Some believe this means offering the most seamless click-and-collect experience, while others believe this means offering the fastest delivery. Stop by and see what we can offer you and your family today! Kroger has also forged a partnership with Cimcorp to bring an automated storage-and-picking system to its dairy facilities. 0 Major grocery players, including traditional competitors (such as Kroger and Walmart), e-commerce giants (such as Amazon), and start-ups with venture-capital funding, are making the kinds of major investments and acquisitions—in customer-value proposition, customer experience, picking, and delivery—that herald an era of true transformation. All this has happened in a very short timespan, and supermarkets are still reacting to a brave new world of online and app-based shopping. Everyone knows that Amazon and other online retailers have changed the retail landscape forever and caused a digital disruption in the space. In response, many traditional grocers are rapidly expanding their online operations (Exhibit 1). ShopperScape® Online Grocery Survey, 2019, Kantar, kantarretailiq.com. %PDF-1.7 %���� ... “It has even reduced some of the timing constraints of my trips to the grocery store. 129 0 obj <>stream 7 Some larger and more traditional grocers may resist transformative innovation in the shopping experience as they maintain their focus on the preferences and demands of their current core customer base. Some grocers are learning from other retail sectors and countries, recognizing threats early, seizing opportunities, and catching a wave of profitable growth. 5. 1. Amid Grocery Retail Disruption, H-E-B Grows Digital Services by JJ Velasquez July 16, 2018 January 31, 2020. Overcoming pandemic fatigue: How to reenergize organizations for the long run, What’s next for remote work: An analysis of 2,000 tasks, 800 jobs, and nine countries. Kroger press release, December 2019. 5 A leading-edge research firm focused on digital transformation. Download it once and read it on your Kindle device, PC, phones or tablets. 9 Which mean it should come as no surprise that Mr. Seinfeld, in his side job as a real-life stand-up comedian forecasted the disruption of the grocery shopping experience in a … �>��Zb��A�nq$�$���7+��$xn ��@B|��]$rN3012��� �3-� Whether you’re in the market for farm fresh local produce, freshly baked cookies or the perfect cut of meat; we have you covered. h�bbd``b`^$'�X�@�m���mL�A�? But in the early weeks of the outbreak, weekly grocery trips by households jumped to 3.6, and 40% of shoppers said they were shopping fewer stores for groceries. The demand-density challenge will become less of an issue as e-commerce operations achieve scale, through either market penetration or dominance, and a move to more centralized fulfillment models will make financial sense in more locations. Instacart, which launched in 2012, has expanded rapidly and can reach more than 80 percent of US households. Understanding them could help grocers of all sizes chart a course to profitable growth in the new, much more competitive environment. Any strong talent strategy begins with retaining and training existing talent, of course, as well as uncovering latent talent already in the business. In fact, many of the technological innovations in this space come from outside of the United States, such as technological developments in pickup from Israel and Western Europe. Martin Joerss, Florian Neuhaus, and Jürgen Schröder, “How customer demands are reshaping last-mile delivery,” October 2016. Audit digital experiences. Flip the odds. Please use UP and DOWN arrow keys to review autocomplete results. Institute of Grocery Distribution says online grocery sales in 2018 were approximately $23.9 billion. This isn’t to say that there aren’t home-grown US innovations happening—there most certainly are, especially on the gig delivery front—but the disruption in online grocery is a global phenomenon, and US grocers should look around the world for solutions to help inform their digital journeys. Use minimal essential Indeed, the offerings themselves are now shaping customer expectations about each element of the experience, including the type and speed of service—which will evolve as quickly as the offers do. Please click "Accept" to help us improve its usefulness with additional cookies. 8 Many formidable players are now competing for e-grocery dominance. the share could be greater than 10 percent by 2025 November 10, 2018 / By Cami Zimmer. “The future of grocery—in store and online,” June 2017. 2. There have been many waves of disruption in the grocery market, and the A&P was the first to innovate on a grand scale. Kroger has retrofitted just about every shelf in two stores in Monroe, Ohio, and Redmond, Wash., with Microsoft’s smart shelves. The grocery market is supply driven, and consumers don’t yet know what they want. The grocer is testing digital shelving powered by Microsoft tech. In the Netherlands, for example, Picnic provides customers with fixed delivery slots, backed by their milkman model and demonstrated to be able to reach up to 14 deliveries per hour. Retailers in the grocery space all know that innovation is the name of the game to win in today’s increasingly digital-first environment. 