Grocery retail business shifting from self-service to personalized model, spawning new channels
Changes will affect how consumers
shop and interact with brands
by Ray Gaul
Vice President, Research & Analytics
The grocery retail industry is facing a monumental shift. This shift can best be described as a shift from a “self-service” grocery industry to a “personalized” grocery industry. The age of driving a car to a big supermarket, taking a shopping cart around acres of retail shelves, filling the cart, and then filling the car is fading. The early stages of “personalized” retail are emerging to replace it.
Whenever an industry emerges quickly, satellite business channels grow alongside that industry. The companies that are satellites often work in tandem or partnership with the original industry. For example, in the 20th century, when the consumer automobile industry emerged, a variety of companies changed their original direction to meet new opportunities. The range of industries that arrived to support the car industry ranged from manufacturing (tire companies), to retail (gas stations and autoparts superstores). Very few people know that Michelin’s original tire business was designed to service the bicycle industry. A few more know that Shell began as an import-export trading business, specializing in obtaining rare seashells for interior home designs that were popular at the time, and later switched to petroleum. Without the emergence of satellite industries, the core industry never can or will develop. Can you imagine Ford Motor Company surviving without partnerships with tire manufacturers or motor fuel stations?
From where we sit today, we know that the shift of the grocery retail industry includes the use of technology to help retailers and shoppers communicate in real time. What does this look like? Instead of waving at a shelf-stocker to come help you, you can instant-message for help, like pressing the assistance button on an airplane. We also know that some items will be available in stores for browsing, while others will only be made available if you ask for a chance to see them before buying. In addition, we know that consumers will be less predictable—one week they will visit the market, the next they will shop from home, and the next they’ll simply order meal solutions in a delivery box. But this is boring stuff—everyone is talking about these things. So let’s talk about what very few people are talking about: the satellite business channels growing rapidly to support this future.
In the age of unicorn companies, the number of startup companies emerging to support a personalized grocery industry should not be underestimated. Dozens of companies get launched each month, specialized in working with personalized grocery giants to make the consumer shopping experience “frictionless.” These companies are emerging at four stages on the path to grocery purchase.
· First stage: Product discovery In the age of self-service grocery there were two ways consumers would try new products. First, they would see it or try it via a friend, family member, or colleague. Second, they would see it or try it at the supermarket, decide to buy a sample, and then try it at home. In the age of personalized-service grocery, we can imagine new ways emerging. The “send samples in a box” industry has already seen some widespread success. Companies like Birchbox and Graze would not have existed prior to the age of personalized grocery. Pop-up grocery stores, sample vans, and other solutions are emerging.
· Second stage: Replenishment The old way of buying groceries has been to check the supplies at home, make a list, go to the store, fill the basket, get home, and realize you forgot two items. In a personalized grocery future, companies will lock you into a subscription and the Internet of Things will begin to help you manage what is expiring soon and what is in short-supply, and even how to save money on your next order. Solutions such as Amazon Dash, which allows brands to supply reorder buttons to households, or Samsung’s Family Hub Refrigerator, which allows families to receive a spoilage update, are just some of the many solutions arriving.
· Third stage: Payment Most people under the age of 40 can imagine a cashless future. Canada may soon be the first country to officially stop printing cash. Kenya and Thailand are not there yet but not due to lack of trying. Only one in eight financial transactions in Sweden involves cash. As we enter the age of personalized grocery, we can imagine a day where technology, product scanning, and payment merge. Amazon Go is the example that has gone viral, where, using a phone, you can scan and pay for your goods. However, a number of companies are launching digital wallets and blockchain financial solutions. The banks and credit card companies are likely to lead the way in this area. Alibaba’s investments in Alipay have in a short time made it the No. 1 form of payment in China. Surely more innovation is on the way.
· Fourth stage: Delivery In the past, grocery shopping was linear. You would start at home or work, go to the store, and then bring your items home. If you had frozen food, you would have to go home quickly or borrow a neighbor’s freezer. The future will be the opposite of linear. You fancy ice cream for the weekend barbecue? Why not order it now, ask for it to be put in a locker, and then pick it up at your kid’s sports game on Saturday morning? Would that ruin the surprise? Why not have the balloon artist you hired pick it up for you, using the unique code you provided with his pre-booked Uber ride? Companies like DHL are already innovating in ways that may surprise you, and they are working in concert with leading retailers to bring the ideas to market.
As you think about the future of brands and branding, one thing is sure: As the grocery industry transforms, we are bound to see a wide range of satellite industries emerge, and the brands that carry these industries are bound to change from what they are today into something potentially quite different. This will only work in partnership.