Grocery 2023: Fresh is the Future
No matter the year or the macroeconomic situation, the stakes for grocers are getting higher and higher. During downturns, share-of-stomach shifts from eating out to eating in, making fresh departments more important than ever. And as grocers look for strategic areas to invest in to drive customer loyalty and build basket size, produce is at the top of the list. FMI's The Food Retailing Industry Speaks 2022 report found that 70 percent of grocers intend to expand their fresh produce departments, an area that has historically had a major impact on overall store profitability. What does this mean? It means that "fresh" is the future – and it represents a critical opportunity for grocers to differentiate from competitors.
It's well known, however, that fresh has always presented unique challenges – like variable weights, seasonality, and hyper-perishability. Until recently, the technology to overcome these challenges just hasn’t been available. Instead, grocers have continued to rely on technology built for shelf-stable products like canned goods and cereal that do not have the same inherent uncertainties as fresh. To drive better business results, retain loyal customers, and empower employees, we need to accelerate the digital transformation of our fresh food supply chain with a “fresh-first” approach. As such, scaling built-for-fresh technologies will be critical to buffering grocers from macroeconomic uncertainty in 2023 and beyond.
In 2023, grocery looks to innovate for “fresh” and core functionality. Grocers should stop relying on technology built for shelf-stable products and embrace built-for-fresh technologies.
To keep up with changing consumer demand, build their competitive edge, and reduce shrink, grocers must embrace tools that help them run their operations more smoothly. 60% of fresh departments still use pen and paper to forecast inventory or calculate orders – but 92% of grocery leaders agree that using modern technology will help them attract and retain talent. As grocers struggle with frequent out-of-stocks and higher-than-normal employee turnover, they need technology that transforms operations so stores can actually meet demand.
Fresh departments using flawed forecasting and ordering processes based on perpetual inventory end up dealing with excessive shrink that leads to additional costs for both the company and consumer. Shrink has a significant impact on bottom-line performance, but it increasingly affects the customer experience too. Knowing that grocery stores are responsible for 43 billion pounds of food waste per year, 71.6% of consumers would be more likely to support a grocery retailer that is committed to reducing food waste.
Investing in and scaling built-for-fresh technology in grocery is one important example of a more significant, overarching trend I’m seeing: the increasing adoption of technology for more foundational areas of functionality. Specifically, after Amazon bought Whole Foods, retailers raced to adopt technology for their digital e-commerce functions (things like partnering with Instacart, building mobile apps and e-commerce websites, digital advertising and marketing applications, etc.).
We are now in the second wave of innovation, where grocers are driving innovation in their core functions: store operations, supply chain, and physical merchandising, all in their brick-and-mortar stores. With more digital tools entering the physical world, grocers will be able to realize the dream of “digital transformation”--not only powering e-commerce and omnichannel applications with modern technology but also reducing food waste, increasing in-stock rate, and delighting shoppers with better quality goods.