kit delivery and meal delivery services like UberEats, Blue Apron, and Plated have saturated the market, with prices that compete with the cost of ingredients in grocery stores.

Home delivery will see the greatest success in cities where real estate is limited and costly for stores with big footprints. But still, supermarkets in rural areas are not immune to change. Stores in the suburbs will convert into warehouses, and customers who want to avoid delivery fees will simply order their groceries online, and then pick them up in a drive-thru. A 2013 Oxford study predicts that 40 percent of U.S. jobs are at risk of “computerization,” and the grocery industry is particularly ripe for automation. Ocado is seeing success in the UK with a semi-automated warehouse delivery system, and is planning to expand. Waiting in a slow checkout line will quickly become a thing of the past as more efficient and consumer-centric systems take over.

“Home delivery will see the greatest success in cities where real estate is limited and costly for stores with big footprints. But still, supermarkets in rural areas are not immune to change.”

Grocery Shopping: The Experience

Grocery stores are not necessarily doomed. There’s an opportunity to recapture a large group of consumers who are less interested in efficiency and more interested in experiences. Restaurant spending just overtook grocery store spending for the first time ever. According to the Restaurant Association, millennials see dining out as an opportunity to connect socially. They are the most ethnically and racially diverse group in U.S. history, so they are drawn to ethnic restaurants and new experiences. Digital integration, personality, transparency, and novelty resonate with millennial customers. These things are rarely found in traditional supermarkets, but that is about to change.

Future-of-GroceryStores_3-Millenial-Inline

Grocery stores are finding new ways to engage with their customers. Free tastings, cooking classes, market festivals, and other immersive and engaging grocery experiences will become the norm. For example, Starbucks found that grocery stores with an immersive Starbucks Signature Aisle make sales three times faster than stores without it.

“If grocery distributors don’t plan to offer more unique experiences or increase convenience, they can plan to become irrelevant like so many department stores today.”

Whole Foods is making big strides in this arena. The chain is introducing a new brand of grocery stores: 365 by Whole Foods. It is a grocerant – a grocery store/restaurant hybrid where customers can dine in at cafeteria-style food counters. 365 by Whole Foods offers prepped ingredients, fresh produce from local farmers, affordable prices, eco-friendly home products, and a voice with personality that resonates with younger consumers. They also offer home delivery. This model meets the needs of both consumer groups, and is likely to be imitated by other brands.  Amazon’s recent acquisition of Whole Foods provides a glimpse into the future of the industry; with a focus on an immersive and streamlined customer shopping experience.

Future-of-GroceryStores_7-Prepped-Inline

What’s next?

AmazonGo is opening in Seattle this year. It boasts a unique customer experience: walk in, grab your food, and go. No checkout, no waiting in lines. The purchasing process is conducted by the customer’s AmazonGo app, which monitors the customer’s location and the items in their basket, and then charges their account when they leave the store. It is a hassle-free experience for those willing to make some small privacy concessions. These stores can be run efficiently with as little as 3 employees at a time. America’s Research Group has predicted that 75 to 90 percent of grocery store employees have the potential to be replaced by Amazon’s technology.

Future-of-GroceryStores_6-Experience-Inline

The grocery industry is overdue for these technological advancements. With these changes, brands have an opportunity to become more present in the home (not just while the shopper is out) – providing meal plans, curating shopping lists, and auto-ordering household products before they run out. Conversational User Interfaces (CUIs) such as Amazon Alexa can suggest recipes based on your conversations, and schedule deliveries to arrive when you are home. It may sound invasive, but consumers are often willing to concede some privacy for increased convenience.

If grocery distributors don’t plan to offer more unique experiences or increase convenience, they can plan to become irrelevant like so many department stores today.

Want to know more? Explore our case study to get a closer look at the future of grocery, and then contact us to continue the conversation!

Download Case Study


Sources

  1. http://www.bizjournals.com/seattle/news/2017/04/13/grocery-workers-amazon-takeover-retail-tech.html
  2. http://www.theverge.com/2017/2/6/14527438/amazon-go-grocery-store-six-human-employees-automation
  3. https://techcrunch.com/2015/07/11/the-billion-dollar-food-delivery-wars/
  4. https://www.bloomberg.com/news/articles/2015-01-14/americans-ate-their-fuel-savings-last-month
  5. https://www.forbes.com/sites/maggiemcgrath/2016/06/16/why-grocerants-are-the-future-of-food-shopping/#910931a18713
  6. http://money.usnews.com/money/personal-finance/articles/2016-01-01/meet-the-supermarket-of-the-future
  7. https://www.amazon.com/b?node=16008589011
  8. https://www.365bywholefoods.com/
  9. https://www.thinkwithgoogle.com/articles/cooking-trends-among-millennials.html
  10. http://www.essence.com/2016/03/28/death-home-cooked-meals-among-millennials
  11. https://verisolutions.co/2016/10/12/third-party-restaurant-delivery-apps-and-services-on-the-rise/
  12. http://www.geekwire.com/2014/grocery-delivery-wars-amazon-fresh-instacart-safeway-stacked-tests/
  13. http://www.businessinsider.com/krogers-grocery-store-of-the-future-2015-11
  14. http://www.epicurious.com/expert-advice/supermarket-technology-interactive-virtual-future-article
  15. https://www.nielsen.com/content/dam/nielsenglobal/vn/docs/Reports/2015/Nielsen%20Global%20E-Commerce%20and%20The%20New%20Retail%20Report%20APRIL%202015%20(Digital).pdf

Related News & Views