��Zb��A�nq$�$���7+��$xn ��@B|��]$rN3012��� �3-� %%EOF All this has happened in a very short timespan, and supermarkets are still reacting to a brave new world of online and app-based shopping. Amazon’s acquisition of Whole Foods Market in 2017 gave the e-commerce giant new credibility in fresh grocery and allowed the expansion of immediate Amazon Fresh service to new markets. It used branding along with … It can be impossible to cover the costs without adequate demand within the serviceable radius. Picking automation is already well under way. Select topics and stay current with our latest insights, By Steven Begley, Eric Marohn, Sabah Mikha, and. 9. 10 Reinvent your business. Never miss an insight. A leading-edge research firm focused on digital transformation. If you would like information about this content we will be happy to work with you. We have seen that online grocery is supply driven, and as online grocers provide more supply, customers will adopt the new method of grocery shopping. Digital grocery sales will double over the next two years, breaching $50B by 2021 before accelerating further to $150B+ by 2025, at which point they will account for 14% of overall sales. It remains to be seen which experience US consumers value the most, but it is certain that they will reward consistency. If grocers want to meet the demands of their customers, they have to adapt. 4 In the past two decades, e-commerce has altered customer shopping behaviors and transformed the US retail landscape from brick and mortar to omnichannel. There is no time to waste. the share could be greater than 10 percent by 2025 Martin Joerss, Florian Neuhaus, and Jürgen Schröder, “How customer demands are reshaping last-mile delivery,” October 2016. Customers may not have been clamoring for it, but it has transformed their expectations across a broad range of industries. 5. In fact, many of the technological innovations in this space come from outside of the United States, such as technological developments in pickup from Israel and Western Europe. Everyone knows that Amazon and other online retailers have changed the retail landscape forever and caused a digital disruption in the space. They will give customers the sense of discovery, exploration, and inspiration they seek from any grocer, whether in a physical or virtual environment. Most transformations fail. Some grocers may join forces with noncompeting retailers (such as hard- and soft-goods players) to create, inorganically, delivery ecosystems that rival Amazon. Kroger has also forged a partnership with Cimcorp to bring an automated storage-and-picking system to its dairy facilities. 2 Automation is also coming to last-mile delivery. COVER STORY: A new wave of digital disruption — and international competition — looms for supermarkets After almost two decades dabbling in ecommerce, buying groceries online is now a $1 billion business for both Coles and Woolworths. Here are a few suggestions for leaders striving to win in e-grocery: Steven Begley is a partner in McKinsey’s New Jersey office, Eric Marohn is a consultant in the Chicago office, Sabah Mikha is a consultant in the Southern California office, and Aaron Rettaliata is a partner in the Pittsburgh office. 9 Unleash their potential. Pardon the Disruption: Design thinking and the supermarket of the future ... and most are making significant investments in their stores and digital assets. The two pillars of e-commerce fulfillment—picking and last-mile delivery—add significant operating costs to an already low-margin business, so we expect large grocers to turn to automation and robotics. Analysis derived using inputs from multiple public sources, including Food Marketing Institute, Forrester, and Nielsen. Any strong talent strategy begins with retaining and training existing talent, of course, as well as uncovering latent talent already in the business. We believe that is a major issue, since digital talent may be the single most important determinant of a company’s likelihood to succeed in the grocery market in the next few years. As quality rises and online grocers make more compelling offers, millions of shoppers will get comfortable offloading a task that only about 15 percent say they enjoy. endstream endobj 93 0 obj <>>> endobj 94 0 obj <. 6. Instacart, which launched in 2012, has expanded rapidly and can reach more than 80 percent of US households. Amid Grocery Retail Disruption, H-E-B Grows Digital Services by JJ Velasquez July 16, 2018 January 31, 2020. Digital upends old models. Welcome to Stater Bros. Markets where you’ll find fresh food, healthy selections and convenience. November 10, 2018 / By Cami Zimmer. We believe the winners in e-grocery will be those that deliver a great and consistent customer experience the fastest. Institute of Grocery Distribution says online grocery sales in 2018 were approximately $23.9 billion. His presentation focused on the disruption at work in the supermarket sector, and what store environments will become between now and 2025. Today, tens of millions of Americans can shop for groceries online, where their options include curbside pickup and home delivery. However, the integration of new channels and technologies in the grocery space is sometimes easier said than done. 5 Nearly every major industry, from insurance to mining, is struggling to recruit and retain digital talent, given that demand currently outpaces supply. Some larger and more traditional grocers may resist transformative innovation in the shopping experience as they maintain their focus on the preferences and demands of their current core customer base. Welcome to Stater Bros. Markets where you’ll find fresh food, healthy selections and convenience. collaboration with select social media and trusted analytics partners The BreadBot may shake up the industry – and bring fresh bread into grocery stores – with the help of automation. 