How Grocery Retailers Can Learn to Thrive in the Face of Change

We are experiencing an evolution of commerce.

Over the past three years, the pandemic, associated lockdowns, and economic impacts have changed our routines time and again, creating an inflection point for consumers, employees and grocers alike. This disruption resulted in consumers and employees redefining and reconsidering their relationships with companies they once relied on, creating an opening for new brands and an existential need for grocery retailers to reinvigorate current relationships. In addition, the rise of Gen Z’s expectations, purchasing power and role in the workforce makes evolving to meet the modern customer a must. Additionally, recent advancements in point-of-sale (POS) solutions and fulfillment systems are providing new ways to address the needs of modern consumers while reducing the strain on front-line workers.

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To effectively capitalize on this moment, as well as moments to come, grocery retailers need to become learning organizations, expanding their ability to analyze and interpret current experiences while anticipating future trends. To drive ongoing success, you’ll need a learning agenda at the organization and team levels, a holistic view of operations across existing functional siloes, and insight into existing gaps and opportunities.  

While many parts of your business are critical for continued evolution, the following four areas require that you fundamentally disrupt or advance current operations: customer experience, front-line employee engagement, POS technology and supply chain planning.

Reconceptualizing Customer Delight

Consumer buying habits and expectations have fundamentally changed. Consumer loyalty is waning, and what once resulted in delight is now a minimum requirement. Over the past year, 71% of consumers worldwide have switched brands at least once.

Speed and convenience are the top-line demands, but that’s just the beginning. While contactless delivery and curbside service gave companies an advantage in winning hearts and minds during the early days of the pandemic, these services quickly became basic expectations, with the average consumer using curbside pickup at least three times per month well after business returned to normal.

It’s time to raise the stakes to meet rising expectations. Consumers want engaging, frictionless shopping experiences that meet them where they are and ideally transport them to a better place, all while delivering convenience and sustainability. Nearly half of online adults in the United States agree that they want different delivery options to suit their needs. Methods and avenues for service delivery are evolving, too. More than 70% of consumers surveyed say that they appreciate the convenience of instantly purchasing products while browsing social media.

Consumers are increasingly exerting their buying power to reward companies that address their expectations and desires. Zeroing in on your customers’ real needs takes communication, information, experimentation and the courage to do things differently. For grocery retailers, this includes everything from the footprint and layout of brick-and-mortar stores to innovative, future-focused technology.

For example, a large regional grocery chain in Texas reimagined its brick-and-mortar model, adding built-in convenience everywhere you look. New stores include large, covered parking areas designated for quick curbside pickup, powered by the store’s mobile app. In addition, the chain has added full in-store restaurants, complete with multilane drive-thru service.

While biometric identification, QR-enabled payments and smart carts are still early in their adoption and use, Amazon is primed to sell its Dashcart technology and has successfully piloted it in select Whole Foods Market stores. Meanwhile, Sam’s Club has doubled down on its mobile experience, allowing shoppers to skip the line by using their smartphones to scan and pay for purchases throughout the store. These frictionless, ultra-convenient models are poised to shape the in-store experience of tomorrow, helping grocers optimize labor while enhancing the customer experience.

Modernizing the Employee Experience

The pandemic prompted front-line workers to re-evaluate their relationship with their jobs as they looked for more stability, safety, value and purpose in their day-to-day lives. Grocery workers were particularly affected because of the truly essential nature of their roles and the personal risk they took to continue doing their work. Now that most hazard-pay programs have expired, many grocery employees are looking for more.

As a result, 80% of food retailers say that they face hiring challenges that are negatively affecting their businesses. In 2022, the turnover rate for all hourly in-store positions was 75.8%, up from 68% in 2021. The turnover rate for store managers and assistant store managers was 17.7% and 29.2%, respectively, up from 14.6% and 22% in 2021.

Employees across the board are demanding more – and backing their demands with real consequences when employers don’t meet their needs. With record low unemployment and a reduced workforce, the best workers are selective and open to switching jobs for stronger compensation or better work-life balance. Recent high-profile unionization efforts have also inspired conversations about collective action. Rather than setting out to fight unionization, retailers should be proactive about meeting the holistic and material needs of their employees well before they reach the point of pushing back.

To retain employees and encourage them to be brand ambassadors, you need to create and sustain a meaningful value equation for your workforce. This means taking a good look at your compensation, culture, expectations and technology.

For example, compensation packages should include material benefits and paid leave in addition to competitive pay. The amount and type of work employees are expected to do should be reasonable, allowing them to produce consistent and impactful results. Modern technology can help your employees see their work becoming more manageable over time. Rather than fearing technology, today’s workers are crying out for advancements that can help lighten their loads. All of this needs to happen within a deliberate culture, one of empowerment and mutual respect where employees are valued, have options for professional-learning and growth opportunities, and feel supported by frictionless processes.

