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The Case for Grocery Reinvention
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The Case for Grocery Reinvention

As we discussed in our last blog post, grocers are entering an era that is essentially “post-digital.” Both grocers and consumers have embraced a digital future, with 90% of grocers and 70% of shoppers transacting onlinei. But the changes grocers face may extend far beyond the mobile app or self-checkout system. 

Grocery-like alternatives, which today represent only 40% of industry revenues, are expected to encroach on traditional supermarkets. Growing consumer preference for online options may open the door for tech-forward third-party aggregators (TPAs) who have emerged as influential players in the grocery ecosystem. Banner loyalty may be harder to retain, driven by heightening consumer expectations and inflation.  Consolidation in the industry continues at a steady pace as mammoth mergers loom on the horizon. 

Meanwhile, macro cross-industry trends could point to even more disruptions on the horizon. Slower economic growth and geopolitical shocks could add pressure in the near term. Demographic shifts portend an aging population and a shrinking labor pool and consumer economy. Deglobalization has the potential to reset supply chains and eco-systems, and hyper-fast technological changes may point to a future where machines will augment experiences in all aspects of life. 

Against this backdrop, grocery leaders may need to confront more than store reinvention.  The industry’s value architecture is fundamentally evolving. The industry could already be on the front end of these shifts. Retail media and customer data monetization are likely responses to the need to create alternative revenue streams. More grocers may expand into health care and financial services to help drive marginii. Some are experimenting with grocery entertainment.

Business history has taught us that proactive self-disruption can be important to surviving periods of industry turmoil. Successful transformation strategies could require protecting those distinct sources of value capital that may need to remain consistent while reconsidering other pieces. Grocers have always held a competitive advantage in their community relationships, customer knowledge and brand characteriiiRemaining true to these equities while evolving in compelling ways could be the key to its future.

From Community to Household

Grocers are not just conveniently located, but also often pillars of their communities.  Locally operated and staffed. A resource ahead of major life events. A refuge ahead of weather events or a community crisis.  

In a world of pervasive connective technology infrastructure, grocers could have the permission to extend their presence from the community to the household. Grocers can aspire to be “everywhere”: embedded in a customer’s habitat, a family’s daily living and possibly in the customer themselves. Shopping has already evolved from an errand to a bilateral interaction through e-commerce and connected devicesiv. Tomorrow, grocer interactions will be woven into our daily lifestyle, serving more of our needs – not just omnichannel, but also omnipresent. 

From Knowledge to Intimacy

Grocers’ regular and ongoing customer interactions have created an advantage in shopper IQ.  In a world where information access creates competitive advantage, this puts grocers in an enviable position. Today, it is common for shopping apps to present a history of past purchases. Tomorrow, grocers may be positioned to be more fully “aware” of why customers made purchasing decisions. By harnessing the power of artificial intelligence, grocers can provide new anticipatory services, gain engagement and operational efficiencies through automation, and develop new life-enhancing services aligned to customer needs (e.g., cost or life stage). The grocer’s knowledge could evolve from recording to observing to knowing. And it could foster more than loyalty — it may engender allegiance with its customers and employees alike. 

From Rewarding to Enhancing

Prior to the stratification of retail that is seen today, grocers were the original general merchandisers. Accessible and knowledgeable of customer needs, grocers had permission to provide a range of services, thereby creating one of the most personal experiences of retail: sensory, hands-on, and filled with familiar interactions and relationships, from the cashier to the deli counter. Grocers not only meet important needs, they also “care.” Tomorrow’s grocer can extend this permission to expand customer relationships, from product selection to a richer array of services that enhance customers' lives, while creating more diversified, profitable revenue streams. This creates a win/win for both the customer and the grocer’s business. As intelligent systems play a greater role in these interactions, touchpoints remain human-like, delivering empathy, explainability and explorability.  

The value architecture of the grocery industry is shifting away from the store and traditional service categories of the past. Tomorrow’s grocer might migrate from the store to be everywhere. From understanding what customers purchased to being fully aware of their underlying preferences and needs, both pre-existing and new. Lastly, tomorrow’s grocer might build on legacy sources of location and knowledge capital to provide new services that enhance the lives of its customers and employees. A grocer who is everywhere, aware and cares in new ways is an Omniscient Grocer. In our next blog post, we’ll go deeper into the role of artificial intelligence as an enabler in becoming this new kind of business. 


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iFMI: The Evolving Grocery Experience 
ii Supermarket News: Retailers Eye Alternative Ways to Monetize Assets 
iii National Grocers Association: New Study Highlights Independent Community Grocers’ Pivotal Role in Growing the  U.S. Economy 
iv FMI: The Evolving Grocery Experience

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