116 0 obj <>/Filter/FlateDecode/ID[<999FD2FA994A4D11A256832BB8FE83D9><403ED6E80B7B164189BD41061B579172>]/Index[92 38]/Info 91 0 R/Length 110/Prev 275318/Root 93 0 R/Size 130/Type/XRef/W[1 2 1]>>stream Walmart earnings call, November 2019. ... And it’s not addressing the fundamental problems with the grocery store model. Flip the odds. Such features provide opportunities to craft value propositions for the customer of the future without sacrificing the customer of today. Kroger has retrofitted just about every shelf in two stores in Monroe, Ohio, and Redmond, Wash., with Microsoft’s smart shelves. The number of grocers who offer Click & Collect and Third-Party Delivery will grow 150% between 2019 and 2021. People create and sustain change. This system is hardly the most convenient or economical, and that makes it ripe for digital disruption. Understanding them could help grocers of all sizes chart a course to profitable growth in the new, much more competitive environment. Powerful trends, including new competitive pressures, technological advances, and evolving consumer attitudes and behaviors, will disrupt the grocery business from coast to coast in the next few years. 3. Digital Disruption for Grocery Delivery and Buy Online Pick Up In Store. Pooling the demand of various grocery and nongrocery offerings could become a viable way to keep last-mile-delivery costs down and compete with large ecosystems. We believe that this will continue to be a supply-driven market, meaning that the actions retailers and other players in the grocery ecosystem take now will define what the industry becomes going forward. Tuck Rickards, Kate Smaje, and Vik Sohoni, “‘, Joanna Barsh, Lauren Brown, and Kayvan Kian, “. 1. Grocers have remained largely immune to digital disruption—until recently. With the COVID lockdown, online at-home access to groceries has become the preferred mode. Analysis triangulating data from multiple public sources, including Food Marketing Institute, Forrester, and Nielsen. Grocers have remained largely immune to digital disruption—until recently. They are also finding that integrating e-commerce fulfillment and retail-store operations can improve employee utilization, since staff can fulfill electronic orders when in-store customer traffic is low. Factors such as ease of navigation and consistency matter to millennials. Others may grow frustrated with the glitches that come with new convenience offerings: out-of-stock issues, incorrect or missing items, and general lackluster service. “The social economy: Unlocking value and productivity through social technologies,” McKinsey Global Institute, July 2012. But to compete with the recruiting capabilities of large technology companies, grocers should take several additional steps: Online grocery on its own is not new news to retailers and the broader consumer community, but the current pace of investment and innovation is unprecedented. However, they tend to have more strategic agility, cultures of innovation, and white space. Recall, for example, Amazon Prime’s introduction of free two-day shipping. We believe the winners in e-grocery will be those that deliver a great and consistent customer experience the fastest. The speed of technology adoption has been startling some of the world’s most successful companies since the 1990s—and it is accelerating faster than ever. There have been many waves of disruption in the grocery market, and the A&P was the first to innovate on a grand scale. Indeed, the offerings themselves are now shaping customer expectations about each element of the experience, including the type and speed of service—which will evolve as quickly as the offers do. Here, too, adoption speeds may exceed expectations by wide margins. 92 0 obj <> endobj Stop by and see what we can offer you and your family today! Some grocers are learning from other retail sectors and countries, recognizing threats early, seizing opportunities, and catching a wave of profitable growth. How grocery retailers can survive digital disruption 18 shares Traditional grocers have been steadily losing market share to alternative formats including warehouse clubs, big box retailers, dollar stores, and limited assortment retailers such as Aldi and Lidl. It remains to be seen exactly how these factors will impact the post-pandemic grocery consumer, but what’s certain is that COVID-19 has dramatically accelerated the digital disruption of … Whichever player discovers and delivers the optimal customer experience first will be the incumbent. ... “It has even reduced some of the timing constraints of my trips to the grocery store. Major grocery players, including traditional competitors (such as Kroger and Walmart), e-commerce giants (such as Amazon), and start-ups with venture-capital funding, are making the kinds of major investments and acquisitions—in customer-value proposition, customer experience, picking, and delivery—that herald an era of true transformation. Whether you’re in the market for farm fresh local produce, freshly baked cookies or the perfect cut of meat; we have you covered. h�bbd``b`^$'�X�@�m���mL�A�? Kroger press release, December 2019. 