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A World Without Grocery Stores

Imagine for a moment a world without Grocery stores. I suspect you’ll find it difficult to do, and with good reason. For most, our earliest childhood memories include being placed in a shopping cart and then whisked through the aisles of our neighborhood grocery store. Add to this, that over the course of their lives, the average American will spend up to 6 full months grocery shopping. Grocery Shopping is so engrained in us that to imagine a world without retail grocery stores is like imagining a world without food!

But now imagine a world without record shops, photo finishing kiosks, or video stores. This is not at all difficult to imagine and essentially reflects the world we live in today. And yet, we don’t lack music, photos or entertainment and in fact, our access to these products has multiplied exponentially. It’s merely the broken economic, technological and customer experience models in these categories that have been completely reimagined.

Now consider that from the opening of the first self-serve Piggly Wiggly store in 1916 to today, grocery stores have barely changed. They’re planned, built, managed and measured in precisely the same ways as they were nearly 102 years ago.

To suggest that the grocery industry is ripe for disruption would be an understatement, to say the least.

Looking forward, here are just a few of the big changes we can expect to see in the grocery industry of the future.

If It Can Go Direct, It Will

As grocery products make their way through the supply chain to the consumer, two phenomena unfold simultaneously. First, as various layers of distribution, transportation and warehousing costs all claim their respective service fees and markups, the price of a product increases exponentially. Yet, at the same time, the actual brand story about the product, information regarding where it’s produced, what the product contains and how it’s made diminish exponentially. In fact, by the time the product reaches the shelf in the store, the story about a given product has been reduced to become no more than a label and a price sticker.

This fundamental void of product story at the shelf sets up an existential problem for brands in which they are losing significant ground to private label products. In a world where consumers are increasingly oblivious to advertising, the marketing war chests of national brands are becoming useless in influencing consumers at the shelf. Indeed, according to Nielsen, the growth in sales of private label brands is a staggering three times that of nationally branded items.

What’s more, according to Accenture, in a world where upwards of 83 percent of consumers express a willingness to share data with brands in order to activate a more personalized experience, brands are largely excluded from any of this precious data, which could be used to improve existing products or innovate new ones.

Finally, according to analysts Jeremy Sporn and Stephanie Tuttle, “direct-to-consumer brand stores and websites generate revenues 86% higher than purchases of those same brands elsewhere — and, of course, better margins.”

These are among the factors prompting even some of the most traditional brands such as Campbell’s Soup, to aggressively explore direct-to-consumer sales channels and supply chain models.

Supporting this move to direct-selling are companies like INS Ecosystem – a start-up aimed at creating a decentralized network of brands operating on a direct-to-consumer platform built by INS, complete with automated pickup kiosks for customer orders. And INS is just one of many industry players acknowledging the degree to which brands are being shortchanged in their relationship with grocers and working to disintermediate incumbent retailers entirely.

That said, the retailer side of this equation is no rosier. Regional players like Winn-Dixie parent Southeastern Grocers are filing for bankruptcy and national players like Walmart and Kroger are having to play defense against a rising tide of insurgent competitors, not the least of which being Amazon, who in 2017 brought the fight directly to the industry’s doorstep, with its 2017 acquisition of Whole Foods Markets.

Customer Experience

Wrapped up in this broken economic model for grocery lies an even more fractured customer experience. Imagine that in 2018 we still travel to grocery stores where we traverse aisles, loading up a grocery cart (replete with one wobbly wheel). Once the cart is full, we move to the checkout where we wait, sometimes for several minutes, and unload the cart onto a conveyor belt. After taking several steps forward to pay, we then repack the items into bags, and reload the bags into the cart. We walk to our cars where we once again unload the cart and put our purchases into our cars and drive home where we yet again unload the car, lug the groceries into the house and then once again unload the bags into our pantries, shelves and refrigerators. In all this loading and unloading, consumers may handle each product up to seven times before they even have a chance to enjoy it!  And if that’s not crazy enough, we engage in this insanity an average of 1.5 times per week!

Part of the antidote to this archaic experience lies in online shopping. According to the Food Marketing Institute and Nielsen, 49 percent of consumers have purchased consumer packaged goods items online. Among millennials the number rises to 61 percent. While it’s true that online grocery still represents a relatively small share of total grocery sales, it’s growing at a colossal rate of 18 percent CAGR, while grocery stores are struggling to eke out a mere three percent growth. It’s an imbalance that’s only likely to grow as more and more pressure comes from players like Amazon, Ocado and a long-tail of online grocery pure-plays.

The Replenishment Economy

Meanwhile, statistics indicate that approximately 45 percent of our purchase behavior is routine, repetitive and replenishment-based.[i] We buy the same products, brands and quantities and will often even eat the same things at the same time of day and week. Therefore, as the Internet of Things envelops us, we can expect technology to manage more and more of this routine shopping behavior. Our refrigerators will manage re-orders of staple items. Our washers and dryers will manage laundry detergent and softeners. Connected packaging will alert us when other items require replenishment. The three-fourths empty box of diapers will trigger its own re-order, the lightbulbs in our homes will re-order their replacements before burning out. We will no longer actively shop for these things. They will simply appear when we need more.

Ingredient boxes, meal kits and other food subscription programs will continue to take a chunk out of our weekly grocery spending. Visitor traffic to subscription ordering programs like Blue Apron, for example, have grown by upwards of 800 percent since 2014.

And whether it’s Amazon or another provider, most of us will eventually subscribe to have our routine grocery needs managed on a day to day basis. We project that by as early as 2025, the Replenishment Economy will account for up to 30 percent of center-aisle product sales in grocery stores as many packaged goods simply come to us as needed.  It’s a phenomenon that will ironically be fueled less by hyper-connected millennials and more by aging baby-boomers, fewer of whom will be able to drive to the store in the years to come.

The Grocery Store of the Future

But does this mean that we’ll no longer require grocery stores? I don’t believe so. There’s a very powerful social and visceral aspect to food that simply cannot be satisfied by online shopping. We seem to retain an almost primal relationship with food reflecting our hunting and gathering DNA. With that said, the grocery store of the future will look nothing like it does today.

The places we now call grocery stores will become the “dark stores” or mini-local warehouses of tomorrow. These dark stores will be used to fulfill rocketing local demand for online fulfillment as more and more replenishment is handled digitally. These fulfillment centers will be operated largely without the need for humans, as advanced robotic warehousing become the norm.

Physical grocery stores will become food experience centers that will focus on not only grocery items but also health, wellness, fitness and lifestyle. We’ll travel to grocery stores to learn from a chef, consult with a nutritionist, or simply to taste new and unusual food items. Part food emporium, part restaurant and part entertainment facility, grocery stores will become a living stage for unique experiences, gatherings, events and conversations around food.

And as the focus in these stores moves from distribution and transactions to experiences and transformations, astute retailers will begin to unlock the media value of their physical stores. Creative retailers will tap new revenue streams from their brand partners by designing and curating experiences around categories and products. In exchange, brands will pay the retailer an agency fee for both the exposure and access to valuable streams of data about consumer interactions with their products.

In my estimation, a world without grocery stores isn’t only possible, it’s just around the corner. We will no longer travel to products, they will travel to us. What we will travel to are experiences with food and people that are immersive, socially connected, memorable and remarkable.

[1] Wood Wendy, and David T. Neal, The habitual consumer, 2009.

The post A World Without Grocery Stores appeared first on ThinkGig.

This post first appeared on Official CenturyLink Enterprise Blogs | CenturyLin, please read the originial post: here

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A World Without Grocery Stores


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