Powerful trends, including new competitive pressures, technological advances, and evolving consumer attitudes and behaviors, will disrupt the grocery business from coast to coast in the next few years. Powerful trends, including new competitive pressures, technological advances, and evolving consumer attitudes and behaviors, will disrupt the grocery business from coast to coast in the next few years. As quality rises and online grocers make more compelling offers, millions of shoppers will get comfortable offloading a task that only about 15 percent say they enjoy. %%EOF Not surprisingly, most first-time online customers expect to get their groceries more seamlessly than when going to the store themselves. 116 0 obj <>/Filter/FlateDecode/ID[<999FD2FA994A4D11A256832BB8FE83D9><403ED6E80B7B164189BD41061B579172>]/Index[92 38]/Info 91 0 R/Length 110/Prev 275318/Root 93 0 R/Size 130/Type/XRef/W[1 2 1]>>stream Customers have embraced new technology and new ways to shop. We strive to provide individuals with disabilities equal access to our website. A leading-edge research firm focused on digital transformation. But many can’t imagine all the options digital grocers might offer. 8 In the Netherlands, for example, Picnic provides customers with fixed delivery slots, backed by their milkman model and demonstrated to be able to reach up to 14 deliveries per hour. Other changes also seem to be taking hold: While convenience attracts most first-time customers to online ordering, it may not keep them coming back. ShopperScape® Online Grocery Survey, 2019, Kantar, kantarretailiq.com. Learn about It remains to be seen which experience US consumers value the most, but it is certain that they will reward consistency. More than ever, retail companies need agile, compelling digital presences. We are also starting to see significant innovations in the omnichannel grocery-customer experience in several Asian markets (such as China and Japan). We are following five powerful trends that will shape the industry’s transformation in the United States. But to compete with the recruiting capabilities of large technology companies, grocers should take several additional steps: Online grocery on its own is not new news to retailers and the broader consumer community, but the current pace of investment and innovation is unprecedented. COVER STORY: A new wave of digital disruption — and international competition — looms for supermarkets After almost two decades dabbling in ecommerce, buying groceries online is now a $1 billion business for both Coles and Woolworths. If you would like information about this content we will be happy to work with you. 5 Indeed, the offerings themselves are now shaping customer expectations about each element of the experience, including the type and speed of service—which will evolve as quickly as the offers do. IBISWorld puts the number slightly higher at $26 billion, as of 2018; Brick Meets Click estimates the online grocery market is $55 billion, as of 2020* which includes non-food items bought in grocery stores like health and beauty care We believe that is a major issue, since digital talent may be the single most important determinant of a company’s likelihood to succeed in the grocery market in the next few years. The digital grocery platforms (eGrocery) have been disrupting the enormous grocery opportunity in India over the past 5-6 years. Large tech companies and hot start-ups continue to have the first pick of data scientists, tech engineers, robotics and artificial-intelligence experts, scrum masters, full-stack architects, and a host of other technical specialists. Reinvent your business. Recognizing the challenges, some major grocers are using their stores as fulfillment centers, getting more value from existing assets rather than making new investments (Exhibit 2). Retailers in the grocery space all know that innovation is the name of the game to win in today’s increasingly digital-first environment. 10. That said, they are evolving rapidly, driven by start-ups and old-school players, such as auto manufacturers—autonomous Ford vehicles are already delivering Domino’s pizza in Miami, for example. endstream endobj 93 0 obj <>>> endobj 94 0 obj <. ShopperScape® Online Grocery Survey, 2019, Kantar, kantarretailiq.com. Use minimal essential Ocado has automated grocery-fulfillment centers in the United Kingdom and partnered with Sobeys and Kroger to automate picking centers in Canada and the United States, respectively. Some miss the sensory experience of shopping in person and feel that they miss out on discovering new ingredients, different meal ideas, and good values. Stop by and see what we can offer you and your family today! Some are expanding into adjacencies, such as household products or health and wellness items, that provide more opportunity for growth and customer delight. We'll email you when new articles are published on this topic. 