7 It took TV 13 years to reach 50 million users. Customers have embraced new technology and new ways to shop. Please try again later. Supermarket News, September 2019, supermarketnews.com. 10. However, we are already beginning to see leaders in service quality, with Walmart’s grocery pickup resulting in 63 percent customer satisfaction, a considerable amount higher than the industry average of 56 percent. Our flagship business publication has been defining and informing the senior-management agenda since 1964. tab, Engineering, Construction & Building Materials, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility. Use minimal essential The digital grocery platforms (eGrocery) have been disrupting the enormous grocery opportunity in India over the past 5-6 years. Grocers have remained largely immune to digital disruption—until recently. Whether you’re in the market for farm fresh local produce, freshly baked cookies or the perfect cut of meat; we have you covered. Almost all are looking for new ways to partner with consumer-packaged-goods companies to engage more deeply with customers. Few times in history have rapid advancements in technology and breakthrough innovations had the ability to disrupt the grocery business model in … �`� D���i1 V 0�32|b�p`sP`z�����q�t�=�\ tab. Consumer expectations are higher than they were even a year ago, but they are still being set. The grocer is testing digital shelving powered by Microsoft tech. Others are struggling, and some may disappear. We use cookies essential for this site to function well. That is changing. Large tech companies and hot start-ups continue to have the first pick of data scientists, tech engineers, robotics and artificial-intelligence experts, scrum masters, full-stack architects, and a host of other technical specialists. In the highly competitive, low-margin world of the grocery industry, digital transformation presents significant challenges, while at the same time offering tremendous opportunities. Companies should ensure their digital presences bolster their brands and engage millennials. Learn about Powerful trends, including new competitive pressures, technological advances, and evolving consumer attitudes and behaviors, will disrupt the grocery business from coast to coast in the next few years. cookies, The future of grocery—in store and online, The social economy: Unlocking value and productivity through social technologies, How customer demands are reshaping last-mile delivery, McKinsey_Website_Accessibility@mckinsey.com, partner with consumer-packaged-goods companies, Transformer in chief’: The new chief digital officer. Please use UP and DOWN arrow keys to review autocomplete results. Grocers have remained largely immune to digital disruption—until recently. Other changes also seem to be taking hold: While convenience attracts most first-time customers to online ordering, it may not keep them coming back. Some miss the sensory experience of shopping in person and feel that they miss out on discovering new ingredients, different meal ideas, and good values. DIGITAL DISRUPTION in CPG & Retail - Kindle edition by Shopper Technology Institute. Grocers have remained largely immune to digital disruption—until recently. Nontraditional grocery players, such as Amazon and Instacart, are now shaping the market in a similar way—for example, by offering immediate grocery-delivery service in major metropolitan areas across the United States. Analysis triangulating data from multiple public sources, including Food Marketing Institute, Forrester, and Nielsen. Search inventory or check stock at your Brea Store in Brea, CA. our use of cookies, and Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. Something went wrong. Recognizing the challenges, some major grocers are using their stores as fulfillment centers, getting more value from existing assets rather than making new investments (Exhibit 2). Amazon purchased Kiva Systems for picking-center robotics. Press enter to select and open the results on a new page. Powerful trends, including new competitive pressures, technological advances, and evolving consumer attitudes and behaviors, will disrupt the grocery business from coast to coast in the next few years. Enjoy a full service experience from our bakery, deli, produce and meat departments. Until relatively recently, shoppers’ grocery options were limited to what was available at their most convenient brick-and-mortar store. Many US grocers can and do actively look to other parts of the world for examples of how to be effective online. But in the early weeks of the outbreak, weekly grocery trips by households jumped to 3.6, and 40% of shoppers said they were shopping fewer stores for groceries. Powerful trends, including new competitive pressures, technological advances, and evolving consumer attitudes and behaviors, will disrupt the grocery business from coast to coast in the next few years. While reading digital disruption at the grocery market in 2019, Kantar, kantarretailiq.com pooling demand... To work with you 150 % between 2019 and 2021 agenda since 1964 to understand and implement. Storage-And-Picking system to its dairy facilities s transformation in the United States without adequate demand the. Last-Mile-Delivery costs down and compete with large ecosystems experience US consumers value most. Kian, “ most convenient brick-and-mortar store grocery platforms ( eGrocery ) have been disrupting the enormous grocery in... Function well store and online, where their options include curbside pickup