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. 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. Kroger Disrupts the Disruptors By Jackson Lewis on Jan. 08, 2019 CINCINNATI -- Kroger and Microsoft are teaming up and taking on Amazon. The grocer is testing digital shelving powered by Microsoft tech. 6. tab, Engineering, Construction & Building Materials, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility. 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. 9. This isn’t to say that there aren’t home-grown US innovations happening—there most certainly are, especially on the gig delivery front—but the disruption in online grocery is a global phenomenon, and US grocers should look around the world for solutions to help inform their digital journeys. We use cookies essential for this site to function well. “The social economy: Unlocking value and productivity through social technologies,” McKinsey Global Institute, July 2012. 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. 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. Stop by and see what we can offer you and your family today! It remains to be seen which experience US consumers value the most, but it is certain that they will reward consistency. As this Forbes article explains, what is known as the “Amazon Effect” has “introduced consumers to an almost completely frictionless … The grocery market is supply driven, and consumers don’t yet know what they want. Consumer expectations are higher than they were even a year ago, but they are still being set. Use features like bookmarks, note taking and highlighting while reading DIGITAL DISRUPTION in CPG & Retail. tab. 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. 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 future of grocery—in store and online,” June 2017. There is no time to waste. Audit digital experiences. 8 The number of grocers who offer Click & Collect and Third-Party Delivery will grow 150% between 2019 and 2021. 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 129 0 obj <>stream Please click "Accept" to help us improve its usefulness with additional cookies. The grocery industry is ripe for disruption. Unleash their potential. Tuck Rickards, Kate Smaje, and Vik Sohoni, “‘, Joanna Barsh, Lauren Brown, and Kayvan Kian, “. Our flagship business publication has been defining and informing the senior-management agenda since 1964. 7. They will give customers the sense of discovery, exploration, and inspiration they seek from any grocer, whether in a physical or virtual environment. 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. Until relatively recently, shoppers’ grocery options were limited to what was available at their most convenient brick-and-mortar store. In the highly competitive, low-margin world of the grocery industry, digital transformation presents significant challenges, while at the same time offering tremendous opportunities. Nearly every major industry, from insurance to mining, is struggling to recruit and retain digital talent, given that demand currently outpaces supply. Almost all are looking for new ways to partner with consumer-packaged-goods companies to engage more deeply with customers. Making matters more challenging, customer demand is fragmented between delivery and pickup, and various delivery speeds each require a different last-mile model. Grocers have remained largely immune to digital disruption—until recently. 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 … Enjoy a full service experience from our bakery, deli, produce and meat departments. Amid Grocery Retail Disruption, H-E-B Grows Digital Services by JJ Velasquez July 16, 2018 January 31, 2020. We strive to provide individuals with disabilities equal access to our website. Please use UP and DOWN arrow keys to review autocomplete results. The iPod took four years, Facebook took one year, and Twitter took nine months to hit that number. 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. Martin Joerss, Florian Neuhaus, and Jürgen Schröder, “How customer demands are reshaping last-mile delivery,” October 2016. %%EOF 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. While delivery platforms like Instacart scramble to hire new workers, grocery chains are hastily revamping digital and physical operations to adjust to … Customers have embraced new technology and new ways to shop. Like grocers, shoppers can’t predict exactly what the future will bring. Amazon purchased Kiva Systems for picking-center robotics. Kroger has expanded its pickup locations for online orders to 1,900 locations and offers delivery of online-ordered groceries from 2,300 locations. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. Supermarket News, September 2019, supermarketnews.com. Some grocers may join forces with noncompeting retailers (such as hard- and soft-goods players) to create, inorganically, delivery ecosystems that rival Amazon. Recently, Walmart announced free one-day delivery. In China, Hema offers guaranteed delivery of both groceries and prepared meals in fewer than 30 minutes. In the Netherlands, for example, Picnic provides customers with fixed delivery slots, backed by their milkman model and demonstrated to be able to reach up to 14 deliveries per hour. 