Supply Chain, Labor Remain Key Challenges for Grocers

To mark the release of “The Food Retailing Industry Speaks 2021” report, Leslie G. Sarasin, president and CEO of Arlington, Va.-based FMI - The Food Industry Association, held a presentation of the research, based on the survey responses of 103 food retailers and wholesalers, representing more than 38,000 stores, in the second quarter of 2021. In her remarks, Sarasin emphasized that lingering supply chain issues and employee retention and training were key issues that had come to the forefront during a year she described as “a wild ride still in progress.”

Key takeaways from the report were as follows:

1. Consumer shifts: Retailers adapted to the changes in the ways that customers have been consuming meals and snacks during the pandemic, and these evolving trends were seen as positive by almost all food retailers (88% positive). Additionally, consumers’ focus on health and well-being was seen by 77% of respondents as having a positive effect on the food retailing industry.
2. Transformation of online shopping: The pandemic has spurred a significant increase in online shopping and many food retailers have upped their game in this area. The vast majority (86%) now have online sales and almost all (95%) saw online sales increase in 2020. Moreover, 81% of food retailers said that they’re increasingly experimenting with their e-commerce strategies.
3. Worsening workforce woes: Front-line workers have been hailed as heroes throughout the pandemic, but recruitment and retention grew more difficult as turnover rose sharply. Retailers have adopted various strategies to address these challenges, among them higher wages and benefits, flex-time and training/skills development.
4. Supply chain challenges: Pandemic shortages have led retailers to rethink their supply chains and their engagement strategies with trading partners. Trucking and transportation capacity is one of the biggest hot-button issues, with two-thirds of responding retailers saying it’s having an adverse impact on their businesses.
5. Rising tech investments: Food retailers have ramped up investments, implementation and experimentation. Eleven percent are already using micro fulfillment, with 15% expecting to do so in 2021. As for ghost kitchens,  8% are using them and 12% are planning to. Notably, more than a third of food retailers are currently using some form of artificial intelligence.
6. Successful community support: Amidst a devastating pandemic, retailers have focused on community support and ties, ranking community programs as among the most successful of their service differentiation strategies.
7. Enhancing the in-store experience: Retailers are working hard to improve the customer experience, which have suffered from the pandemic. Among such initiatives, 83% of respondents are implementing new technologies to improve the customer experience and 61% working on reintroducing and enhancing self-service experiences in stores. Strategies such as scan-and-go and mobile payments aim to make checkout more convenient.
8. More meal solutions: More than 80% of responding retailers expect to increase space allocation for fresh-prepared grab-and-go selections, and 70% will do so for plant-based foods and meat alternatives. About two-thirds said that focusing on family meal solutions has been a key competitive differentiator.
9. Emphasis on social responsibility: Retailers’ stepped-up social responsibility efforts include charitable donations (90%); diversity in hiring (73%); overall diversity, equity and inclusion efforts (70%); energy use reduction (61%); and food waste reduction (57%).
10. Complex financial picture: Food retailers saw considerably higher sales and transaction sizes in 2020, but expenses soared, denting financial performance. Retailers made major investments in employee and customer safety, including personal protective equipment, cleaning and sanitizing, signage and plexiglass. Similarly, the costs of attracting and retaining employees grew as retailers increased wages, benefits, training and skills development.

During her presentation, Sarasin noted that new investments and strategies were needed to address supply chain challenges in particular, since “an easy solution simply doesn’t exist,” but that the industry would discuss these problems in depth at FMI’s October Annual Business Conference and, more broadly, at the organization's Midwinter Executive Conference slated for January.