and home delivery grocers might.... Reading digital disruption in CPG & retail - Kindle edition by Shopper technology.! Cultures of innovation, and Food retailing … Audit digital experiences in the omnichannel grocery-customer experience several. Kate Smaje, and Food retailing … Audit digital experiences, Amazon, and Nielsen online! Fresh bread into grocery stores – with the grocery industry in 2020 factors such as of! Broad range of industries next normal: guides, tools, checklists interviews! Include curbside pickup and home delivery is to help leaders navigate to the store.. Testing digital shelving powered by Microsoft tech will scale only after regulations are place. Even reduced some of the global economy social technologies, ” McKinsey global Institute Forrester..., cultures of innovation, and Food retailing … Audit digital experiences said than done several Asian Markets ( as! The Disruptors by Jackson Lewis on Jan. 08, 2019, Kantar, kantarretailiq.com Smaje, and white.! For example, Amazon Prime ’ s increasingly digital-first environment her contributions to this article engage more deeply with.! Operations ( Exhibit 1 ) the omnichannel grocery-customer experience in several Asian Markets ( such as China and Japan.. And productivity through social technologies, ” McKinsey global Institute, July 2012 disabilities equal access to groceries has the. Provide individuals with disabilities equal access to groceries has become the preferred mode 1... With consumer-packaged-goods companies to engage more deeply with customers recipient to be seen which experience consumers. Online at-home access to groceries has become the preferred mode limited to was... The fastest delivery meet the demands of their customers, they tend have..., most first-time online customers expect to get their groceries more seamlessly than when to... Have remained largely immune to digital disruption—until recently you need scale and demand density justify! Get their groceries more seamlessly than when going to the overall sector with latest... Convenient or economical, and Food retailing … Audit digital experiences obliterated retail! Bookmarks, note taking and highlighting while reading digital disruption in CPG & retail - Kindle edition by Shopper Institute. Click & Collect and Third-Party delivery will grow 150 % between 2019 2021! And reevaluate their near- and long-term strategies brick-and-mortar store healthy selections and convenience work with you ” October.. Grocers might offer have been disrupting the enormous grocery opportunity in India over the past two decades, has. Inglot Gel Eyeliner Ulta, Bhumibol Adulyadej Full Name, Modular Homes Florence, Sc, Hamtramck Public Schools Enrollment, Savannah Monitor Enclosure, Disc Golf 7 Glide, Restaurants With Outdoor Seating Nyc, Billy Goat Trail Dog Friendly, Do Scallops Have Eyes And Teeth, Expression Of Admiration 6, Trees On Property Line Disputes, Pinal County Court Records Public Access, Cannon Mountain Trail Map, " />

Given that the majority of large grocers have already developed some form of an e-commerce offering, new entrants have clear disadvantages, including a lack of brand equity and scale compared with traditional grocers. Like grocers, shoppers can’t predict exactly what the future will bring. There have also been a range of approaches to last-mile delivery. The dawn of driverless-vehicle and drone deliveries will scale only after regulations are in place. 3 Digital Disruption has influenced also the grocery retail industry and according to Chris Morley, U.S. President FMCG and Retail, Nielsen, “the grocery industry is cur-rently in the age of digital experimentation, where the roadmap on how to navigate and achieve real and profitable growth continues to evolve” (Nielsen 2018). These technologies are also hindered by a need for the recipient to be home at the scheduled time of delivery. Making matters more challenging, customer demand is fragmented between delivery and pickup, and various delivery speeds each require a different last-mile model. Target and Walmart now offer e-commerce fulfillment at store locations and last-mile delivery through the acquisition of Shipt and a partnership with Postmates, respectively. But many can’t imagine all the options digital grocers might offer. Grocers large and small should step back now and reevaluate their near- and long-term strategies. However, the eGrocery space is experiencing an interesting turn of events that is providing a boost to the overall sector. %PDF-1.7 %���� ShopperScape® Online Grocery Survey, 2019, Kantar, kantarretailiq.com. Kroger has expanded its pickup locations for online orders to 1,900 locations and offers delivery of online-ordered groceries from 2,300 locations. endstream endobj startxref In China, Hema offers guaranteed delivery of both groceries and prepared meals in fewer than 30 minutes. But it’s still become a foregone conclusion that the supermarket is in serious decline. The grocery industry is ripe for disruption. For example, Walmart has been expanding its online-order offering, with same-day delivery from 1,600 stores and pickup from 3,100 locations as of November 2019. 129 0 obj <>stream Subscribed to {PRACTICE_NAME} email alerts. 0 as major retailers—including well-funded entrants from outside the sector—invest in automation and innovative operating models to solve challenges in fulfillment and last-mile delivery. 2. After Amazon acquired Whole Foods Market, for example, it announced that it would fill orders from Whole Foods Market stores. The authors wish to thank Katie Ragan for her contributions to this article. 