What Grocers Need to Do Now
OPINION: EDITOR'S NOTE
As grocery retailers prepare to head into the all-important holiday season, the industry faces some worrisome headwinds.
Headlines (and podcasts and TikToks and …) about grocery price inflation and product recalls are incessant. At Progressive Grocer’s GroceryTech event in June, retailers spoke of challenges with expense control, shopper promotions and a “theft crisis.” Meanwhile, the Kroger-Albertsons merger still hangs in the balance. And profit margins across the food retail landscape continue to be under tremendous pressure.
But there is much to celebrate and to do.
A Resurgent Supply Chain
According to the Food Industry Association’s (FMI) 75th annual research report, “The Food Retailing Industry Speaks,” impressive operational improvements are happening across the board in the grocery channel.
Both retailers and suppliers reported significant declines in the negative impacts of supply chain and transportation capacity issues that have plagued the industry over the past few years. According to FMI’s survey, the percentage of retailers emphasizing negative impacts from trucking/transportation challenges declined from 79% to 35%, while suppliers noted a decline from 72% to 58%. Retailers are also reporting a dramatic drop in out-of-stock rates, which fell from 10.7% in 2022 to 6.5% in 2023 — even lower than the typical historic rate of 8%.
PG reports that companies such as Walmart are investing in supply chain modernization this year, with the retailer set to open its second automated perishable distribution center, in Lancaster, Texas, followed by sites in Wellford, S.C.; Belvidere, Ill.; and Pilesgrove, N.J.
Playing for Keeps
The FMI research also showed that retailers and suppliers are shoring up employee retention, another persistent hot-button issue for the industry. Food retailers and suppliers offered more positive feedback about their ability to recruit and retain quality talent, with average turnover rates for food retail employees falling slightly from a historic high of 65% in 2022 to 58% last year.
Companies such as SpartanNash are making great strides when it comes to creating workforce cultures that bring out the best in each and every employee, as Nicole Zube, EVP and chief human resources officer at the company, detailed in PG’s latest TWIG Podcast.
Investment in the Future
And yes, retailers are still investing — specifically in innovative strategies to improve customer experience and increase growth, according to the FMI survey. Top initiatives include experimenting with in-store technologies to enhance the shopping experience (81%). Retailers are also responding to changing consumer habits by increasing in-store space for freshly prepared grab-and-go items (79%) and carrying more private-brand items (67%) and locally sourced foods (57%).
In recent visits to stores operated by Kroger, Fresh Thyme Farmers Market, ALDI, Price Chopper/Market 32, Tops Markets LLC, Albertsons, Wegmans Food Markets, Publix Supermarkets and H-E-B, a renewed focus on grab-and-go, private brands and local is gloriously obvious.
The Tech-Enabled Grocer
Technology is also playing a bigger role in the grocery shopping experience, with 41% of food retailers and 69% of food suppliers reporting the use of artificial intelligence (AI) for parts of their businesses — the retailer usage percentage nearly doubling year over year. Some of the tech priorities for retailers attending GroceryTech included launching or expanding electronic shelf labels, deploying replenishment-friendly robots, and adopting retail media.
“The food industry continues to demonstrate its collective resilience and adaptability in solving persistent transportation and employee turnover issues so it can focus on operational efficiencies,” said FMI President and CEO Leslie G. Sarasin. “Inflationary pressures and other challenges continue to squeeze profit margins, but even these obstacles do not stop the industry from its investment commitments to sustainability, emerging technologies, and marketing and modernization strategies that improve the in-store shopping experience.”
I can’t wait to see what else 2024 brings.
