Symphony Retail AI, provider of artificial intelligence-enabled decision platforms, solutions and customer-centric insights, highlights key trends that are forcing unprecedented and rapid changes in the grocery industry, with the release of its “Supermarket 2020” findings and recommendations.
The findings pinpoint the market forces that are driving radical disruption in supermarkets, along with prescriptive information on how the grocery industry can transform itself with a massive re-imagination of supermarkets driven by consumer trends.
Key trends include:
- Large weekly shopping trips being displaced by online shopping and preferences for prepared foods. The weekly “pantry-loading” shopping trip to the local grocery store is declining, with a 3-4 percent decrease in large baskets from just a year ago. Consumers are increasingly turning to online shopping when purchasing 15 or more items, and online grocery shopping has risen 14 percent in the United States. In addition, 76 percent of consumers report that they are increasingly buying prepared food instead of cooking dinner.
- Amazon’s disruption through its acquisition of Whole Foods. Whole Foods immediately lowered prices on many products on Day One of the Amazon acquisition, and together, Amazon and Whole Foods have a huge logistical advantage. Eighty-one percent of Whole Foods shoppers represent the same demographics as Amazon Prime customers, and 95 percent of Amazon Prime customers now have refrigerated Amazon distribution centers within 10 miles.
- Growth of private label brands. CPGs are feeling the pressure, too, facing increasing competition from private label brands. Private label is up 18 percent in the United States, leading to revenue losses and lower margins for major CPGs and creating headwinds for future growth.
- Continued, fierce competition from discounters such as Aldi, LIDL, Walmart and others. Aldi and LIDL are turning up the heat on traditional supermarkets by rapidly increasing their store count in the United States. Far more than just discounters, they are expert product curators with highly efficient stores that feature higher-margin private label brands and low overhead. Adding to this, Walmart has declared a “price war” on grocery SKUs, asking CPGs to move all trade promotion dollars into “Everyday Low Price.”
“Supermarkets face unprecedented competitive pressures today,” says Pallab Chatterjee, chairman and CEO, Symphony Retail Ai. “In order to compete and win, grocery retailers must transform their outdated store models and become ‘stores of the future’ that are agile and aligned with today’s consumer preferences.”
The stores of the future, or what Symphony calls "Supermarket 2020" stores, are radically different from today’s stores. Symphony Retail Ai has identified the following distinct characteristics of these future stores:
- Stores will have fewer than 10 aisles instead of today’s 15+ aisles, with an average product range of fewer than 10 highly curated SKUs per category to meet consumer needs for convenience and quality. Stores can support this in-store model by offering a million SKUs online as part of their multichannel strategy, offering shoppers virtually unlimited product access.
- Stores should remove the center store aisles to make room for prepared foods, taking advantage of shoppers’ intentions to spend 3-4 times more on prepared foods compared to other areas. Symphony’s research indicates that year-over-year growth in prepared foods is 8-9 percent annually for supermarkets.
- A special products aisle can offer a “surprise and delight” section that engages shoppers with products that change twice a week.
- Grocers can recreate a farmer’s market in every store, supplied by local and regional farms and suppliers that meet strict requirements.
- Private label will represent a much higher percent of SKUs, increasing to 40-45 percent compared with today’s 18-20 percent.
- Stores will offer shoppers convenient tools such as click and collect, 3D store-navigation that allows shoppers to connect their shopping list to store layout on their mobile phones, and AI-enabled, real-time basket cost reduction offers.