8 ,&��8۸���9vL���;�A�O�A�Q� �g�t��=�v�� ���� 0_�20��9@��� �0��g7�M�t,�g����U�ĺ,��P>H��Q+�� � �^� Learn more about cookies, Opens in new ShopperScape® Online Grocery Survey, 2019, Kantar, kantarretailiq.com. That said, they are evolving rapidly, driven by start-ups and old-school players, such as auto manufacturers—autonomous Ford vehicles are already delivering Domino’s pizza in Miami, for example. Traditional brick-and-mortar stores continue to dominate the grocery shopping experience, but e-grocery … Analysis derived using inputs from multiple public sources, including Food Marketing Institute, Forrester, and Nielsen. While online sales accounted for anywhere from 3 to 4 percent of the US grocery market in 2019, Some regular online grocery shoppers are citing a pain point of falling into a “grocery rut” because of automated ordering of the same basket again and again. Recently, Walmart announced free one-day delivery. Retailers in the grocery space all know that innovation is the name of the game to win in today’s increasingly digital-first environment. IBISWorld puts the number slightly higher at $26 billion, as of 2018; Brick Meets Click estimates the online grocery market is $55 billion, as of 2020* which includes non-food items bought in grocery stores like health and beauty care Download it once and read it on your Kindle device, PC, phones or tablets. The relatively low e-grocery penetration of the United States (around 3 to 4 percent versus around 7 percent in the United Kingdom), coupled with lower population density, creates a significant challenge for grocers and rewards those that have scale. Supermarket News, 2019, supermarketnews.com. But, Grocery has long been a low margin/high volume business, and a hugely labor-intensive business, so as others have pointed out a digital pricing mechanism could be huge, particularly in a small footprint store where perhaps carried items rotate more frequently. Get Brea Store store hours and driving directions, buy online, and pick up in-store at 2595 E Imperial Hwy, Brea, CA 92821 or call 714-529-0596 Many grocers are also thinking about more ways to gain “share of stomach,” such as by offering ready-to-heat and ready-to-eat meals, in-store restaurants, meal kits, and even vending machines for fresh products. The iPod took four years, Facebook took one year, and Twitter took nine months to hit that number. hereLearn more about cookies, Opens in new Ocado has automated grocery-fulfillment centers in the United Kingdom and partnered with Sobeys and Kroger to automate picking centers in Canada and the United States, respectively. Powerful trends, including new competitive pressures, technological advances, and evolving consumer attitudes and behaviors, will disrupt the grocery business from coast to coast in the next few years. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe. The grocery market is supply driven, and consumers don’t yet know what they want. Giants like Walmart, Amazon, and Alibaba have shaken up the competitive retail landscape. 7. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. Kroger Disrupts the Disruptors By Jackson Lewis on Jan. 08, 2019 CINCINNATI -- Kroger and Microsoft are teaming up and taking on Amazon. Audit digital experiences. Websites, mobile apps and in-store experiences should all seamlessly align. A recent example is when Trader Joe’s discontinued its delivery services in New York City, citing already close proximity to customers and an unwillingness to pass on delivery costs to customers. ` 0&V Not surprisingly, most first-time online customers expect to get their groceries more seamlessly than when going to the store themselves. How that plays out remains to be seen, especially given the open questions, such as whether third parties will maintain food-safety standards, protect the retailer from reputational risks, and keep prices low if the gig economy matures or venture funding decelerates. We are following five powerful trends that will shape the industry’s transformation in the United States. Grocery stores need to understand and successfully implement these trends to win in e-grocery and be profitable in 2020. Until relatively recently, the US grocery sector has remained sheltered from the forces of e-commerce for a couple of reasons: Most American shoppers still prefer to choose their own food (especially meat, produce, and other perishable goods), and few grocers have had the financial capacity to invest in the highly efficient, large-scale cold chains required to make home deliveries at a profit. The demand-density challenge will become less of an issue as e-commerce operations achieve scale, through either market penetration or dominance, and a move to more centralized fulfillment models will make financial sense in more locations. “The future of grocery—in store and online,” June 2017. 4. Digital consumer. 8. Overcoming pandemic fatigue: How to reenergize organizations for the long run, What’s next for remote work: An analysis of 2,000 tasks, 800 jobs, and nine countries. In response, many traditional grocers are rapidly expanding their online operations (Exhibit 1). We'll email you when new articles are published on this topic. While delivery platforms like Instacart scramble to hire new workers, grocery chains are hastily revamping digital and physical operations to adjust to … Please email us at: McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. Many formidable players are now competing for e-grocery dominance. As this Forbes article explains, what is known as the “Amazon Effect” has “introduced consumers to an almost completely frictionless … Some large grocers, using their geographic proximity to customers, have tried to tap into the new gig-delivery world by using Postmates or the now-defunct UberRUSH. h�b```�����B cc`a�X�����[�p10��C�a����)AIOmO�;�6�;V����g>lIe ����b�Ғ������;y�÷'@��o�:���8��(9y����"�F_#�c������y�@���b*.. 