Five Trends for Grocery Retail in 2018
This year brought a number of changes for the grocery industry – most notably Amazon’s acquisition of Whole Foods. In 2017, the industry experienced the convergence of online and offline channels, while grocers increased speed-to-market, supply chain transparency and prioritized shopping experience over price. As the grocery industry continues to rapidly evolve, retailers are feeling more pressure than ever, from both consumers and peers, to transform.
While 2017 trends will continue into the new year, many new challenges are predicted to arise. To stay competitive, it is important for grocery retailers to adapt to these five expected trends for 2018.
The pricing war in grocery will continue to intensify
With Amazon’s acquisition of Whole Foods and grocery discounters Lidl and Aldi entering the U.S. market, traditional grocers will need to find ways to differentiate themselves from this competition beyond just price, in order to avoid the race to the bottom. This means grocers will need to work hard to reinvent their processes and put increased pressure on optimizing operations to lower costs in this fiercely competitive space.
E-commerce will become more prevalent
Amazon-Whole Foods has the potential to prompt widespread innovation in online grocery shopping, especially when 30% of U.S. shoppers are already purchasing some groceries online. U.S. online grocery retail is expected to boom in 2018 and major brick-and-mortar chains will be pressured to offer the e-commerce options that consumers are pursuing.
Focus on fresh foods will be emphasized
To draw shoppers into stores, traditional grocers will need to cater to changing consumer preferences as they steer away from packaged, frozen and manufactured foods towards healthier fresh food options. A challenge for grocers is to figure out how to sell fresh food online in the growing e-commerce landscape and avoid high supply chain costs for these perishable goods.
Weather forecasting and planning will become top of mind
With all the severe weather conditions that occurred in 2017, grocers will increase their focus on incorporating weather data into forecasting and planning for next year. Retailers will make planning for unpredictable weather a priority, so that when these circumstances occur, their businesses will have a competitive advantage by having the products customers need to buy when they want to buy them.
Retail supply chains will become more space aware
Instead of using the outdated model of basing in-store space planning on weekly averages, retail supply chains will understand the benefits of optimizing shelf space by matching daily demand forecasts with both suppliers’ and DC delivery replenishment cycles. The resulting benefits can include direct-to-shelf deliveries and reduced backroom storage space. Retailers are finding out that store space optimization can bring significant cost savings and drive increased efficiencies to their store.
As we shift into the new year, it’s important for grocers to be aware of new practices that are transforming the industry at an accelerated speed. In order to stand out from competitors and see successful results in 2018, retailers need to make changes to differentiate their business and meet consumer needs.
-Michael Flack, co-founder and U.S. President, RELEX Solutions