Next generation grocery stores face a challenging environment. But at this week’s inaugural Groceryshop event in Las Vegas, with 3,000 participants, industry executives and tech vendors suggested that store enhancements, omnichannel and assisted-shopping capabilities and final mile delivery choices will help them avoid the “retail apocalypse” afflicting other multi-channel retailers.
More than 30,000 grocery stores in the U.S. bring in almost $1 trillion a year, but have relatively thin margins – perhaps $20 on a typical $135 order. In many cases, they also have antiquated and inefficient operations. Just two percent of grocery-related goods are currently purchased online in the U.S. and store counts are dropping: Wharton has forecast that 25 percent of grocery markets will close by 2021.
Groceryshop participants, however, suggested most of it can be fixed and that user and consumption trends all favor the industry’s future success. They noted the industry’s intrinsic appeal, including the popularity of many destination-oriented brands like Wegmans; their stores’ proximity to consumers; the stores’ powerful display and transaction capabilities; their ability to blur industry lines and remake themselves as logistics centers for all kinds of retail and services that turn them at once into “Groceraunts,” purveyors of prepared foods, and health and beauty centers.
They are also moving to higher margin and differentiated private brand goods. Increasingly, they can also use AI and automation to scale and leverage customer data for subscription programs, promotions and loyalty.
Kroger Co. Chief Digital Officer Yael Cosset, in a GroceryShop keynote, said the grocery giant, which owns 30 grocery-related chains and brands, is entirely focused on being “more available, accessible and relevant” to the “60 million families that shop with us.”
Cossett says the company divides its activities into two phases: a “learning phase” and a “revenue phase.” It all comes down to boosting “relevance of the offering, changing the nature of your engagement, boosting store visit frequency, and a higher share of mind,” he says.
Seamless payment services and mobile experiences are top of mind for Cossett. He noted that some of the Asian grocery stores are taking a lead in the former, and European companies in the latter.
But Kroger is also a public company and is determined not to spend on services that aren’t ready for prime time in their marketplaces. “We have the most relevant services for our customers,” says Cosset. “It is dangerous to become enamored of technology, like some of our competitors have.”
Similarly, Albertsons Group Vice President of Product Management and User Experience Karl Varsanyi said it is all about “creating an enabling platform.” “The omnichannel growth opportunities are fantastic,” he said.
Varsanyi added that key components of the platform include making data more useful and efficient; creating “category concept shops” for things like wine, wellness and pets; developing a new generation of direct and subscription services for things like the company’s Plated prepared food services; and integrating it all with the company’s loyalty program.
Albertsons is also very focused on its Marketplace program creating a marketplace supporting third party vendors, including many local entrepreneurs. Marketplace currently gives Albertsons customers access to 40,000 third party SKUs It also sees a revenue stream from its Performance Media division.