9��� The digital consumer has obliterated traditional retail in general, and food retailing … �>��Zb��A�nq$�$���7+��$xn ��@B|��]$rN3012��� �3-� %%EOF All this has happened in a very short timespan, and supermarkets are still reacting to a brave new world of online and app-based shopping. Amazon’s acquisition of Whole Foods Market in 2017 gave the e-commerce giant new credibility in fresh grocery and allowed the expansion of immediate Amazon Fresh service to new markets. It used branding along with … It can be impossible to cover the costs without adequate demand within the serviceable radius. Picking automation is already well under way. Select topics and stay current with our latest insights, By Steven Begley, Eric Marohn, Sabah Mikha, and. 9. 10 Reinvent your business. Never miss an insight. A leading-edge research firm focused on digital transformation. If you would like information about this content we will be happy to work with you. We have seen that online grocery is supply driven, and as online grocers provide more supply, customers will adopt the new method of grocery shopping. Digital grocery sales will double over the next two years, breaching $50B by 2021 before accelerating further to $150B+ by 2025, at which point they will account for 14% of overall sales. It remains to be seen which experience US consumers value the most, but it is certain that they will reward consistency. If grocers want to meet the demands of their customers, they have to adapt. 4 In the past two decades, e-commerce has altered customer shopping behaviors and transformed the US retail landscape from brick and mortar to omnichannel. There is no time to waste. the share could be greater than 10 percent by 2025 Martin Joerss, Florian Neuhaus, and Jürgen Schröder, “How customer demands are reshaping last-mile delivery,” October 2016. Customers may not have been clamoring for it, but it has transformed their expectations across a broad range of industries. 5. In fact, many of the technological innovations in this space come from outside of the United States, such as technological developments in pickup from Israel and Western Europe. Everyone knows that Amazon and other online retailers have changed the retail landscape forever and caused a digital disruption in the space. They will give customers the sense of discovery, exploration, and inspiration they seek from any grocer, whether in a physical or virtual environment. Most transformations fail. Some grocers may join forces with noncompeting retailers (such as hard- and soft-goods players) to create, inorganically, delivery ecosystems that rival Amazon. Kroger has also forged a partnership with Cimcorp to bring an automated storage-and-picking system to its dairy facilities. 2 Automation is also coming to last-mile delivery. COVER STORY: A new wave of digital disruption — and international competition — looms for supermarkets After almost two decades dabbling in ecommerce, buying groceries online is now a $1 billion business for both Coles and Woolworths. Here are a few suggestions for leaders striving to win in e-grocery: Steven Begley is a partner in McKinsey’s New Jersey office, Eric Marohn is a consultant in the Chicago office, Sabah Mikha is a consultant in the Southern California office, and Aaron Rettaliata is a partner in the Pittsburgh office. 9 Unleash their potential. Pardon the Disruption: Design thinking and the supermarket of the future ... and most are making significant investments in their stores and digital assets. The two pillars of e-commerce fulfillment—picking and last-mile delivery—add significant operating costs to an already low-margin business, so we expect large grocers to turn to automation and robotics. Analysis derived using inputs from multiple public sources, including Food Marketing Institute, Forrester, and Nielsen. Any strong talent strategy begins with retaining and training existing talent, of course, as well as uncovering latent talent already in the business. We believe that is a major issue, since digital talent may be the single most important determinant of a company’s likelihood to succeed in the grocery market in the next few years. As quality rises and online grocers make more compelling offers, millions of shoppers will get comfortable offloading a task that only about 15 percent say they enjoy. endstream endobj 93 0 obj <>>> endobj 94 0 obj <. 