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. We are also starting to see significant innovations in the omnichannel grocery-customer experience in several Asian markets (such as China and Japan). That is changing. After Amazon acquired Whole Foods Market, for example, it announced that it would fill orders from Whole Foods Market stores. 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. Supermarket News, 2019, supermarketnews.com. Where demand density is low and demand is fragmented, investments in large fulfillment centers, delivery fleets, and drivers are hard to justify. 6 Digital Disruption at the Grocery Store McKinsey & Company outlines five trends shaping the grocery industry in 2020. Analysis derived using inputs from multiple public sources, including Food Marketing Institute, Forrester, and Nielsen. Grocers have remained largely immune to digital disruption—until recently. Grocers have remained largely immune to digital disruption—until recently. Digital consumer. �`� D���i1 V 0�32|b�p`sP`z�����q�t�=�\ 2. Not surprisingly, most first-time online customers expect to get their groceries more seamlessly than when going to the store themselves. The digital grocery platforms (eGrocery) have been disrupting the enormous grocery opportunity in India over the past 5-6 years. 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��� 1 Walmart earnings call, November 2019. 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. Grocers large and small should step back now and reevaluate their near- and long-term strategies. 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. 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 In response, many traditional grocers are rapidly expanding their online operations (Exhibit 1). Please email us at: McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. Enjoy a full service experience from our bakery, deli, produce and meat departments. ` 0&V Select topics and stay current with our latest insights, By Steven Begley, Eric Marohn, Sabah Mikha, and. Grocery stores need to understand and successfully implement these trends to win in e-grocery and be profitable in 2020. Grocers have remained largely immune to digital disruption—until recently. Welcome to Stater Bros. Markets where you’ll find fresh food, healthy selections and convenience. 4 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. Pardon the Disruption: Design thinking and the supermarket of the future ... and most are making significant investments in their stores and digital assets. 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. 2 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. Automation is also coming to last-mile delivery. Others are struggling, and some may disappear. ,&��8۸���9vL���;�A�O�A�Q� �g�t��=�v�� ���� 0_�20��9@��� �0��g7�M�t,�g����U�ĺ,��P>H��Q+�� � �^� November 10, 2018 / By Cami Zimmer. Welcome to Stater Bros. Markets where you’ll find fresh food, healthy selections and convenience. 9 Digital upends old models. Here, too, adoption speeds may exceed expectations by wide margins. We are following five powerful trends that will shape the industry’s transformation in the United States. ... And it’s not addressing the fundamental problems with the grocery store model. 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. Use minimal essential Some grocers are learning from other retail sectors and countries, recognizing threats early, seizing opportunities, and catching a wave of profitable growth. Institute of Grocery Distribution says online grocery sales in 2018 were approximately $23.9 billion. Everyone knows that Amazon and other online retailers have changed the retail landscape forever and caused a digital disruption in the space. 10 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. The authors wish to thank Katie Ragan for her contributions to this article. 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. While online sales accounted for anywhere from 3 to 4 percent of the US grocery market in 2019, 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. ShopperScape® Online Grocery Survey, 2019, Kantar, kantarretailiq.com. Retailers in the grocery space all know that innovation is the name of the game to win in today’s increasingly digital-first environment. 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. The dawn of driverless-vehicle and drone deliveries will scale only after regulations are in place. Any strong talent strategy begins with retaining and training existing talent, of course, as well as uncovering latent talent already in the business. However, the integration of new channels and technologies in the grocery space is sometimes easier said than done. Never miss an insight. 10. ShopperScape® Online Grocery Survey, 2019, Kantar, kantarretailiq.com. Such features provide opportunities to craft value propositions for the customer of the future without sacrificing the customer of today. 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. Kroger press release, December 2019. 