Where grocery retail is headed: The year in trends

E-COMMERCE KEEPS GROWING

The continuous change that occurs in the trends followed by consumers in online shopping is driving the change in most retailer processes. A study in US grocery stores revealed that 71% has already extended beyond physical stores in online retail. This makes sense, given the IMF and Nielsen prediction that consumers could spend $ 100B a year on online groceries by 2025.

The challenge of electronic commerce is to meet customer expectations, in addition to generating profits in the process. And this is very difficult as today's retailers are absorbing the costs of rising customer expectations, such as free shipping and immediate delivery windows. But the problem of these services, as they are managed today, are not sustainable in the long term.

The goal is to increase operational efficiency, in large part because the collection and costs of the last mile constantly consume profits. The idea is to develop automated options for collection and compliance with free and urgent shipments with the consumer.

CONVENIENCE AND READY-MADE FOODS

Currently, more and more supermarkets are implementing the growing trends of convenience, takeaway, food kits and prepared meals, and because of this they are forced to compete with the food service sector. But they have a disadvantage, since, in this new competitive relationship, supermarkets cannot make home deliveries as easily as food service, due to considerable collection and transportation costs. While restaurants benefit from opportunities like UberEats, supermarkets have not yet found a true equivalent after last mile costs.

Restaurants could even go into the food kit trade, as supermarkets challenge restaurants through the expansion to "edible" options such as coffee shops. While this is happening, supermarkets also face new demand forecasting challenges, something that they have managed to solve through the creation of bill of materials (BOM). The list of materials, a term borrowed from manufacturing, allows supermarkets to forecast individual items that should be used in each recipe, for those products, such as sandwiches and salads, that are created on the premises.

Other changes in consumer shopping habits are reflected in the evolution of store formats, as supermarkets have given way to neighborhood convenience stores. A clear example is the initial thrust of Lidl in large stores in the US, which is being reassessed as they look more closely at smaller store formats.

SUSTAINABILITY AND ECOLOGICAL CHOICES

The growing interest of consumers and businesses in sustainability and environmental impact has created an important trend this year, and will not stop growing in importance in the future. The trend is currently clearer in Europe, where supermarkets are responding with actions to boost sustainability in their daily tasks. Many have won great approval from customers thanks to a sharp reduction in their CO2 footprint, by radically optimizing their trips in vehicles. US retailers should expect to experience a similar change in the coming years with supermarkets that offer greener options and the development of more sustainable supply chains.

Millennial consumers have a great influence, which is growing, in the way Americans eat and buy. This is due, above all, to the healthier food choices that reflect their concerns about sustainability and the environment. Sustainable supply chain practices acquire great relevance in the case of premium fresh products (another upward trend), because they go beyond appealing to consumer values. It consists of minimizing the deterioration through accurate forecasts, directly impacting the final result, because if a single article goes wrong it can erase the profits of multiple sales.

WORKFORCE MANAGEMENT AND FINDING TALENTED EMPLOYEES

The final main trend of 2019 is the one that is emerging in the labor market, which is unusually adjusted, with unemployment in the United States at a record low. The technique most used by companies that seek to attract and retain permanent and temporary workers, who compete for talent, is to offer higher salaries, more benefits and even hiring bonuses.

As these incentives are increasing, food retailers are beginning to jointly develop strategies to reduce labor costs by planning their labor needs more precisely. Supermarkets are making more use of demand forecast data from the supply chain. They are using them in all their organizations to support the optimization of capacity and workforce, both in distribution centers and in stores. Another action they are taking is to share planning data with suppliers to reduce friction points and improve their collaborative relationships, boosting efficiency and savings for both supermarkets and suppliers.

The coming year will be hard on both brick and mortar and e-commerce retailers — there’s simply no getting around that. Luckily, these trends from 2019 suggest that retailers are being quite thoughtful and deliberate in their retail planning strategies and can see continued growth despite the difficult climate.