6 DIGITAL DISRUPTION in CPG & Retail - Kindle edition by Shopper Technology Institute. Making matters more challenging, customer demand is fragmented between delivery and pickup, and various delivery speeds each require a different last-mile model. The dawn of driverless-vehicle and drone deliveries will scale only after regulations are in place. Some grocers may join forces with noncompeting retailers (such as hard- and soft-goods players) to create, inorganically, delivery ecosystems that rival Amazon. Pooling the demand of various grocery and nongrocery offerings could become a viable way to keep last-mile-delivery costs down and compete with large ecosystems. However, they tend to have more strategic agility, cultures of innovation, and white space. Giants like Walmart, Amazon, and Alibaba have shaken up the competitive retail landscape. �`� D���i1 V 0�32|b�p`sP`z�����q�t�=�\ In the highly competitive, low-margin world of the grocery industry, digital transformation presents significant challenges, while at the same time offering tremendous opportunities. 9. Grocery stores need to understand and successfully implement these trends to win in e-grocery and be profitable in 2020. ` 0&V Digital Disruption at the Grocery Store McKinsey & Company outlines five trends shaping the grocery industry in 2020. The grocery industry is ripe for disruption. Walmart earnings call, November 2019. For example, Walmart has been expanding its online-order offering, with same-day delivery from 1,600 stores and pickup from 3,100 locations as of November 2019. Never miss an insight. Please try again later. It used branding along with … collaboration with select social media and trusted analytics partners Grocers have remained largely immune to digital disruption—until recently. Companies should ensure their digital presences bolster their brands and engage millennials. Analysis triangulating data from multiple public sources, including Food Marketing Institute, Forrester, and Nielsen. Traditional brick-and-mortar stores continue to dominate the grocery shopping experience, but e-grocery … Grocers have remained largely immune to digital disruption—until recently. tab. If you would like information about this content we will be happy to work with you. Tuck Rickards, Kate Smaje, and Vik Sohoni, “‘, Joanna Barsh, Lauren Brown, and Kayvan Kian, “. Our flagship business publication has been defining and informing the senior-management agenda since 1964. 4 endstream endobj 93 0 obj <>>> endobj 94 0 obj <. Analysis triangulating data from multiple public sources, including Food Marketing Institute, Forrester, and Nielsen. While delivery platforms like Instacart scramble to hire new workers, grocery chains are hastily revamping digital and physical operations to adjust to … They will give customers the sense of discovery, exploration, and inspiration they seek from any grocer, whether in a physical or virtual environment. hereLearn more about cookies, Opens in new The speed of technology adoption has been startling some of the world’s most successful companies since the 1990s—and it is accelerating faster than ever. Whether you’re in the market for farm fresh local produce, freshly baked cookies or the perfect cut of meat; we have you covered. Where demand density is low and demand is fragmented, investments in large fulfillment centers, delivery fleets, and drivers are hard to justify. They are also finding that integrating e-commerce fulfillment and retail-store operations can improve employee utilization, since staff can fulfill electronic orders when in-store customer traffic is low. Digital Disruption for Grocery Delivery and Buy Online Pick Up In Store. Grocers have remained largely immune to digital disruption—until recently. Grocers have remained largely immune to digital disruption—until recently. Whichever player discovers and delivers the optimal customer experience first will be the incumbent. Kroger has expanded its pickup locations for online orders to 1,900 locations and offers delivery of online-ordered groceries from 2,300 locations. Amazon purchased Kiva Systems for picking-center robotics. The authors wish to thank Katie Ragan for her contributions to this article. ShopperScape® Online Grocery Survey, 2019, Kantar, kantarretailiq.com. Nearly every major industry, from insurance to mining, is struggling to recruit and retain digital talent, given that demand currently outpaces supply. Given that the majority of large grocers have already developed some form of an e-commerce offering, new entrants have clear disadvantages, including a lack of brand equity and scale compared with traditional grocers. 10 A recent example is when Trader Joe’s discontinued its delivery services in New York City, citing already close proximity to customers and an unwillingness to pass on delivery costs to customers. Until relatively recently, the US grocery sector has remained sheltered from the forces of e-commerce for a couple of reasons: Most American shoppers still prefer to choose their own food (especially meat, produce, and other perishable goods), and few grocers have had the financial capacity to invest in the highly efficient, large-scale cold chains required to make home deliveries at a profit. as major retailers—including well-funded entrants from outside the sector—invest in automation and innovative operating models to solve challenges in fulfillment and last-mile delivery. Almost all are looking for new ways to partner with