The definitive guide to everything you missed at Groceryshop – even if you were there
There is general agreement the food retail industry is poised for tremendous disruption, but beyond that there is little agreement over what change will look like or the pace at which it will occur.
This disparity of viewpoints was highly evident at the inaugural Groceryshop event held Oct. 28-31 in Las Vegas. Organizers of the event, who are the same team behind Shoptalk, tapped into the uncertainty and angst that exists among players in the space, many of whom don't agree on the size of the market or what constitutes “grocery,” but know they need to move with speed or risk being marginalized.
The form disruption takes in the years ahead will be shaped, as it always is, by consumer behavior. However, one change that’s evident is that entrepreneurs and disruptors are also eager to beat shoppers to the punch and provide services and solutions that aren't yet in demand. Despite the palpable uncertainty present at Groceryshop, some directionally consistent themes emerged during speaker presentations, conversations with solution providers and encounters with industry contacts in hallways, at receptions and during meals. For example:
- The robotic revolution is real: Home delivery and store pickup have gained acceptance among shoppers faster than anything veteran retailers say they have ever seen. In the rush to satisfy the shift in consumer behavior, retailers have added costs to an already low margin business, relied on third parties or attempted to execute with in-house labor. None are good options from a cost structure standpoint, which is why an arms race is underway to develop robotic picking systems. Kroger, Walmart and Albertsons executives speaking at Groceryshop all described bold automation initiatives with the potential to scale.
- Fulfillment anywhere: Automation and robotics at scale will be required to help retailers operate profitably, but autonomous deliveries hold great promise as well. An orange vehicle from Udelv has already made more than 1,000 deliveries in the San Francisco area so it’s happening now. However, the economics are challenging and there is work to be done to make unaided deliveries feasible. The technology exists and is functioning, but estimates of when autonomy is widespread range from a few year to a few decades, ensuring there will be plenty of conjecture and experimentation in the space for years to come.
- The store experience reimagined: There is broad agreement physical retail will dominate food retailing in the future, but the concept of store experience is being turned on its head. That’s because as stores become fulfillment centers, optimized for the picking of orders, whether for delivery or pick-up, they won’t need to look like they do today, which is to say elaborate presentations the require extensive labor to create visual appeal. There may not even need to be as many stores. Some operators are already rethinking their expansion plans because as a growing percentage of sales are deliveries, fewer stores will be need. Conversely, developers contend for exactly the same reason that fewer, smaller stores closer to customers are needed to ensure faster deliveries. Either way, one clue will be when developers start requesting zoning variances for reduced parking requirements because the role of stores has evolved to become forward deployed distribution hubs and meal prep centers.
- The size of the prize is unclear: Some people call it the grocery industry and others call it food retailing. Either way, as market participants navigate new digital waters, estimates of the market size heard at Groceryshop ranged from $800 billion to $2 trillion. Leading retailers are taking an expansive “share of stomach” view when thinking about their competitive set and addressable market because that is how consumers think about food. Traditional food retailers are competing with food service operators who are competing with C-store operators who are competing with prepared meal offerings at warehouse clubs and home delivered meal kit providers. This blurring of the line affects promotion and pricing strategies, store operations and distribution strategies.
- Think like a startup. This is a phrase often used by large, slow growing mega-cap CPG companies who have failed to innovate and been outmaneuvered by nimble competitors. The solution has been to make acquisitions or fund skunkworks projects to fail fast, often and cheaply in the name of uncovering innovation. However, instead of talking about being something they can never truly be, major CPG companies can be what they are - organizations that have the resources, production capabilities, distribution channels and regulatory compliance infrastructure to out startup the startups.
- What about Amazon: The most disruptive force in retail was noticeably absent from Groceryshop’s otherwise comprehensive agenda. While this was a conspicuous omission, stranger still was that Amazon didn’t dominate conversations the way it normally does. It’s been only 18 months since the Whole Foods acquisition. One theory is other retailers have so upped their e-commerce game and are now more effectively leveraging their physical infrastructure that some of the gloom and doom talk around Amazon has subsided. Look for Amazon to have a presence at the fourth iteration of Shoptalk next March 3-6.
- Innovation lives abroad: Most U.S. retailers focus on the competitor down the street because in analog times retail was a local phenomenon. The Internet changed that decades ago and savvy competitors understand they need to look abroad to international markets such as China and the U.K., which are further along the digital adoption curve for a glimpse of what awaits the U.S. market. China in particular is a hotbed of innovation and Alibaba leads the way. The company’s business intelligence manager Jing Wang shared details of the company’s Hema supermarkets, which represent the seamless blending of physical and digital, fulfilling and delivering thousands of orders daily and pushing sales per square foot to nearly $700. Meanwhile, in the U.K., Ocado has developed highly automated food fulfillment centers that are unlike anything in the U.S., which is why Kroger has entered into an agreement with Ocado to open fulfillment centers in the U.S.
- Groceryshop was great. No event is perfect, but Groceryshop was close, especially when compared to other industry events that just don’t measure up in terms of total attendee experience. There was some grumbling about speakers who didn’t share intimate details, but that is a complaint at many events. The event’s biggest critics were the organizers themselves who found themselves a victim of their own success. Groceryshop’s attendance of 2,200 people and different aspects of the event’s structure strained the capacity of the Aria resort. That won’t be a problem next year when the event follows in the footstep of Shoptalk and moves to the Venetian with attendance for the Sept. 15-18, 2019, event already forecast to exceed 3,000. “Our shows get better every year because we listen very carefully and we iterate very fast,” Groceryshop founder, chairman and CEO Anil Aggarwal told attendees at the beginning of the event.