Reimagining the Retail Experience at Groceryshop
by Frank Beard on
It’s become cliche to suggest that the distinctions between many retail channels are blurring, but this phenomenon was particularly evident at this month’s Groceryshop conference in Las Vegas.
When asked on stage if Chicago-based Foxtrot is an app or a store, Mike LaVitola—the company’s CEO—argued that “it doesn’t matter.” After all, sales are split nearly 50-50 and come from the same customers.
It’s also emblematic of the times that Foxtrot—along with Google, Gopuff, DoorDash, and others—shared the stage at an event dedicated to grocery stores and the CPG brands that sell within them. It’s hard to deny a sense that grocers are in the midst of an identity crisis. The competitive landscape has shifted, and many are forced to offer prepared grab-and-go food, meet demands for delivery from customers who prefer to shop at home, and they’re even reckoning with preferences for instant-needs and quick commerce that might otherwise fall under the purview of convenience stores or new competitors like Gopuff.
Fresh on everyone’s minds at the conference—of course—were the lingering effects of the COVID-19 pandemic.
“It goes without saying that the way we shop for groceries has certainly changed forever—I don't need to tell you guys that,” said Carrie Tharp, VP of retail and consumer insights for Google Cloud, in a presentation. “But what we've seen in research is that it takes 66 days to form a habit. When we first started the pandemic, most of us thought we were going to be at our house two weeks or three weeks, so we ordered some stuff online. We did some searches for that toilet paper. But the reality is we settled it for a lot longer than that, and [in] the high-frequency category, like grocery, we've now really set new patterns and behaviors that will stay for a long time.”
Writing in HNGRY, Matt Newberg argues that the recent growth of grocery e-commerce from 3% to 10% has pressured many grocers to transition from a reliance on in-store shoppers to automated micro-fulfillment systems. Indeed, I observed a working demo of one such platform in the Groceryshop exhibit hall. Whereas many grocers relied on third-parties platforms, many are now asking how they can vertically integrate.
But grocers do face strong competition in delivery. Also speaking at the conference was Gopuff’s co-founder and co-CEO, Yakir Gola. Founded in 2013, Gopuff coined the phrase “instant needs'' that is now used to describe a category of digitally-native delivery companies promising rapid delivery of around 4,000 SKUs or less. New competitors such as Gorillas and Jokr promise even lower delivery times hovering around 15 minutes.
“Once you have too many parties involved—the store, the driver, the delivery platform itself—you start to erode margin, and the customer experience is not flawless,” said Gola, presumably taking aim at delivery aggregators such as DoorDash.
In fact, DoorDash's CEO, Tony Xu, raised eyebrows with an announcement at Groceryshop that his company will now expand the delivery of alcohol to 20 states and the District of Columbia.
But it's interesting to see how grocers are attempting to future-proof their businesses. Speaking at the event, Kroger’s CEO, Rodney McMullen, acknowledged that customers are ultimately dictating how and when they want to interact with grocers. That’s why Kroger has prioritized building an omnichannel business model and made a partnership with Instacart for 30-minute delivery one of the pillars. To be fair though, he did emphasize a belief that instant needs platforms don’t necessarily serve the needs of all customers.
“There are people with a lot of money doing 2-3k SKUs that will satisfy 70% of the basket,” said McMullen. “But 30% is the recipe and the oddball spice. The glue is being able to offer total variety.”
Regardless of delivery and off-premise strategy, one thing is absolutely clear: grocers must think carefully about what their in-store experience will offer that can’t be replicated through e-commerce solutions.
Experimentation on this front is playing out in my hometown. Just before departing for Groceryshop, Hy-Vee opened a new state-of-the-art concept in Grimes, IA. In addition to a trendy food hall, upscale wine selection, and digital price tags, the store features non-traditional categories such as fitness equipment and shoes. It’s enough to wonder if they’re moving in the direction of retailers like Target.
Indeed, an interesting point was made by Rick Gomez, Target’s EVP of food and beverages at Groceryshop. He argues that the company’s widening momentum in grocery sales comes from various investments—such as their private-label products and store refreshes—that have turned Target from a "retailer that simply sells food and beverages to a retailer that celebrates food and beverages.”
There’s little no doubt that the customer experience will continue to evolve. Indeed, one of attendees at Standard’s Groceryshop dinner remarked on our efforts leading the autonomous checkout revolution, pointing out that it might lead to a similar revolution in the way stores are run. For years, retailers cut costs and removed the human element from their operations. Helpful recommendations and curated suggestions by trained staff gave way to lower wages and lower-skilled expectations. Perhaps we’re returning full circle to where we began? It’s easy to imagine a time when rather than standing behind a register all day, employees are free to deploy a higher level of creativity, management, and customer service.
It's certainly a new world in retail, and the Standard team is proud to help lead the way.