How Grocery Retailers Can Survive Digital Disruption

Stephanie Waters

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. Today 83% of consumers regularly visit 4-9 stores to buy groceries.

Add in today’s consumer preference for out-of-home dining, and grocers and other food retailers have lost 29% of their total market share since 1991.

Only 35% of food spending takes place in a food store today, according to a recent survey from IDC.

How grocery retailers can adapt

A plethora of digitally native competitors have cropped up in recent years, such as Blue Apron, Boxed, and Instabuggy, but none have had the impact of Amazon, which has been steadily building momentum in grocery with AmazonPantry, AmazonFresh, AmazonGo, AmazonFresh Pickup, and of course, its Whole Food acquisition. Recently Amazon announced the first major integration between its e-commerce operations and Whole Foods. Groceries from the chain has been added to Amazon’s Prime Now service in four markets, with plans to expand.

What can grocery retailers learn from Amazon’s approach to grocery?

  • Be willing to experiment with different business models
  • Don’t rush to market but rather take a measured test and learn approach
  • Use acquisitions to acquire expertise not available in-house

Grocery retailers in Canada are well-positioned to survive and thrive

Longo Brothers acquired and has been successfully operating the Grocery Gateway delivery service since 2004. Most recently, they’ve tripled the size of their facilities, upgraded their infrastructure, and re-launched their website to make it even easier to use and more convenient. This helped them reach double-digit percentage growth in the first six months after re-launch.

Loblaws launched a grocery click-and-collect service in a few of their namesake Toronto stores in 2014. Since then they have methodically rolled out the service across different banners, store formats, and geographies. Recently Loblaws reported they reached 300 click-and-collect locations at the end of 2017 and is adding approximately one store per day to the total. While firmly believing the click-and-collect model provides the most value to their customers, they have formed a strategic partnership with Instacart to offer a delivery alternative.

Metro launched in-store collection and delivery services in three stores in Montreal and Laval in late 2016. A year later their services cover the vast majority of Quebec with plans for Ontario. Capitalizing on the meal kit trend, Metro recently became majority owner of Miss Fresh, a Montreal startup.

What now?

There are success stories of grocery retailers preparing for and staying ahead of the disruption in their industry. But there are also lessons to be learned from other retailers’ false starts. Here are a few examples:

  • Taking the fast and easy route of partnering with a third-party provider for your online delivery business only to have them acquired by one of your biggest competitors.
  • Over-investing in an elaborate warehouse and distribution system for your initial foray into selling groceries online rather than leveraging your existing store assets to build scale.
  • Deciding to build a supply chain system from scratch that results in empty shelves and unhappy employees rather than choosing a best-in-class, time-tested solution.

To succeed in the face of industry disruption, you need to:

  • Have leadership vision and commitment
  • Look outside your industry to fill resource and experience gaps
  • Explore what the world has to offer in terms of business models and solutions
  • Be open to coopetition partnerships and acquisitions
  • Select a technology partner that has: (1) The industry expertise, resources, and tools to help you create your vision and build your strategic plan and roadmap; (2) Market-leading “innovation to execution” pre-integrated modular solutions; (3) Long-term financial stability to invest in new technologies such as IoT, artificial intelligence, machine learning, conversational commerce, blockchain, and more; (4) Global experience with local presence and expertise

Want to learn more about engaging the modern grocery shopper? Click here!

This article originally appeared on The Future of Customer Engagement and Commerce.