One St. Louis-based grocery chain is embracing change by following the ridesharing model, empowering employees to build their own schedules and receive notifications about open shifts through a mobile app. This provides workers with new levels of flexibility and choice, helping the store remain relevant as an employer to an evolving workforce.

It’s a well-accepted adage that employee satisfaction and customer experience go hand in hand, especially in service industries like grocery retail. Engaged front-line workers give the best service, create low-friction work environments and foster other happy employees. What’s more, socially conscious consumers have taken a renewed interest in working conditions and workers’ rights, opting to support brands with a reputation for treating their people well.

A Prime Time for POS

The POS system is the lifeblood of the grocery business, connecting customers, employees and management; gathering essential data; and tying in gas rewards, loyalty programs, customer apps, digital coupons, and more. Investing in modern POS technology and other integrated systems is another critical way to empower front-line workers and enhance your customer experience.

Historically, companies have been slow to invest in POS upgrades or replacements, waiting until the pain from antiquated systems is impossible to ignore. Grocery retailers should invest and upgrade proactively, not just to guard against potential failure, but also to enable modern integrations, increase functionality, and create a more robust experience for your consumers and team. This is a trend that’s gaining steam, as more than 55% of retailers plan to replace their POS software in the next three years, and about 30% plan to replace it within one year. For POS hardware alone, that number jumps to nearly 60% within the next three years, and 22% within one year.

A seamless and frictionless transaction can make or break a customer’s experience. Leaders need to get out on the shop floor to gather feedback from employees with direct experience and personally observe the pain points, inefficiencies and missed opportunities created by current systems.

While an efficient and user-friendly POS is essential for brick-and-mortar operations, it’s no less important in e-commerce. The right systems can capture essential data about customer behavior and satisfaction, parse it to provide valuable insights, and offer an online purchasing experience that’s convenient, functional and enjoyable for the customer.

It’s an exciting time to explore new POS technologies. The pandemic sparked a surge of innovation, offering more features, streamlined user experiences and a host of data collection tools.

Deliver More With a Streamlined Supply Chain

Like POS, supply chain and fulfillment were once considered back-end. When business is running smoothly, customers never even think about the concept of the supply chain. Consumer anxiety has grown, however, after experiencing recent and memorable shortages of items that we used to take for granted. Today, “supply chain” is a new household buzzword as continued disruptions and shipping delays lead to rising frustrations. While pandemic-era shortages are behind us for now, supply chain issues are a continued reality in grocery stores, with sporadic shortages occurring across categories.

It’s essential to meet customers where they are, with the product they want, when they need it. Right now, 46% of consumers will move to a competitor if their usual brand is out of stock.  Also, 45% of consumers wish they had more information about their in-transit orders. This starts with supply chain planning, accurately predicting demand and understanding the implications of each decision made to get your product into the consumer’s hands.

While delivery has flourished, the path to efficient and profitable shipping in the grocery sector has been challenged by cold-chain logistics and variable product sizes and weights. To make shipping more feasible, some grocers are piloting micro-fulfillment centers, often within existing stores, that leverage automation in the “last mile” of grocery supply chains. This test-and-learn approach allows grocers to make informed decisions on how to scale the channel based on the interplay among operational efficiency, customer experience and overall economics. 

Just like POS technologies, supply chain systems have historically been entrenched and slow to change. Many small companies, and even some large ones, still use Excel as their only management tool. In fact, 67% of supply chain managers use Excel. Meanwhile, only 6% of companies have full visibility into their supply chain, and 69% don’t have any visibility at all.

This lack of visibility and efficiency reached a breaking point during the pandemic, prompting many executives to consider investing in tech that they had previously dismissed as a nice-to-have. An updated, tech-enabled supply chain environment does more than make customers happy – it also provides valuable data and organization that can vastly improve efficiency, reduce costs, and enable mindful adjustments based on real-time and historical data.

Taking the 1st Step

Each of these issues is vast, complex and interrelated, which can initially seem overwhelming. While these topics are complex, there’s also an element of simplicity in each one. To make meaningful changes, it’s helpful to start by revisiting and updating your foundational value proposition: What is your brand promise? Who is your customer (now), and what do they want? What do you need to do (differently) to meet them where they are?  What do your employees need to thrive? How do you measure and celebrate success? 

Developing a learning agenda in regard to these questions will help you capitalize on the evolution of commerce.

As markets find a new normal, we are at an inflection point that presents opportunities for business leaders to adapt and evolve. Ad-hoc, incremental adjustments made to maintain existing operations will no longer carry the day. To grow your business, you must commit to enhancing consumer and employee experiences with your brand. This goes beyond attraction and engagement to focus on serving employees and customers at every stage of their journey.