9. Here, too, adoption speeds may exceed expectations by wide margins. Kroger has retrofitted just about every shelf in two stores in Monroe, Ohio, and Redmond, Wash., with Microsoft’s smart shelves. The BreadBot may shake up the industry – and bring fresh bread into grocery stores – with the help of automation. Making matters more challenging, customer demand is fragmented between delivery and pickup, and various delivery speeds each require a different last-mile model. Many US grocers can and do actively look to other parts of the world for examples of how to be effective online. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. Grocery stores need to understand and successfully implement these trends to win in e-grocery and be profitable in 2020. DIGITAL DISRUPTION in CPG & Retail - Kindle edition by Shopper Technology Institute. hereLearn more about cookies, Opens in new 6 Kroger Disrupts the Disruptors By Jackson Lewis on Jan. 08, 2019 CINCINNATI -- Kroger and Microsoft are teaming up and taking on Amazon. Analysis derived using inputs from multiple public sources, including Food Marketing Institute, Forrester, and Nielsen. People create and sustain change. The demand-density challenge will become less of an issue as e-commerce operations achieve scale, through either market penetration or dominance, and a move to more centralized fulfillment models will make financial sense in more locations. “The future of grocery—in store and online,” June 2017. However, the eGrocery space is experiencing an interesting turn of events that is providing a boost to the overall sector. Giants like Walmart, Amazon, and Alibaba have shaken up the competitive retail landscape. Most transformations fail. Martin Joerss, Florian Neuhaus, and Jürgen Schröder, “. Almost all are looking for new ways to partner with consumer-packaged-goods companies to engage more deeply with customers. 2. Some grocers are learning from other retail sectors and countries, recognizing threats early, seizing opportunities, and catching a wave of profitable growth. The number of grocers who offer Click & Collect and Third-Party Delivery will grow 150% between 2019 and 2021. We believe that this will continue to be a supply-driven market, meaning that the actions retailers and other players in the grocery ecosystem take now will define what the industry becomes going forward. Supermarket News, 2019, supermarketnews.com. Supermarket News, September 2019, supermarketnews.com. Whether you’re in the market for farm fresh local produce, freshly baked cookies or the perfect cut of meat; we have you covered. The grocery industry is ripe for disruption. Powerful trends, including new competitive pressures, technological advances, and evolving consumer attitudes and behaviors, will disrupt the grocery business from coast to coast in the next few years. Amid Grocery Retail Disruption, H-E-B Grows Digital Services by JJ Velasquez July 16, 2018 January 31, 2020. This isn’t to say that there aren’t home-grown US innovations happening—there most certainly are, especially on the gig delivery front—but the disruption in online grocery is a global phenomenon, and US grocers should look around the world for solutions to help inform their digital journeys. Subscribed to {PRACTICE_NAME} email alerts. Given that the majority of large grocers have already developed some form of an e-commerce offering, new entrants have clear disadvantages, including a lack of brand equity and scale compared with traditional grocers. While delivery platforms like Instacart scramble to hire new workers, grocery chains are hastily revamping digital and physical operations to adjust to … Never miss an insight. Pooling the demand of various grocery and nongrocery offerings could become a viable way to keep last-mile-delivery costs down and compete with large ecosystems. In fact, many of the technological innovations in this space come from outside of the United States, such as technological developments in pickup from Israel and Western Europe. 10 Some large grocers, using their geographic proximity to customers, have tried to tap into the new gig-delivery world by using Postmates or the now-defunct UberRUSH. We use cookies essential for this site to function well. Such features provide opportunities to craft value propositions for the customer of the future without sacrificing the customer of today. Until relatively recently, shoppers’ grocery options were limited to what was available at their most convenient brick-and-mortar store. Whether you’re in the market for farm fresh local produce, freshly baked cookies or the perfect cut of meat; we have you covered. as major retailers—including well-funded entrants from outside the sector—invest in automation and innovative operating models to solve challenges in fulfillment and last-mile delivery. h�bbd``b`^$'�X�@�m���mL�A�? There is no time to waste. 