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Amidst an evolving retail environment, the role of the traditional grocery store is evolving to a connected set of alternative retail options that make up a new food marketplace. While some of the elements are not new, what is new is the pace of disruption and number of disruptors. Consumers are more rapidly adopting the plethora of new platforms, brands, and retail models available to them, from food subscription services to brand cafés. These new models are being introduced and expanded at such a rapid pace that in just a few years we expect the market to look nothing like it does today.
Traditional food retailers reigned supreme for many years and they still hold their own.Their large, loyal customer bases, high transactional frequency, and strong cash flow provide a foundation from which to innovate.
However, three emerging trends, along with the adoption of digital technologies, are threatening to leave traditional food retailers behind.
Channels, formats and touchpoints. Consumer channels with food retailers are exploding from three (store, web, mobile) to 20+ touchpoints (voice commerce, virtual stores, auto-replenishment, etc.). These new touchpoints are transaction ready and developed by entirely new competitors based on business models that provide food and service, together. Even today, more than half (51%) of consumers want to leverage digital more broadly, experiencing new digital-to-physical combinations.1
Concierge convenience. The bounty of new ways to get food, from community sourced agriculture to prepared meal solutions, pose a challenge to traditional models. According to Accenture Strategy research, five out of ten consumers would trust Artificial Intelligence to shop for their food to streamline daily decision making.2 This allows consumers to easily bypass retailer doors and instead have food delivered directly to their doorstep, pantry, or refrigerator whenever and however they choose. To that end, 72% of customers say they would like their customer service to be faster.3
Business model innovation. New entrants, traditional grocers, venture capital, established CPG brands, and private equity funds all have big war chests. Grocery and meal delivery companies raised $781 million globally midway through 2017.4 This investment pool, along with consumers’ willingness to experiment, creates a ripe environment for rapid business model innovation – which makes the new competitive landscape significantly wider.
As consumer demands move in new directions, so goes the market. To stay relevant, traditional retailers should focus their efforts on a few key areas to redefine their value proposition and evolve their model.
First, take a fresh look at the todays food journeys and reinvent how best to support consumers’ food needs; in other words, eliminate all the pain and inconvenience from their experience along every step.
Second, pivot to new business models to enable these new journeys that leave behind the baggage of the old model.
Third, modernize operations to remove inefficiency to pay for the transformation needed, and create an ecosystem of partners that bring capabilities and meaningful acceleration along the path.
Finally, invest in technologies that support both operational efficiency and growth goals. Capabilities range from automation of routine tasks to analytics that improve understanding of customer needs to platforms that enable seamless digital experiences.
Consumers will increasingly vote with their trips, clicks and purchase occasions as they adopt new technologies that enable their own personal food experience. Traditional retailers must keep pace with new technologies of their own to deliver relevant experiences whenever, and however, consumers want them.
1Accenture Strategy Global Consumer Pulse Research, 2017
2Accenture Strategy Global Consumer Pulse Research, 2017
4 Grocery Delivery Startups Lead Financing In Food Sector For First Time, Forbes 2016