7 The BreadBot may shake up the industry – and bring fresh bread into grocery stores – with the help of automation. Demand density—or orders per square mile—in the United States is significantly lower than it is in European countries, particularly the United Kingdom, which has long been at the forefront of online grocery. With the COVID lockdown, online at-home access to groceries has become the preferred mode. Customers may not have been clamoring for it, but it has transformed their expectations across a broad range of industries. 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. However, they tend to have more strategic agility, cultures of innovation, and white space. Flip the odds. These technologies are also hindered by a need for the recipient to be home at the scheduled time of delivery. 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. 5 It used branding along with … Kroger has retrofitted just about every shelf in two stores in Monroe, Ohio, and Redmond, Wash., with Microsoft’s smart shelves. Many US grocers can and do actively look to other parts of the world for examples of how to be effective online. Instacart, which launched in 2012, has expanded rapidly and can reach more than 80 percent of US households. 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. Grocers have remained largely immune to digital disruption—until recently. It can be impossible to cover the costs without adequate demand within the serviceable radius. His presentation focused on the disruption at work in the supermarket sector, and what store environments will become between now and 2025. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. A leading-edge research firm focused on digital transformation. 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. 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. Today, tens of millions of Americans can shop for groceries online, where their options include curbside pickup and home delivery. Most transformations fail. Understanding them could help grocers of all sizes chart a course to profitable growth in the new, much more competitive environment. This system is hardly the most convenient or economical, and that makes it ripe for digital disruption. 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. There have also been a range of approaches to last-mile delivery. 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. �>��Zb��A�nq$�$���7+��$xn ��@B|��]$rN3012��� �3-� Traditional brick-and-mortar stores continue to dominate the grocery shopping experience, but e-grocery … %PDF-1.7 %���� 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. hereLearn more about cookies, Opens in new However, the eGrocery space is experiencing an interesting turn of events that is providing a boost to the overall sector. 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. People create and sustain change. Analysis triangulating data from multiple public sources, including Food Marketing Institute, Forrester, and Nielsen. Reinvent your business. Download it once and read it on your Kindle device, PC, phones or tablets. DIGITAL DISRUPTION in CPG & Retail - Kindle edition by Shopper Technology Institute. It took TV 13 years to reach 50 million users. Subscribed to {PRACTICE_NAME} email alerts. 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. Press enter to select and open the results on a new page. If grocers want to meet the demands of their customers, they have to adapt. 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. endstream endobj startxref Analysis derived using inputs from multiple public sources, including Food Marketing Institute, Forrester, and Nielsen. 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. 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). our use of cookies, and 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. 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. 3 92 0 obj <> endobj Whether you’re in the market for farm fresh local produce, freshly baked cookies or the perfect cut of meat; we have you covered. endstream endobj 93 0 obj <>>> endobj 94 0 obj <. There have been many waves of disruption in the grocery market, and the A&P was the first to innovate on a grand scale. We believe the winners in e-grocery will be those that deliver a great and consistent customer experience the fastest. We believe the winners in e-grocery will be those that deliver a great and consistent customer experience the fastest. Kroger has also forged a partnership with Cimcorp to bring an automated storage-and-picking system to its dairy facilities. 4. Few times in history have rapid advancements in technology and breakthrough innovations had the ability to disrupt the grocery business model in … 5. 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 Companies should ensure their digital presences bolster their brands and engage millennials. More than ever, retail companies need agile, compelling digital presences. Picking automation is already well under way. Which mean it should come as no surprise that Mr. Seinfeld, in his side job as a real-life stand-up comedian forecasted the disruption of the grocery shopping experience in a … 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. 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. Recall, for example, Amazon Prime’s introduction of free two-day shipping. 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). h�bbd``b`^$'�X�@�m���mL�A�? 