CIO , Data
eGrocery is here, and for the most part, the players that have dominated the industry over the last century are the ones falling by the wayside. In the last 5 years, a slew of big-name grocery chains have filed for bankruptcy, including A&P, Winn-Dixie, Bi-Lo and Marsh Supermarkets. What’s now calling for concern is the news of two local supermarket chains biting the bullet just a day apart in the new year.
New York’s beloved 87 year-old chain, Fairway, filed for Chapter 11 bankruptcy citing “market pressure” as the cause. They’ve agreed to sell 5 stores and a distribution center in a $70M deal with Village Super Market in an effort to unlade the $227M they currently hold in debt. The very next day, Lucky’s Market, also filed for chapter 11 with plans to sell stores to Aldi & Publix.
Is this a red herring of what’s to come for 2020?
What’s happening in grocery retail is more than a shakeout, and retailers can certainly expect to see further upheaval in the coming decade. In fact, more than 50% of the grocery sector’s economic profit vanished between 2012 and 2017, and the cause is evident: digital transformation.
eMarketer’s research found that US grocery eCommerce is the fastest-growing product category online. This coincides with their projection that “US food and beverage eCommerce sales will grow roughly 23% in 2019 to $22.63 billion”.
Buy online, pick up in-store (BOPUS) has been a major growth catalyst in recent years, with the number of retail locations offering the service nearly doubling in the last year alone.
Today’s leaders in grocery sales are the ones with the greatest stake in eCommerce. Brian Crain, Head of Global Business Development with PrecimaNow tells ProgressiveGrocer, “Winners in retail are absolutely embracing data, and it’s not just in marketing and merchandising, it’s everywhere throughout the organization.” Amazon being one of the pioneers of eGrocery saw a 12.5% increase in grocery sales ($8.2B) for 2019. The tech giant announced in October that their Amazon Fresh service will be included free for Amazon Prime members, prompting an 80% increase in Prime members trying grocery delivery for the first time.
Walmart also showed signs of significant growth with a 10.1% increase in sales ($2.8B) last year, which presumably came as a result of their expanded BOPUS & curbside pickup offerings in over 3,000 stores nationwide. Walmart’s success in the grocery category was an evidently strategic move following several years of brick and mortar closures with “financial performance” being the main cause, and in lieu of this, the retail giant has experimented with a cashier-less store in Florida in an effort to cut costs at the core of their business: the store.
The third largest digital retailer, Kroger, shouldn’t be ignored, as they saw their biggest year-over-year gain of 66% in 2019. The 137-year-old company has aptly leveraged digital transformation to revolutionize their business, so it’s especially notably that they’re now holding the ranks with Amazon & Walmart. Kroger has expanded its home delivery services with their Kroger Ship app, providing online grocery pickup to 91% of households in 1,581 of its 2,764 stores. They’ve also kick-started a trial program in Cincinnati for 30-minute Grocery deliveries, known as Kroger Rush. Investing in long-run gains, they’ve opened their robot-operated fulfillment center in Maryland, which is set to bring them close to 100% in order accuracy once the facility is fully functional in 2021. Kroger has also transformed their digital presence with new developments in their mobile app, the release of a Kroger podcast exploring food trends with cookbook author & TV personality, Danielle Kartes, and recruiting DDB as their “agency of record”. Kroger is a prime example of a legacy company gracefully adapting to a new era without getting caught up in the meandering trends that have futilely affected others in the industry.
The grocery category is thriving now more than ever, with recent projections estimating that sales will increase 17% ( $100B in the United States alone) by 2025. This lends more opportunity than there was before, but with an upturn in opportunity comes an even more drastic increase in competition. That being said, 2020 is the year that grocers must either seize the moment much like a Kroger, or cut their losses like a Fairway.
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