Hyper-Competition Fuels a New Golden Age in Grocery

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Hyper-Competition Fuels a New Golden Age in Grocery

By Joe Skorupa - 10/23/2017

No segment in retail has been more affected by the pace and depth of disruption than grocery. A perfect storm of hyper-competition shakes the pillars of grocery today and triggers a rapid response by grocers to embrace new business models, customer services, and transformative technologies.

RIS News and Progressive Grocer in a unique collaboration examine the impact of this rapid response, especially in technology spend trends, in the just released “2017 Grocery Tech Trends Study: Embracing Digital Transformation.”

The perfect storm of hyper-competition includes such recent developments as Amazon + Whole Foods, the Walmart vs. Amazon death-cage match, Lidl's and Aldi's aggressive expansion plans, the rise of extreme discounters, the rise of grocerants, the rise of subscription meal services, and the rapidly changing diets and lifestyles of consumers.

However, none of these factors alone provided the fuel for the urgency to transform currently gripping grocers. Instead, the root causes are twofold: 1. Consumers want more – much more – than grocers presently offer in the stores, online or blending of both into an omnichannel experience; and 2. The sluggish pace of change grocers pursued for many years created a gap for aggressive and innovative competitors to fill, which they are doing.

While apparel retailers, department stores and shopping malls are closing doors to cut their losses, grocers are opening stores at a rapid clip. They are also increasing their technology investments with a sense of urgency never seen before.

Here are three key takeaways from the study:

  • Amazon is the biggest threat to grocers today, right? No, according to the study – 50% said it was global retailers entering the U.S. market, which is twice as many as chose competition from Amazon (25%).
  • What is the key to future success that will guide investments over the next 18 months?  A huge majority (85%) believe it is developing digital capabilities (e.g. online, mobile, omnichannel, etc.). This actually out polls investing in store upgrades (65%).
  • The number-one technology investment area over the next 12 months of all 58 tracked in the study is click-and-collect technology (47%). Is digital transformation and the blending of brick-and-mortar with online fake news? Not according to the huge numbers of grocers investing in this and similar technologies.

Once known for a cautious approach to technology, grocery is now retail’s most aggressive tech investor. In fact, no grocer reported cutting its IT budget year-over-year, which is a rarity in benchmark research reports.

Will some grocers' efforts be too little too late? Absolutely, especially those who were too complacent in tech investing for too many years as well as those who underestimate the threat from Amazon + Whole Foods, as noted in the bullet point above.

But grocery is a notoriously difficult business to master, which gives current grocers some runway to make necessary changes. This report tracks how market leaders are making those changes and aligning their business models with the needs of their customers.

To get a complete set of charts and analysis, including purchase intentions for 58 separate technologies, download the “2017 Grocery Tech Trends Study: Embracing Digital Transformation.”

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