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Digital Disruption at the Grocery Store McKinsey & Company outlines five trends shaping the grocery industry in 2020. Nearly every major industry, from insurance to mining, is struggling to recruit and retain digital talent, given that demand currently outpaces supply. But to compete with the recruiting capabilities of large technology companies, grocers should take several additional steps: Online grocery on its own is not new news to retailers and the broader consumer community, but the current pace of investment and innovation is unprecedented. Supermarket News, September 2019, supermarketnews.com. 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. 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. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. 129 0 obj <>stream Subscribed to {PRACTICE_NAME} email alerts. Walmart earnings call, November 2019. If grocers want to meet the demands of their customers, they have to adapt. We use cookies essential for this site to function well. 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 … 9 Some believe this means offering the most seamless click-and-collect experience, while others believe this means offering the fastest delivery. Grocers have remained largely immune to digital disruption—until recently. Amazon purchased Kiva Systems for picking-center robotics. Companies should ensure their digital presences bolster their brands and engage millennials. Almost all are looking for new ways to partner with consumer-packaged-goods companies to engage more deeply with customers. Websites, mobile apps and in-store experiences should all seamlessly align. Where demand density is low and demand is fragmented, investments in large fulfillment centers, delivery fleets, and drivers are hard to justify. Traditional brick-and-mortar stores continue to dominate the grocery shopping experience, but e-grocery … As this Forbes article explains, what is known as the “Amazon Effect” has “introduced consumers to an almost completely frictionless … �`� D���i1 V 0�32|b�p`sP`z�����q�t�=�\ 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. Digital Disruption for Grocery Delivery and Buy Online Pick Up In Store. 10. 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 Whether you’re in the market for farm fresh local produce, freshly baked cookies or the perfect cut of meat; we have you covered. Here, too, adoption speeds may exceed expectations by wide margins. 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. DIGITAL DISRUPTION in CPG & Retail - Kindle edition by Shopper Technology Institute. We believe the winners in e-grocery will be those that deliver a great and consistent customer experience the fastest. Automation is also coming to last-mile delivery. 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). 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. There have also been a range of approaches to last-mile delivery. 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. Whether you’re in the market for farm fresh local produce, freshly baked cookies or the perfect cut of meat; we have you covered. We are following five powerful trends that will shape the industry’s transformation in the United States. 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. Today, tens of millions of Americans can shop for groceries online, where their options include curbside pickup and home delivery. Grocers large and small should step back now and reevaluate their near- and long-term strategies. as major retailers—including well-funded entrants from outside the sector—invest in automation and innovative operating models to solve challenges in fulfillment and last-mile delivery. Never miss an insight. Others are struggling, and some may disappear. In the highly competitive, low-margin world of the grocery industry, digital transformation presents significant challenges, while at the same time offering tremendous opportunities. The two pillars of e-commerce fulfillment—picking and last-mile delivery—add significant operating costs to an already low-margin business, so we expect large grocers to turn to automation and robotics. 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. Enjoy a full service experience from our bakery, deli, produce and meat departments. 4 Kroger Disrupts the Disruptors By Jackson Lewis on Jan. 08, 2019 CINCINNATI -- Kroger and Microsoft are teaming up and taking on Amazon. We are also starting to see significant innovations in the omnichannel grocery-customer experience in several Asian markets (such as China and Japan). 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. tab, Engineering, Construction & Building Materials, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility. Martin Joerss, Florian Neuhaus, and Jürgen Schröder, “. In response, many traditional grocers are rapidly expanding their online operations (Exhibit 1). Kroger has retrofitted just about every shelf in two stores in Monroe, Ohio, and Redmond, Wash., with Microsoft’s smart shelves. Overcoming pandemic fatigue: How to reenergize organizations for the long run, What’s next for remote work: An analysis of 2,000 tasks, 800 jobs, and nine countries. 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. The grocery industry is ripe for disruption. Our flagship business publication has been defining and informing the senior-management agenda since 1964. Please click "Accept" to help us improve its usefulness with additional cookies. Few times in history have rapid advancements in technology and breakthrough innovations had the ability to disrupt the grocery business model in … %%EOF 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. Grocers have remained largely immune to digital disruption—until recently. Whichever player discovers and delivers the optimal customer experience first will be the incumbent. 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