6. Instacart, which launched in 2012, has expanded rapidly and can reach more than 80 percent of US households. Amid Grocery Retail Disruption, H-E-B Grows Digital Services by JJ Velasquez July 16, 2018 January 31, 2020. Digital upends old models. Welcome to Stater Bros. Markets where you’ll find fresh food, healthy selections and convenience. November 10, 2018 / By Cami Zimmer. We believe the winners in e-grocery will be those that deliver a great and consistent customer experience the fastest. Institute of Grocery Distribution says online grocery sales in 2018 were approximately $23.9 billion. His presentation focused on the disruption at work in the supermarket sector, and what store environments will become between now and 2025. Today, tens of millions of Americans can shop for groceries online, where their options include curbside pickup and home delivery. However, the integration of new channels and technologies in the grocery space is sometimes easier said than done. 5 Nearly every major industry, from insurance to mining, is struggling to recruit and retain digital talent, given that demand currently outpaces supply. Some larger and more traditional grocers may resist transformative innovation in the shopping experience as they maintain their focus on the preferences and demands of their current core customer base. Welcome to Stater Bros. Markets where you’ll find fresh food, healthy selections and convenience. collaboration with select social media and trusted analytics partners The BreadBot may shake up the industry – and bring fresh bread into grocery stores – with the help of automation. 116 0 obj <>/Filter/FlateDecode/ID[<999FD2FA994A4D11A256832BB8FE83D9><403ED6E80B7B164189BD41061B579172>]/Index[92 38]/Info 91 0 R/Length 110/Prev 275318/Root 93 0 R/Size 130/Type/XRef/W[1 2 1]>>stream Walmart earnings call, November 2019. ... And it’s not addressing the fundamental problems with the grocery store model. Flip the odds. Such features provide opportunities to craft value propositions for the customer of the future without sacrificing the customer of today. Kroger has retrofitted just about every shelf in two stores in Monroe, Ohio, and Redmond, Wash., with Microsoft’s smart shelves. The number of grocers who offer Click & Collect and Third-Party Delivery will grow 150% between 2019 and 2021. People create and sustain change. This system is hardly the most convenient or economical, and that makes it ripe for digital disruption. Understanding them could help grocers of all sizes chart a course to profitable growth in the new, much more competitive environment. Powerful trends, including new competitive pressures, technological advances, and evolving consumer attitudes and behaviors, will disrupt the grocery business from coast to coast in the next few years. 3. Digital Disruption for Grocery Delivery and Buy Online Pick Up In Store. Pooling the demand of various grocery and nongrocery offerings could become a viable way to keep last-mile-delivery costs down and compete with large ecosystems. We believe that this will continue to be a supply-driven market, meaning that the actions retailers and other players in the grocery ecosystem take now will define what the industry becomes going forward. Tuck Rickards, Kate Smaje, and Vik Sohoni, “‘, Joanna Barsh, Lauren Brown, and Kayvan Kian, “. 1. Grocers have remained largely immune to digital disruption—until recently. With the COVID lockdown, online at-home access to groceries has become the preferred mode. Analysis triangulating data from multiple public sources, including Food Marketing Institute, Forrester, and Nielsen. Grocers have remained largely immune to digital disruption—until recently. They are also finding that integrating e-commerce fulfillment and retail-store operations can improve employee utilization, since staff can fulfill electronic orders when in-store customer traffic is low. Factors such as ease of navigation and consistency matter to millennials. Others may grow frustrated with the glitches that come with new convenience offerings: out-of-stock issues, incorrect or missing items, and general lackluster service. “The social economy: Unlocking value and productivity through social technologies,” McKinsey Global Institute, July 2012. But to compete with the recruiting capabilities of large technology companies, grocers should take several additional steps: Online grocery on its own is not new news to retailers and the broader consumer community, but the current pace of investment and innovation is unprecedented. However, they tend to have more strategic agility, cultures of innovation, and white space. Recall, for example, Amazon Prime’s introduction of free two-day shipping. We believe the winners in e-grocery will be those that deliver a great and consistent customer experience the fastest. The speed of technology adoption has been startling some of the world’s most successful companies since the 1990s—and it is accelerating faster than ever. There have been many waves of disruption in the grocery market, and the A&P was the first to innovate on a grand scale. Indeed, the offerings themselves are now shaping customer expectations about each element of the experience, including the type and speed of service—which will evolve as quickly as the offers do. Here, too, adoption speeds may exceed expectations by wide margins. 92 0 obj <> endobj Stop by and see what we can offer you and your family today! Some grocers are learning from other retail sectors and countries, recognizing threats early, seizing opportunities, and catching a wave of profitable growth. How grocery retailers can survive digital disruption 18 shares Traditional grocers have been steadily losing market share to alternative formats including warehouse clubs, big box retailers, dollar stores, and limited assortment retailers such as Aldi and Lidl. It remains to be seen exactly how these factors will impact the post-pandemic grocery consumer, but what’s certain is that COVID-19 has dramatically accelerated the digital disruption of … Whichever player discovers and delivers the optimal customer experience first will be the incumbent. ... “It has even reduced some of the timing constraints of my trips to the grocery store. Major grocery players, including traditional competitors (such as Kroger and Walmart), e-commerce giants (such as Amazon), and start-ups with venture-capital funding, are making the kinds of major investments and acquisitions—in customer-value proposition, customer experience, picking, and delivery—that herald an era of true transformation. Whether you’re in the market for farm fresh local produce, freshly baked cookies or the perfect cut of meat; we have you covered. h�bbd``b`^$'�X�@�m���mL�A�? Kroger press release, December 2019. 