When bad things happen in good times, it means tectonic plates are shifting and permanent change is occurring. This can be clearly seen in the dividing line between retailers who are riding a wave of macro-economic growth and those who are struggling against a tide of store closings and bankruptcies, which are currently at historic levels.
In times like these, the ability to change becomes a coveted and essential skill. Today, one of the best demonstrations of this skill is taking place in food retailing, which thanks to its agility is riding high after enjoying healthy growth in sales, profits and store openings in 2017.
The irony is that the traditional grocery business is in many ways under siege and feeling enormous pain from many engines of disruption. Grocery has been challenged in recent years with price wars, shrinking margins, aggressive new players entering the marketplace (Lidl and Aldi in particular), omnichannel shoppers demanding costly new conveniences (click-and-collect and home delivery), and the creation of a new super competitor – Whole Food + Amazon and the just-launched Amazon Go cashier-less store.
The difference is that this formerly conservative group is responding to the disruption by increasing its spending on technology, adopting new business models, and ripping up the traditional retail playbook to make room for an innovative, customer-centric approach.
Based on a wealth of customer research from the U.S. and Europe, Symphony Retail AI recently released a report and video highlighting specific changes occurring in grocery retailing. These changes will result in a radically transformed supermarket experience for shoppers by 2020 and a new way to do business for grocers.
Here are seven key changes that Symphony Retail AI predicts we will see by 2020 that will transform the traditional supermarket:
- Click-and-collect areas in stores will increase in size. Drive-through pick-up areas will be added. Also, the pharmacy will be located near both of these to centralize a fast-pick-up experience for the shopper.
- Specialty food courts and in-store dining areas will be expanded, a trend already occurring in some supermarkets. Shoppers will have the option to eat prepared foods or immediately consume food-to-go, creating a destination experience for shoppers and a new way to increase engagement.
- Third-party shops (banks, fitness centers, pet grooming, massage, etc.) will have walk-through access to the main store and give the store a multi-service, marketplace feel. These strip-mall-type tenants in small formats will offset property costs for grocers as well as offer customer convenience.
- A farmer’s market will be in each store that features regionally sourced produce, meat and artisanal foods. Many of these customer-centric additions (farmer’s market, click-and-collect area, food court, etc.) will reduce the footprint of the traditional center aisle in the store that traditionally sold commodity products, which will be reduced in space and assortment.
- Time-starved customers are the compelling reason that grocers will enlarge grab-and-go departments that will have a wide range of prepared foods.
- A special product aisle will be created that will change assortments twice a week to present a treasure hunt experience for shoppers every time they visit.
- The checkout experience will flip to 80% self-checkout and 20% manned checkout, the opposite of what it is today.
All of these near-term predictions, some of which are starting to appear, are shown in the “Supermarket 2020” video, which brings the ideas to life and graphically shows the impact they will have on the physical store layout, department shapes and sizes, and the customer experience.
Food retailing’s aggressive response to powerful market forces and intense competition is one of the "good news" stories in retail and a place where important lessons can be learned that other retail segments would be smart to follow.