Where is the industry going and how will it get there? These are the two questions a futurist is frequently asked. Former AT&T internal consultant and consumer technologist Rich Wolf of the consulting firm InfoScapes.com, Rumson, N.J., addresses these and other questions concerning shopping trends for the next few years.
olf, a futurist, to determine the unknown equation of future shopping, and SN asked Wolf to project his reactions into the poll. Wolf acknowledges that his point of view revolves around consumer demand and technology.
"The problem with polling shoppers about the future is that most shoppers don't know what is possible and can't reasonably be expected to appreciate the advantages that new applications such as electronic commerce can bring to them," he observed.
In short, the shopper poll could underspin the importance electronic commerce will eventually have to supermarket-style shopping.
Indeed, in strong language, Wolf asserts that current supermarket players could be left out in the cold if they aren't alert to challenges posed by electronic business: "In general, the winners will be those companies that can envision the need to provide their customers with an effective in-home shopping experience. The losers will be those companies that harbor the myth that supermarket shopping will remain an in-store experience despite the rising tide of electronic commerce."
Here's a summary of his observations about future shopping:
SN: Do the conclusions of the SN Shoppers Poll sound reasonable given your recent experiences with shoppers?
WOLF: As a futurist, I focus on trends in consumer demand and technological opportunity. The problem with polling shoppers about the future is that most shoppers don't know what is possible and can't reasonably be expected to appreciate the advantages that new applications such as electronic commerce can bring to them. Consider, too, that the median income of the polled respondents was $28, 870. This population is less likely to have access to electronic commerce on the Internet.
SN: Do you have any quantifiable evidence about your answer?
WOLF: The survey identified that only 8% of shoppers polled had access to home delivery for an extra charge. However, many shoppers enjoyed home delivery 50 years ago when there were small neighborhood grocery stores, pushcarts and dairy trucks.
The average North American grocery shopper spends eight hours per month in a supermarket. Younger shoppers have less and less discretionary time and are most dissatisfied with supermarkets.
Electronic commerce can provide a way to satisfy the modern consumer's desire to save time and lower prices. The move to electronic grocery shopping will be inevitable regardless of the current perceptions of today's shopper.
SN: What types of activities are companies doing to further accommodate the shopper?
WOLF: There are many activities that are making the visit to the supermarket a more pleasant and efficient experience. These include new one-stop services such as dry cleaning and new conveniences such as self-scanning and automated checkout.
Some supermarkets such as Jungle Jim's or Stew Leonard's are transforming the supermarket into a theme park. The most important activity, however, is the emergence of on-line supermarket shopping, such as Peapod, NetGrocer or Hannaford's Homeruns. In other words, the best shopper accommodation is avoidance of in-store shopping altogether.
SN: What segments of food retailing and food service do you think are going to undergo the greatest change in the next ten years?
WOLF: There are going to be two key variables: price and availability. If I have a willingness to pay for a product but it is not priced right or not available, I will not buy it regardless of the sales channel. On-line in-home shopping will lead the success curve in urban areas because the inherent distribution costs are lower. That is where you will see the most amount of competition from on-line folks like NetGrocer and Peapod.
Once these pioneers become the cultural leaders and people recognize that there are a large number of satisfied customers, people will start talking to each other -- word of mouth -- then there will be demands that will move out of the urban areas and start to serve that same purpose across all geographic regions. Soon after, the local supermarkets will see a decline in walk-in traffic. Perhaps the local supermarket will become a kind of fill-in solution. This phenomenon will blur the distinction between the supermarket and the convenience market.
If the local supermarket is going to maintain inventory, require expensive real-estate space, have pickers and a computer program so picking for on-line orders can be done efficiently, then why doesn't it start consolidating from large warehouse space in an area where the real estate is cheap and just send trucks out to provide the last step of delivery? If I am going through the whole on-line experience, why do I get it within 1 mile from my house and not just get delivery to my house? Now it could be because there is a myth that it is too expensive to deliver to homes, but I doubt that this will be true if home delivery is done on a mass basis as it was in the 1950s.
SN: Why aren't the current on-line business models for grocery working?
WOLF: With any new concept or new cultural idea it takes a while for it to grow and it has to be nurtured. That is why most Internet stocks are not turning any profit -- they are still in the "feed the network stage." Companies like Peapod and NetGrocer are basically feeding their networks and there are currently not enough people out there who are willing to make on-line shopping profitable. However, the trends are up and we are approaching a critical point where all of a sudden you will see on-line shopping in the media. You'll see the benefits of on-line grocery shopping on the nightly news and the concept will suddenly take off.
