We’ve seen many traditional industries give way to disruptive technologies: Kodak, Blockbuster, and the cell phone to name a few. In each of these situations, an established way of doing things—taking film photos, renting movies from a store, using a non-Internet enabled phone—was usurped by a technological innovation.
Over the past few weeks, and the flurry of reporting surrounding Amazon’s acquisition of Whole Foods, the question has become: is this grocery’s moment?
In the 1930s, the supermarket itself was a disruptive innovation, using economies of scale to lower prices and provide goods on an unmatched scale. The supermarket eliminated the need for a separate bakery, deli, butcher, florist, and other services – bringing them into one location, under one roof – and putting many out of business. With eCommerce powerhouse Amazon taking over Whole Foods, it’s possible we may see the same consolidation happen, albeit digitally, potentially changing our relationship with the brick and mortar supermarket as we currently know it.
While there have been unsuccessful attempts to change the grocery business in the past, the past does not dictate our future. Here are a few reasons why this time may be different:
Growing eCommerce Sales
Global eCommerce sales are expected to grow to $1.915 Trillion by 2018. Consumer’s comfort level with eCommerce is increasing, due to the convenience of being able to shop at any time. This tailwind is pushing both grocers and consumers to explore new channels to shop consumable retail items. For example, Wegmans just announced a new partnership with Instacart to provide grocery deliveries in suburban areas. As customers transition their consumption of goods from brick and mortar to online, we will see competition and share of wallet allocated to digital grocery purchases accelerate.
Brick & Mortar + eCommerce = Value
Buying Whole Foods is a nod to the fact that selling groceries requires brick and mortar locations, either as a fulfillment center for neighborhood deliveries, or as a pickup location for consumers. This is profitable for retailers, too. As customers come to pick up their items, they make another purchase at least 40% of the time. We’ve seen this transform other industries—apparel retail, as an example—as competition increased to provide customers an elevated customer experience that is differentiated from the competition.
Mobile Is Ready
An annual retailer survey by Forrester Research Inc. ranked mobile at the top of the list of strategic priorities for the fourth year in a row. And 94% of smartphone users look for local information on their device, and 90% take action after the search. To create sticky retail experiences, retailers must optimize their mobile experiences to capture share of wallet from other channels. As grocers gear up to compete in a digital world, mobile will undoubtedly play a role in creating the grocery store of the future.
Others Have Paved The Way
Others have paved the way for “unconventional” grocery experiences. Consider meal kit services such as Blue Apron, Hello Fresh, or Plated, which have a great following: Seven in 10 meal kit purchasers are still actively buying them. Also consider produce boxes from local farms, Peapod, even Amazon Fresh, that are offering alternatives to the typical supermarket fulfillment experience. Because others have paved the way, consumers will be more likely to embrace alternative grocery on a larger scale. Amazon’s purchase of Whole Foods might be just the shot in the arm the grocery industry needs to start moving toward a digital revolution.
Consumers Are Ready
According to a Nielsen and Food Marketing Institute study, More than 70% of consumers will engage with online food shopping within 10 years. And it’s not just Millennials. 24% to 26% of Millennials ages 18-37 said they shop groceries online, 24% of Gen Xers say they buy online, and 21% of Baby Boomers say they buy groceries online. As detailed in point four, others have paved the way, and consumer habits are changing. Even the staying power of farmer’s markets points to a consumer willingness to deviate from the supermarket.
Technology Is Ready
For grocers to embrace this change, it goes without saying that they must adapt technologically to compete. The reality is that consumers want to purchase consumable goods, but on their terms and in their channel of choice. This highlights the importance of technologies like order management solutions that allow companies to move products quickly and efficiently, and eCommerce platforms that enable grocers to reach their customers where ever and whenever.
What happens next?
After nearly 100 years, the grocery industry is changing – arguably for the better – thanks to technologies that have made it possible not only to order a wider selection of groceries from the comfort of your home, but also to receive them at your convenience.
The grocery retailers that will survive will place a priority on responding to consumer’s needs across channels and touchpoints.