3. Any strong talent strategy begins with retaining and training existing talent, of course, as well as uncovering latent talent already in the business. Grocers have remained largely immune to digital disruption—until recently. Picking automation is already well under way. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe. Everyone knows that Amazon and other online retailers have changed the retail landscape forever and caused a digital disruption in the space. A recent example is when Trader Joe’s discontinued its delivery services in New York City, citing already close proximity to customers and an unwillingness to pass on delivery costs to customers. h�b```�����B cc`a�X�����[�p10��C�a����)AIOmO�;�6�;V����g>lIe ����b�Ғ������;y�÷'@��o�:���8��(9y����"�F_#�c������y�@���b*.. 9��� His presentation focused on the disruption at work in the supermarket sector, and what store environments will become between now and 2025. “The social economy: Unlocking value and productivity through social technologies,” McKinsey Global Institute, July 2012. Audit digital experiences. 8. Many formidable players are now competing for e-grocery dominance. Understanding them could help grocers of all sizes chart a course to profitable growth in the new, much more competitive environment. Until relatively recently, the US grocery sector has remained sheltered from the forces of e-commerce for a couple of reasons: Most American shoppers still prefer to choose their own food (especially meat, produce, and other perishable goods), and few grocers have had the financial capacity to invest in the highly efficient, large-scale cold chains required to make home deliveries at a profit. These technologies are also hindered by a need for the recipient to be home at the scheduled time of delivery. Target and Walmart now offer e-commerce fulfillment at store locations and last-mile delivery through the acquisition of Shipt and a partnership with Postmates, respectively. Consumer expectations are higher than they were even a year ago, but they are still being set. 0 7 Powerful trends, including new competitive pressures, technological advances, and evolving consumer attitudes and behaviors, will disrupt the grocery business from coast to coast in the next few years. Today, tens of millions of Americans can shop for groceries online, where their options include curbside pickup and home delivery. Some regular online grocery shoppers are citing a pain point of falling into a “grocery rut” because of automated ordering of the same basket again and again. Please email us at: McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. Others may grow frustrated with the glitches that come with new convenience offerings: out-of-stock issues, incorrect or missing items, and general lackluster service. Recall, for example, Amazon Prime’s introduction of free two-day shipping. endstream endobj startxref Grocers have remained largely immune to digital disruption—until recently. tab, Engineering, Construction & Building Materials, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility. Enjoy a full service experience from our bakery, deli, produce and meat departments. 6. In China, Hema offers guaranteed delivery of both groceries and prepared meals in fewer than 30 minutes. Technology advancements could help level the playing field, but you need scale and demand density to justify the heavy up-front investment. 4 Martin Joerss, Florian Neuhaus, and Jürgen Schröder, “How customer demands are reshaping last-mile delivery,” October 2016. �>��Zb��A�nq$�$���7+��$xn ��@B|��]$rN3012��� �3-� Overcoming pandemic fatigue: How to reenergize organizations for the long run, What’s next for remote work: An analysis of 2,000 tasks, 800 jobs, and nine countries. Powerful trends, including new competitive pressures, technological advances, and evolving consumer attitudes and behaviors, will disrupt the grocery business from coast to coast in the next few years. Many grocers are also thinking about more ways to gain “share of stomach,” such as by offering ready-to-heat and ready-to-eat meals, in-store restaurants, meal kits, and even vending machines for fresh products. Amazon purchased Kiva Systems for picking-center robotics. Kroger has expanded its pickup locations for online orders to 1,900 locations and offers delivery of online-ordered groceries from 2,300 locations. Grocers have remained largely immune to digital disruption—until recently. 2 Unleash their potential. Analysis triangulating data from multiple public sources, including Food Marketing Institute, Forrester, and Nielsen. They are also finding that integrating e-commerce fulfillment and retail-store operations can improve employee utilization, since staff can fulfill electronic orders when in-store customer traffic is low. 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