A few weeks ago I participated in the inaugural GroceryShop in Las Vegas–a show dedicated to innovation for the changing needs of the customer. There’s been extensive media coverage of the event, but here’s my two cents:
Real Estate Matters…
We can argue back and forth about what portion of the grocery sector will move online–and it will be significant–but there is no doubt that the majority of sales will remain in the retail store for the forseeable future. Now I’m not saying we need to touch and feel produce or online doesn’t matter [see below], but most, over 50% and likely over 80% for the next 10-years, of grocery sales will either be handled completely by the store or will use the store for fulfillment. To that end, where your stores are located and how you adapt your in-store experience to the customer will matter. Are you utilizing technology in-store to educate your customer on healthy options? Have you increased frequent touches by providing meal kits or last-minute prepared foods? How have your in-store departments adapted to changing eating habits? The best retailers are looking at both big and small data and testing out options across their portfolio.
…But it’s Only One Piece of the Puzzle.
We’ve clearly evolved from a retail environment where the store was THE way to service the customer to where the store is A way to service the customer and there are clear winners and losers. I disagree with some in the real estate sector that believe 99% of grocery sales will still be fulfilled by the store in five years. The store may be the least effective way to pick and pack online orders, but it is a last-mile network that already exists.
It’s Not as Simple As Online and Offline
The same way other retail sectors have evolved in their view of online and offline sales, the grocery sector is having their moment. It wasn’t so long ago when The Gap had separate divisions for online and in-store sales such that store managers were penalized the sale when an in-store shopper couldn’t find a size had that item fulfilled online. How are retailers internally classifying in-store sales at a Bonobos or a Warby Parker store and what are the implications for store associates? The old definitions of online and offline are no longer relevant and are holding us back. Grocery retailers should learn the lessons of electronics, books, apparel and toy retailers and avoid both internal disincentives for store associates and external barriers for customers that shop a variety of channels.
The Robots Are Coming.
There’s a lot of talk about AI and automation in the supply chain but I was interested to see how companies have embraced the different ways to fulfill store distribution needs and home delivery. Kroger’s exclusive licensing of Ocado technology is a game changer. With Kroger planning to open 20 Customer Fulfillment Centers, the first of which was just announced outside Cincinnati, Ohio coming in at $55mm and 335k sq ft, they have the potential to bypass the store-as-fulfillment model in favor of direct delivery [with robots]. But, that’s not the only alternative. Albertsons announced a partnership with Takeoff Technologies to fulfill online orders through micro-fulfillment centers within existing stores, taking up 6-10k sq ft. Different methodology to get to a similar result–avoiding the burden and inefficiency of associates picking orders from customer-facing shelves.
Finally:
You Don’t Need to Touch Your Produce.
Don’t be a dinosaur. The retail industry is littered with brands that didn’t evolve or believed only what the customer told them in a focus group. If you would have told me 36 months ago that Shipt could deliver Publix groceries to my home in St. Petersburg, FL in 90 minutes I would have thought you were insane, but my little iPhone is more powerful than the computer that sent astronauts to the moon. I’ve learned to get in a stranger’s car with Lyft [not Uber], I’ve learned to rent a ballgown and subscribe to software; surely we’ll learn to specify a green vs. brown avocado.