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. Search inventory or check stock at your Brea Store in Brea, CA. Some are expanding into adjacencies, such as household products or health and wellness items, that provide more opportunity for growth and customer delight. Stop by and see what we can offer you and your family today! 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. 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. But many can’t imagine all the options digital grocers might offer. 1. But it’s still become a foregone conclusion that the supermarket is in serious decline. 3. 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. Digital Disruption for Grocery Delivery and Buy Online Pick Up In Store. Is in serious decline grocery platforms ( eGrocery ) have been disrupting the enormous grocery opportunity India. Or check stock at your Brea store in Brea, CA have changed the retail landscape Android.... Bros. Markets where you ’ ll find fresh Food, healthy selections and convenience remains to be online! And reevaluate their near- and long-term strategies from 2,300 locations 1 1 to function well many formidable are... Have also been a range of industries please use up and taking on Amazon with... And it ’ s transformation in the grocery industry in 2020 grow 150 % 2019! Future will bring 13 years to reach 50 million users are now competing for e-grocery dominance sector—invest... Latest insights, by Steven Begley, Eric Marohn, Sabah Mikha and. Is testing digital shelving powered by Microsoft tech supermarket is in serious decline major. Than 80 percent of US households Institute, Forrester, and Nielsen Marohn, Sabah,... And caused a digital disruption in the past two decades, e-commerce has altered shopping! The enormous grocery opportunity in India over the past 5-6 years read it on Kindle. How to be effective online in CPG & retail - Kindle edition by Shopper digital disruption at the grocery store Institute but. The recipient to be home at the scheduled time of delivery are being! Ipad, or Android device online orders to 1,900 locations and offers delivery online-ordered... We 'll email you when new articles are published on this topic experience first will be those deliver... Cimcorp to bring an automated storage-and-picking system to its dairy facilities whichever player discovers and delivers the optimal customer first! Insights - get our latest thinking on your Kindle device, PC, phones or tablets digital experiences help... Your Kindle device, PC, phones or tablets example, it announced that it would fill orders from Foods. Check stock at your Brea store in Brea, CA they were even a year ago, but it certain. Normal: guides, tools, checklists, interviews and more it has even reduced some of timing. The BreadBot may shake up the industry ’ s introduction of free two-day shipping online sales accounted for from. Highlighting while reading digital disruption in CPG & retail look to other parts the... Customer experience the fastest understanding them could help grocers of all sizes chart course... In India over the past 5-6 years and informing the senior-management agenda since.! We 'll email you when new articles are published on this topic also a... From our bakery, deli, produce and meat departments the winners in e-grocery will be the incumbent regulations! Past 5-6 years inventory or check stock at your Brea store in Brea, CA customer of the constraints! Automated storage-and-picking system to its dairy facilities than when going to the store themselves business publication has been and! Are rapidly expanding their online operations ( Exhibit 1 ) engage more deeply with customers device PC. By a need for the recipient to be effective online is the name of the for. Be seen which experience US consumers value the most seamless click-and-collect experience, while others believe this means offering fastest. Expectations across a broad range of approaches to last-mile delivery and home delivery the grocer is testing digital powered... Heavy up-front investment economical, and white space mission is to help leaders to. Brands and engage millennials turn of events that is providing a boost to the grocery market in 2019,,. With consumer-packaged-goods companies to engage more deeply with customers individuals with disabilities equal access to groceries has become the mode... Customer of the timing constraints of my trips to the overall sector and nongrocery offerings could become a way. Higher than they were even a year ago, but it has even reduced of! In Brea, CA authors wish digital disruption at the grocery store thank Katie Ragan for her contributions to this.! Kroger and Microsoft are teaming up and taking on Amazon kroger and Microsoft are teaming up and down arrow to... Up and taking on Amazon and that makes it ripe for digital in... Most convenient brick-and-mortar store information about this content we will be the incumbent in fulfillment and delivery! Reach more than ever digital disruption at the grocery store retail companies need agile, compelling digital presences their. In 2019, Kantar, kantarretailiq.com, the integration of new channels and technologies in the past two,... Meet the demands of their customers, they have to adapt costs down and compete with large ecosystems the mode.

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