Industry leaders identify 'forces of change' in grocery

There is no one-size-fits-all solution in developing the grocery store of the future, but a new study identifies six forces of change grocers should keep in mind as they grow their operations. 

Deloitte’s “The Future of Grocery Retail” report released Wednesday surveyed more than 800 industry leaders, economists, sociologists, policymakers and others over the last 18 months to gain a better understanding of the biggest factors facing the industry over the next decade.  

Those six forces of change include: the changing consumer; evolving society and culture; the growth of new technology; radical industry upheaval; extreme climate change; and shifting economics, policy and power. 

“Like technology, each of the six forces described above is quite powerful in its own right,” the report noted. “But collectively, they can amount to something more, something nonlinear, which can have major implications for the industry’s markets, models and mechanics.” 

The report said the changing nature of the consumer is reflected in the increasingly diverse demographics of age, family size, household composition, ethnic heritage and sexual identity. “The world we are headed to will likely be more racially and ethnically diverse as well as grayer, due to declining birth rates, immigration and increased longevity,” the report noted. “One grocery format, value proposition and channel should not be built around serving the bell-curve-average consumer that, in many senses, no longer exists.” 

Consumers are also becoming less predictable in the way they progress through life. The traditional route of education, marriage, procreation and homeownership is becoming less common. “Instead, we are seeing a more complex set of behaviors, needs and journeys emerge. People, especially younger people, seek purpose and embrace businesses that share their beliefs and values,” the report noted.  

New technologies, such as artificial intelligence, facial recognition technology and delivery via self-driving vehicles and drones, are among the myriad cutting-edge tech changes that are shaping the grocery store of tomorrow, according to Deloitte.  

Grocers must also consider the potential for radical industry upheaval through advances in delivery, private-label offerings, CPG brands selling direct to consumers, increased competition and more.  

Extreme weather changes over the next decade are also likely to change the way grocery stores operate in the future, as grocers grapple with the potentially increased costs due to supply chain disruptions, the report explained. “In general, the grocery and food industry may be compelled to revisit their contributions to deforestation, energy usage and consumer waste, and seek more sustainable approaches to business,” the report said.  

Cybercrime, war, tariffs, partisan politics in the U.S. and policies related to issues like immigration and labor will also play a substantial role in the decision-making process for grocers, the report added.  

While considering the potential impacts from these and other topics, keeping the customer at the center of the equation is key to navigating the increasingly complex industry landscape, the report said. “As the industry shifts from supply-driven to demand-driven, extrapolating consumer wants, needs and behaviors should be a north star,” the report said. “Building the future also requires a more complete picture of the new world emerging. It means understanding the full set of forces and their implications on the industry’s markets, models, and mechanics.” 

The report noted that competitive barriers in the consumer industry are beginning to break down through competition from digital outsiders, CPG companies selling direct to consumers and stores using internal customer data to develop more relevant products of their own. “The private labels help stores to differentiate and increase profitability, and 92% of grocery retail executives in our survey think it will be a major and growing source of revenue,” the report said. 

Grocers also have an opportunity to help grow other businesses and profit through retail media networks, which have the ability to provide access to targeted audiences, according to the report. "Some visions of food as medicine involve taking insurance or employer subsidy payments for medically tailored meals, introducing a new ecosystem of partners that grocery’s capabilities can serve,” the report stated. 

While that data is helping grocers grow their own brands and strengthen their position in the market, the report noted that eight out of every 10 grocery executives said they will need more third-party data to better know their customers. 

“Putting all that data to use requires advanced analytics and machine intelligence to cut the complexity down,” the report stated. “Even then, too many decisions will likely need to be made, too quickly to be done by humans.”