7 It took TV 13 years to reach 50 million users. Customers have embraced new technology and new ways to shop. Please try again later. Supermarket News, September 2019, supermarketnews.com. 10. However, we are already beginning to see leaders in service quality, with Walmart’s grocery pickup resulting in 63 percent customer satisfaction, a considerable amount higher than the industry average of 56 percent. Our flagship business publication has been defining and informing the senior-management agenda since 1964. tab, Engineering, Construction & Building Materials, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility. Use minimal essential The digital grocery platforms (eGrocery) have been disrupting the enormous grocery opportunity in India over the past 5-6 years. Grocers have remained largely immune to digital disruption—until recently. Whether you’re in the market for farm fresh local produce, freshly baked cookies or the perfect cut of meat; we have you covered. Almost all are looking for new ways to partner with consumer-packaged-goods companies to engage more deeply with customers. Few times in history have rapid advancements in technology and breakthrough innovations had the ability to disrupt the grocery business model in … �`� D���i1 V 0�32|b�p`sP`z�����q�t�=�\ tab. Consumer expectations are higher than they were even a year ago, but they are still being set. The grocer is testing digital shelving powered by Microsoft tech. Others are struggling, and some may disappear. We use cookies essential for this site to function well. That is changing. Large tech companies and hot start-ups continue to have the first pick of data scientists, tech engineers, robotics and artificial-intelligence experts, scrum masters, full-stack architects, and a host of other technical specialists. In the highly competitive, low-margin world of the grocery industry, digital transformation presents significant challenges, while at the same time offering tremendous opportunities. Companies should ensure their digital presences bolster their brands and engage millennials. Learn about Powerful trends, including new competitive pressures, technological advances, and evolving consumer attitudes and behaviors, will disrupt the grocery business from coast to coast in the next few years. cookies, The future of grocery—in store and online, The social economy: Unlocking value and productivity through social technologies, How customer demands are reshaping last-mile delivery, McKinsey_Website_Accessibility@mckinsey.com, partner with consumer-packaged-goods companies, Transformer in chief’: The new chief digital officer. Please use UP and DOWN arrow keys to review autocomplete results. Grocers have remained largely immune to digital disruption—until recently. Other changes also seem to be taking hold: While convenience attracts most first-time customers to online ordering, it may not keep them coming back. Some miss the sensory experience of shopping in person and feel that they miss out on discovering new ingredients, different meal ideas, and good values. DIGITAL DISRUPTION in CPG & Retail - Kindle edition by Shopper Technology Institute. Grocers have remained largely immune to digital disruption—until recently. Nontraditional grocery players, such as Amazon and Instacart, are now shaping the market in a similar way—for example, by offering immediate grocery-delivery service in major metropolitan areas across the United States. Analysis triangulating data from multiple public sources, including Food Marketing Institute, Forrester, and Nielsen. Search inventory or check stock at your Brea Store in Brea, CA. our use of cookies, and Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. Something went wrong. Recognizing the challenges, some major grocers are using their stores as fulfillment centers, getting more value from existing assets rather than making new investments (Exhibit 2). Amazon purchased Kiva Systems for picking-center robotics. Press enter to select and open the results on a new page. Powerful trends, including new competitive pressures, technological advances, and evolving consumer attitudes and behaviors, will disrupt the grocery business from coast to coast in the next few years. Enjoy a full service experience from our bakery, deli, produce and meat departments. Until relatively recently, shoppers’ grocery options were limited to what was available at their most convenient brick-and-mortar store. Many US grocers can and do actively look to other parts of the world for examples of how to be effective online. But in the early weeks of the outbreak, weekly grocery trips by households jumped to 3.6, and 40% of shoppers said they were shopping fewer stores for groceries. Powerful trends, including new competitive pressures, technological advances, and evolving consumer attitudes and behaviors, will disrupt the grocery business from coast to coast in the next few years. 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