Posted on: January 9, 2022 Posted by: Ariel Tattum Comments: 0

This story is the first in a series on key trends that will impact grocers in 2022.

Retailers are heading into a 2022 filled with challenges. The supply chain shortage continues to batter shelves, and record-high inflation doesn’t seem like it will resolve any time soon, forcing companies to raise prices and potentially frustrate their customers. 

Grocers are also struggling to keep their stores and warehouses staffed in what many fear is a foundational readjustment in the labor market. 

Industry experts alluded to these challenges when discussing their top trends for the year. But they also pointed to numerous opportunities that lie ahead for grocers — many of which are driven by the fact that significantly more people are still ordering and eating food at home than before the pandemic.

Expect grocers to elevate their meal offerings and offer new digital purchasing options this year. And despite the focus on finding value amid price hikes, look for many consumers to seek out premium products.

Here are the top trends that promise to shape the grocery industry in 2021.

Quick delivery expands

Following the ultrafast delivery boom in New York City and the rollout of faster service from e-commerce platforms like DoorDash and Instacart in 2021, this year will see widespread adoption of faster operations among top retailers, especially as they look to court younger shoppers, experts said. 

Jordan Berke, founder and CEO of Tomorrow Retail Consulting, said retailers are looking for new ways to boost e-commerce demand as digital shopping has declined in recent months from its 2020 high point.

“We see quick commerce falling into this demand generation space, which is why we see an urgency around it,” said Berke. 

Courtesy of Gopuff

 

Thirty minutes will become the new expectation for shoppers in delivery, and if grocers don’t meet it, they’ll need to develop some other differentiator, said Anne Mezzenga, a Target veteran and co-CEO of retail blog Omni Talk. 

“Whether that’s dark stores, whether that’s sortation centers, whether it’s partnerships and acquisitions, every grocer is going to have to figure out a long-term solution for instant delivery [in order to] stay competitive,” Mezzenga said. 

She expects instant delivery to grow beyond urban cores and into suburbia, putting greater pressure on regional grocers.

Meanwhile, for quick-commerce startups, 2022 may give a better indication on whether they pose more competition to convenience stores, local stores or traditional grocers, and how much they impact grocers’ margins and product mix, said Vishwa Chandra, partner at McKinsey & Company. 

“None of the players are at scale. None of the players have really made a dent in terms of absolute volume, so the question is, ‘How big can this get?’” Chandra said. “And No. 2 is, where will that volume come from?”

Mezzenga said she expects consolidation among the rapid delivery firms, which are burning through money as they scramble to gain more footing.

Turning to automation to offset labor shortages

Given the continuing difficulty it’s facing in hiring enough workers, the grocery industry needs to combat the perception that retail jobs are not bona fide career opportunities, said Nicole DeHoratius, a professor of operations management at the University of Chicago Booth School of Business.

But many companies need immediate solutions to handle the heavy flow of in-store and digital business. Gautham Vadakkepatt, director of the Center for Retail Transformation at George Mason University, predicted that retailers will hasten their adoption of automation technology to manage tasks not only in the backroom and warehouses but also in customer-facing areas of stores.

This includes adding self-checkout kiosks and aisle-scanning robots to retail floors. Down the road, it could lead to the integration of equipment that picks center store items robotically while customers shop for items like produce, meat and seafood, Vadakkepatt said.

Investing in operational efficiencies like this could allow retailers to offer higher salaries and better benefits to their workforce, boosting longevity and satisfaction, DeHoratius said.

Courtesy of Walmart

 

Neil Stern, CEO of Good Food Holdings, which oversees West Coast chains Bristol Farms, New Seasons Market and Metropolitan Market, said he thinks grocers will turn more heavily to self-checkout terminals in the coming months to quickly deal with worker shortages and serve customers.

When Good Food added self-checkouts to a Metropolitan Market store in Gig Harbor, Washington, the retailer found that the terminals quickly accounted for a third of its transactions, reflecting increasing comfort among customers with self-service equipment in food stores, he said.

“We’re going to keep on working to hire more people, but the reality is we’re going to have to go to automation,” said Stern.

Improving the use of consumer data

As the grocery business increasingly migrates online, retailers are seeing a growing need to use the data they collect through their digital channels to improve their ability to satisfy customers who have grown accustomed to personalized shopping experiences.

That trend is likely to intensify in 2022 as supply chain unpredictability shines a spotlight on the ability of grocers to avoid out-of-stocks and offer suitable alternatives when items people want are unavailable, said Spencer Price, CEO of Halla, a technology company that helps retailers understand and respond to shopping patterns.

Improving substitutions is especially important, because dissatisfaction can lead to shoppers switching retailers, Price said.

DeHoratius said grocers have plenty of runway for improving their ability to use consumer data. “Right now a lot of companies are operating in two independent silos with data and analysis, and [they] need to have the consumer behavior data effectively inform [their] operational choices,” she said. 

Beyond helping retailers manage their inventory, analytics can give product manufacturers an edge as they look to deal with supply chain issues.

“One thing that I’ve been hearing from vendors … is they need better information about what’s going out the door through an online customer versus a regular customer,” DeHoratius said. “That impacts their ability to forecast and their ability to deliver.”

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Meals get fresher and more convenient

Grocers have been improving their prepared meal selections in recent years. To truly compete with restaurant and meal delivery services like HelloFresh, they’re continuing to level up their meal selections while also adding digital ordering tools, said Tanja Ebner, principal with consulting firm Oliver Wyman.

She cited Kroger’s integration of ghost kitchens into select stores as an example of how grocers are looking beyond prepared foods to kitchen-prepared meals that have digital ordering capabilities through apps like DoorDash and UberEats. To boost the creativity and quality of dishes, grocers are hiring more culinary talent and preparing more meals on premises or in nearby commissaries.

“We’ve started to see them doubling down on everything that’s a meal solution,” said Ebner. “Ready-to-heat, ready-to-eat, ready-to-cook meals and even a restaurant-quality fresh meal that’s ready for pickup and for delivery.”

https://www.grocerydive.com/news/7-trends-that-will-shape-the-grocery-industry-in-2022/616497/