consumer-packaged-goods companies to engage more deeply with customers. Some are expanding into adjacencies, such as household products or health and wellness items, that provide more opportunity for growth and customer delight. Digital grocery sales will double over the next two years, breaching $50B by 2021 before accelerating further to $150B+ by 2025, at which point they will account for 14% of overall sales. The iPod took four years, Facebook took one year, and Twitter took nine months to hit that number. We strive to provide individuals with disabilities equal access to our website. This system is hardly the most convenient or economical, and that makes it ripe for digital disruption. We are also starting to see significant innovations in the omnichannel grocery-customer experience in several Asian markets (such as China and Japan). Kroger Disrupts the Disruptors By Jackson Lewis on Jan. 08, 2019 CINCINNATI -- Kroger and Microsoft are teaming up and taking on Amazon. While online sales accounted for anywhere from 3 to 4 percent of the US grocery market in 2019, Reinvent your business. Welcome to Stater Bros. Markets where you’ll find fresh food, healthy selections and convenience. It remains to be seen which experience US consumers value the most, but it is certain that they will reward consistency. Subscribed to {PRACTICE_NAME} email alerts. Websites, mobile apps and in-store experiences should all seamlessly align. Customers may not have been clamoring for it, but it has transformed their expectations across a broad range of industries. Demand density—or orders per square mile—in the United States is significantly lower than it is in European countries, particularly the United Kingdom, which has long been at the forefront of online grocery. Few times in history have rapid advancements in technology and breakthrough innovations had the ability to disrupt the grocery business model in … Consumer expectations are higher than they were even a year ago, but they are still being set. The relatively low e-grocery penetration of the United States (around 3 to 4 percent versus around 7 percent in the United Kingdom), coupled with lower population density, creates a significant challenge for grocers and rewards those that have scale. Here are a few suggestions for leaders striving to win in e-grocery: Steven Begley is a partner in McKinsey’s New Jersey office, Eric Marohn is a consultant in the Chicago office, Sabah Mikha is a consultant in the Southern California office, and Aaron Rettaliata is a partner in the Pittsburgh office. With the COVID lockdown, online at-home access to groceries has become the preferred mode. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. Enjoy a full service experience from our bakery, deli, produce and meat departments. How grocery retailers can survive digital disruption 18 shares Traditional grocers have been steadily losing market share to alternative formats including warehouse clubs, big box retailers, dollar stores, and limited assortment retailers such as Aldi and Lidl. Customers have embraced new technology and new ways to shop. In the past two decades, e-commerce has altered customer shopping behaviors and transformed the US retail landscape from brick and mortar to omnichannel. Welcome to Stater Bros. Markets where you’ll find fresh food, healthy selections and convenience. 10. Nontraditional grocery players, such as Amazon and Instacart, are now shaping the market in a similar way—for example, by offering immediate grocery-delivery service in major metropolitan areas across the United States. There have also been a range of approaches to last-mile delivery. But to compete with the recruiting capabilities of large technology companies, grocers should take several additional steps: Online grocery on its own is not new news to retailers and the broader consumer community, but the current pace of investment and innovation is unprecedented. our use of cookies, and We use cookies essential for this site to function well. Other changes also seem to be taking hold: While convenience attracts most first-time customers to online ordering, it may not keep them coming back. Grocers have remained largely immune to digital disruption—until recently. 4. tab, Engineering, Construction & Building Materials, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility. The two pillars of e-commerce fulfillment—picking and last-mile delivery—add significant operating costs to an already low-margin business, so we expect large grocers to turn to automation and robotics. h�b```�����B cc`a�X�����[�p10��C�a����)AIOmO�;�6�;V����g>lIe ����b�Ғ������;y�÷'@��o�:���8��(9y����"�F_#�c������y�@���b*.. 9��� However, the eGrocery space is experiencing an interesting turn of events that is providing a boost to the overall sector. Some regular online grocery shoppers are citing a pain point of falling into a “grocery rut” because of automated ordering of the same basket again and again. The digital grocery platforms (eGrocery) have been disrupting the enormous grocery opportunity in India over the past 5-6 years. Supermarket News, 2019, supermarketnews.com. We believe the winners in e-grocery will be those that deliver a great and consistent customer experience the fastest. More than ever, retail companies need agile, compelling digital presences. 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