Future of grocery retail

The era of abundance, and Big Data, is making food shopping better, smarter, more convenient and more interesting.

 

TREND DRIVERS

What's causing the changes. 

1. Better than ever

Things are better than ever:

  • living standards are up
  • poverty is down
  • the global middle class is rising: there'll be 4.9 billion by 2030 (Source: Reuters)

But abundance brings new problems, like complexity, information overload, “stuffocation”, and busyness.

“Busyness is… frenetic, always alert, multitasking… always on, glancing regularly at our phones… juggling,
cramming, and rushing.” — Tony Crabbe, author, Busy

2. Exceptional expectations
“There’s better on-shelf availability than ever before but people think it’s getting worse.” — Darren Smillie, customer supply chain insight manager, IGD

3. Urbanisation
More than 1.5m people go to live in cities every week.

  • 50% of global GDP comes from the top 300 cities (source: UN)
  • 2025: 2.482 billion people in cities of <1m (sources: Brookings Institution)

4. Technological times

“The pace of technological change [is] making heads spin” — The Economist

  • Smartphones, human genome sequencing, always-on, quantified self, sharing economy
  • The Internet of Things (IoT): by 2020, there will be 50 billion connected devices – including phones, chips, sensors, implants, and "devices not yet conceived"
  • 5% of consumer products will be 3D printed by 2025 (source: WEF)

For more on this, read the section on the pace of change in our essay Why You Need a Futurist.

5. The age of experiments

We’re working out how to live, how to…

  • Love: internet dating, Tindr
  • Transport: driverless, Uber
  • Consume and share our goods: location, goods
  • Socialise:
    “Facebook has more people than God on this planet, and can reach them on a mobile phone” — Scott Galloway, NYU Stern

6. We're still flesh and blood…

We’re trying things and tech is more important than ever, but we're still human, with human habits.

"Human minds are the product of evolution, shaped by millions of years of natural selection.” — Jason Collins, blogger, Evolving Economics

  • Online sales of grocery in the UK are just 4% of the total (source: Retail Think Tank)
  • Stores are here to stay: in-store sales still account for >90% of all retail spending (source: MasterCard)

 

TRENDS

Convenience culture

“Grocery retail is now judged by convenience that's measured in delivery times of hours and even minutes, and to your door. That dramatically changes what grocery shopping even means, and reshapes the meaning of what a shop is for.” — Ed White, senior editor, IDEO


Simple rules: the rise of the discounters
The discounters have created a new normal, where simplicity rules.

  • Discounters tend to have a simple offer: after “peak complexity”, fewer SKUs
  • They're not just cheaper
  • “Aldi and Lidl stepped in with new, much simpler and transparent offers that shoppers find attractive. Note that others, like Co-op, did not benefit from the economic downturn: being perceived as cheap is not enough in itself.” — Mark Teale, ex-CBRE and Retail Think Tank

On-demand economy

  • 20% of British adults now do all or most of their grocery shopping online (source: Mintel)
  • 25% of respondents worldwide are already ordering grocery products online for home delivery (source: Nielsen)
  • This isn't only in rich countries:
  • “E-tail could account for up to 25% of grocery sales in India’s top 30-40 cities within two years — for the middle and upper income segment of the population.” — Arvind Singhal, CEO, Technopak

Click and collect rising

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In a connected world, we want to click anywhere and have food delivered to… home, car boots, lockers, mobile pick-up centres, and drive-thru outlets.

There are now 500,000 click and collect locations in Europe in 2015 — that's a 20% increase from 2014 (source: Deloitte Touche Tohmatsu)

“Click and collect… is a win-win solution for consumers and a least-worst solution for retailers.” — Chris Summerscales, head of retail consultancy, CBRE


Quicker than clicking

  • scanning — as with Amazon’s and Peapod's mobile app
  • pushing — Amazon’s Dash is a real-world "Buy It Now" button
  • saying — personal assistants like Echo make it easy to order
  • saying nothing — like Ocado’s Apple Watch app
  • This is great for retailers because of “list lock”: 55% of US shoppers repeat-order the same groceries (source: Kantar Worldpanel)

“Online grocery typically attracts the most profitable customers: dual-income households, customers who prioritize convenience over price or promotions, big-spending customers — these are the type of customers you’ll be making more loyal” — Christian Wanner, founder, LeShop.ch

Omnishoppers
We’re all omnishoppers now.