It will be a competitive market in cyberspace. On-line food-marketing companies may presently have faulty business models, but they will fix it or someone will buy them out and fix it. There is a fundamental problem that Peapod has and they are changing it now, and that is their application over the whole business model in the supermarket business today. So all of the expenses they have are added expenses. Plus it is unseemly for armies of vans to pull into a parking lot of a neighborhood supermarket disgorging hordes of people picking things off the shelves. It seems like an awful lot of overhead. So now they are starting to build these distribution centers and that is going to change the whole business model. Companies such as Peapod are currently very sensitive to stepping on the toes of any of their supermarket partners. Nor is Kraft Foods going to want to cut the supermarkets out. There are going to be sensitivities all over the place, but just follow the money to find the future of on-line grocery shopping.
SN: Where will convenience stores fit in the future of food retailing?
WOLF: If you look at the advantages of an in-store experience today, from the vendors', producers' and shoppers' perspective, some things will go away. They may be replaced with other things that are a lot more convenient. Convenience stores are sort of a niche that is going to be reasonably shielded. I don't exactly know what people buy in convenience stores, but it is stuff that they need right away, otherwise they wouldn't pay a premium in terms of price.
So if you say why do people go to the convenience store rather than the supermarket, then you have to start saying why would people go to the convenience store rather than the Internet, and the answer to that is because it is fast. If you need gratification right now because you just ran out of milk, you are going to need some places to buy that milk. The supermarket may change its model in some way so that it starts competing for the remaining walk-in customers by delivering directly to the home to make convenience shopping super-convenient. Convenience stores just like restaurants will be shielded from much of on-line activity.
SN: How about mass merchants?
WOLF: Everybody is worried about these companies because they are extending into groceries and they already have the model and the infrastructure. They are going to be very potent competitors to the existing supermarkets. And, Amazon.com may threaten both classes of trade because they have the best consumer feedback, and they listen to their customers as to what to sell.
SN: Do you think drug stores and health-food stores have a future?
WOLF: Their survival depends on what motivates you to go out to buy aspirins in the store when you can just check off a box and you can have it delivered. Where they will have a niche is where the consumer will say "I can't wait three days to get this." But even prescriptions are going on-line now.
SN: How do you think the home-dining experience will change within the next 10 years?
WOLF: Families will have less and less discretionary time. Time is going to be extremely important. The consumer will be going to prepackaged meal components, a more coordinated dinner that you can cook either manually or have your smart appliances do it. But the package is a menu put together in advance and all the ingredients will come out. You will either be given instructions if you wish to cook yourself or have something else do it for you. This could lead to a huge rise in the in-home eating experience.
SN: How can retailer's best take advantage of that change?
WOLF: By packaging things up as whole dinners but not a TV dinner, not all in one tray but something people don't feel guilty about.
SN: What do you see as the shopping experience of the future?
WOLF: The shopping experience of the future will consist of automatic replenishment of in-home inventory augmented by the existence of experiential or niche in-store experiences.
SN: What areas in the supermarkets will grow?
WOLF: In order to attract customers the supermarket experience has to be fun. And that doesn't mean painting the walls. For example, supermarkets are going to need to have cooking-class areas. While you are having your cooking class, they will do the shopping for you. There will be a niche for supermarkets that will host ethnic nights, cooking schools and the like to draw shoppers.
SN: Which areas will shrink?
WOLF: There will be less and less of the food area. The inventory may start going away. There will be more prepared foods and meals solutions.I would invest in taking care of kids and running cooking classes. Set some space aside for your customers to draw them to your store.
SN: What are the next steps to be taken in the grocery-retailing business?
WOLF: There is under way a gradual metamorphosis that will lead us to the new grocery-shopping paradigm. The change started with the use of in-store technology such as checkout scanning. The current changes are being led by on-line information and shopping. Chances are that your supermarket is on the Internet.
The next phase will be characterized by competitive on-line supermarket alternatives and experiential/niche brick-and-mortar groceries. In-store shopping will decline. In the final phase, the industry will evolve into an on-line supplier network feeding into a competitive series of fulfillment and distribution facilities. The emergence of home scanners and smart-card readers will complete the transition to automatic home-based food shopping.
SN: Who will be the winners and who will be the losers?
WOLF: In general, the winners will be those companies that can envision the need to provide their customers with an effective in-home shopping experience. The losers will be those companies that harbor the myth that supermarket shopping will remain an in-store experience.
Futurist Rich Wolf, who has hosted industry workshops, has a special interest in the trends and implications of information technology. He is a frequent keynote speaker at customer venues and has lectured at professional societies and universities.
Wolf worked at Bell Laboratories and AT&T Labs for 32 years, where his assignments included the design of customer switching and central office systems, legal and regulatory matters, network management and security. Prior to leaving AT&T Labs in 1998 he managed the AT&T Labs Technical Center for Customer Programs where he directed the AT&T effort to interface customers with AT&T's researchers and developers.