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Grocery Industry Outlook: Insights into the future from The Supermarket Guru

Consumer needs have changed and evolved during the pandemic. We saw empty shelves as a result of a broken supply chain coupled with consumer panic and hoarding. Prices went up as a result of inefficient food production facilities that were not able to maintain capacity and will continue to go up due to the rise in raw material and continued shortages. Technology has created a whole new world of buying, selling, and exploration. The retail landscape was upended, and now we have to fix it.

One thing we learned through this pandemic is that we all need each other. All along the supply chain, we are in this together. Our job is to bring back the once-pleasant shopping experience, and to shift consumers from being scared to being inspired.

The state of the market

It’s a new era for food retailing. Food has become highly personal. We are seeing more specialty SKUs than ever before, especially healthier and more innovative products. Retailers are accumulating more curated offerings in an effort to create differentiation. Key selling points for consumers are transparency, local relevancy, and, of course, deliciousness. Any retailer not trending in this direction will struggle.

Trends show that today’s consumers want more information about where their food is coming from. As a result, retailers are offering up more transparency into food sourcing, growing practices, and transport. Shoppers want to buy products and from companies that align with their values. Especially as prices continue to increase, customers will want to know what they are paying for.

Not to mention that where people buy their food is changing. We all know consumers have turned to buying groceries online, including meal kits from services like Blue Apron or from more specialty food retailers like Hungryroot, in greater numbers. But we’re seeing more outside-the-box options as well, like fresh food vending machines. It seems like everyone, not just traditional supermarkets, is selling food these days.

And it’s not just about what you offer but also how you offer it. Even before the pandemic, retailers like Aldi were changing the way people shop. At a traditional store, you will see dozens of different bottles of olive oil. But at Aldi, you’ll have maybe four. Do we really need dozens of options? Many consumers would say no. Instead of overwhelming shoppers with options, stores like Aldi appeal to consumers seeking quality and an easier shopping experience.

A need for operational efficiency

To keep up with changing consumer demands, grocery retailers and CPG companies will have to rethink how they operate. From manufacturing to fulfillment to the in-store experience, the whole supply chain is innovating and adapting.

One thing has become abundantly clear — increased efficiency is a must. For CPGs, this means moving away from the traditional model of having one big plant supplying all your retailers. Having smaller, highly automated plants around the country allows more efficient production and transportation. Not to mention that with multiple plants, you are protected from extreme weather patterns or disease outbreak shutting down operations completely.

For grocers, one of the major focal points of increasing efficiency is the last mile. On average, delivery orders actually cost retailers. It’s just not a sustainable solution. Click and collect or curbside pickup are the clear ways forward for retailers, and they will continue to be a popular choice for consumers.

The supermarket of the future

We are going to see a different format for supermarkets in the not-so-distant future. In order for grocers to align with the need for both efficiency and a better customer shopping experience, supermarkets will embrace a hybrid micro-fulfillment and fresh grocer model.

Again, online grocery shopping and curbside pickup are now permanent fixtures of grocery. Yet building the relationship with your consumers and meeting their emotional needs is easier with in-store shopping. Hence the hybrid model.

In the back half of the store, retailers will have the micro-fulfillment center where employees (or robots) pick and pack dry goods, beauty products, and other unemotional items, while the front of the store will be a fresh market where consumers can choose their produce, meats, and other products they prefer to see and select. This also goes back to the demand for transparency and the need to connect with where our food comes from.

Which brings up the next point — partnerships with local growers and suppliers will also continue to increase in importance. With the demand for fresh and fair-trade products, supermarkets need to build local connections and leverage their emotional pull with shoppers.

Three questions to focus on

It’s a new and exciting world out there for grocery. But how can retailers begin to embrace this new future? Start by asking yourself these three questions.

What is the next big trend?

Dig into your sales data and leverage analytics to see what’s coming. Think about the trends now and what could come next as a result of natural progression. Uncover these upcoming trends, and then figure out how to capitalize on them.

What three things would you like to know about your customers?

It’s a constant battle to stay ahead of consumer trends. That means you must be constantly learning. Identify the three things you most want to know about your customers, and then go and find them out. Once you’ve accomplished that, identify the next three things you want to learn, and repeat the cycle.

What innovation in the past 12 months can you learn from?

Pick a recent innovation that you find interesting. It doesn’t have to be a grocery-specific or even a retail-specific innovation. We can learn and find inspiration anywhere. Look for new ways to create memorable, unique experiences. How can you create a “wow” moment for your customers?

Want to continue the conversation on the outlook for grocery in 2021 and beyond? Drop me a line on LinkedIn.

About the Author

For more than 25 years, Phil Lempert, an expert analyst of consumer behavior, marketing trends, new products, and the changing retail landscape, has identified and explained impending trends to consumers and some of the most prestigious companies worldwide. Known as The Supermarket Guru®, Lempert is a distinguished author and speaker who alerts customers and business leaders to impending corporate and consumer trends and empowers them to make educated purchasing and marketing decisions.