“Grocers can cultivate greater shopper loyalty by encouraging cross-channel shopping: we think consumers are more likely to stick with those who are providing an integrated mix of supermarkets, online and c-stores that caters to different shopping missions.” — John Mercer, European retail analyst, Mintel

“Self-scanning has been trialled since the 1980s without ever working satisfactorily – at great irritation to consumers. Scanning from mobiles will
eventually result in a reduction in the need for till staff.” — Mark Teale, ex-CBRE and Retail Think Tank


The 3 Ts: transparency, traceability, trust

“Transparency and traceability are going to be even more important as consumers value provenance above everything” — Mandy Saven, head of food, beverage & hospitality, Stylus

For example: 

  • Barilla’s Farfalle Pasta and Tomato and Basil Sauce packaging shows the entire chain of production for its ingredients, from where it was grown to how it arrived on the store shelf.
  • A new technology platform called Safety for Food will provide a global database on food products.

“In the near future, we will be able to discover everything there is to know about the apple we are looking at: the tree it grew on, the CO2 it produced, the chemical treatments it received, and its journey to the supermarket shelf.” Carlo Ratti, professor, Massachusetts Institute of Technology, creator of Coop Italia’s store of the future, Milan, 2015

Cookie commerce

“For now, retailers get store level data and share that with suppliers. The next level will be understanding demand at the individual shopper level… and then taking that extra level of data, sharing it in real time, to be more responsive, better at forecasting, and even anticipating demand.” — Darren Smillie, customer supply chain insight manager, IGD


Predictive ordering
Or, "Cognitive commerce" 

The internet of things will know what your customers want before they know.

“With the internet of things and cognitive technology, more of our gadgets will intuitively know when they need filling up, when things are out of date, when we need deliveries.” — Lucie Greene, worldwide director of trends, JWT Intelligence

The internet of things also means supply chain managers can plan effectively, get a greater insight into consumers’ preferences and offer a better service.


The future store

“As stores get smaller and rents get higher there's a huge focus on maximising revenues throughout the day rather than just at peak times.” — Jim Whyte, senior insights analyst, Fitch

“There is a separation in grocery now between routine and interesting.” — Leigh Sparks, professor, Institute for Retail Studies, University of Stirling


Future store 1: "more than a store"

As seen in… 

  1. Japan: FamilyMart has a pharmacy, travel tickets, banking
  2. Mexico: Oxxo has banking
  3. France: Monop offers dry-cleaning drop off and pick up in their transport-hub stores.
  4. US: Duane Reade on Wall Street has a sushi bar, juice bar, beauty area, manicure
  5. UK: Tesco Extra in Watford has a Harris + Hoole cafe, Euphorium bakery, Giraffe restaurant, community room, endless aisle toy department

Note: the concept of offering more than just things for sale is far from new. It is just we're seeing a wave of this right now. When The Future Is Here's founder, James Wallman, advised BMW on the future of retail in 2007, one of the key trends was "More than a store".


Future store 2: “edutainment” store
Note that 50% of men, 70% of women worldwide now consider shopping a form of entertainment, and that 32% of millennials expect brands to host some kind of entertainment (source: a strategy agency based in Oregon called Fiction)


Future store 3: store as producer
“Manufacturers want retailers to do more of the assembly and finishing. It’s about moving manufacturing closer to consumption: perhaps the retailer will mix ingredients or add water… or even get the customer to do some customisation.” — Jaideep Prabhu, co-author, Frugal Innovation

“Right now, there’s a lot of innovation in food-tech: delivery of food from restaurants and dark kitchens to consumers” — Arvind Singhal, CEO, Technopak

In the US, venture capitalists are pouring money into serivces like Munchery, Blue Apron and Plated

Future store 4: hub store
“Stores will serve as a small distribution centres” — John Fernie, emeritus professor of retail marketing, Heriot-Watt University

“Think about leveraging the sharing economy and peer-topeer dynamics to create a free exchange area where everyone can be both a producer and a consumer – almost an Airbnb of home-made products” — Giovanni de Niederhausern, COO, Carlo Ratti Associati


Take-outs

  • Be lean: curate for your customer
  • Be flexible: software over hardware
  • Distinguish between fun and functional
  • Think like a startup: fail fast, learn, adapt
  • Get and give person-level data
  • Care for the planet and your customers

 

This is a brief, edited version of a presentation given to one of the world's largest food retailers. Get in touch to find out more.