Grocers today are navigating numerous operational issues in the midst of the disruptions that have been challenging the economy in the aftermath of the pandemic, including supply chain imbalance, food inflation and labor shortages, among others. Moreover, the unpredictability of constantly altering consumer purchasing behaviors has made operational issues even harder to deal with as grocers chase answers to — What consumers want? Where are they shopping? Where should grocers focus their energies and investments?
According to a report from the Food Industry Association, in 2022 50% of online shoppers bought groceries online every two weeks or more. The pandemic-influenced surge of online shopping adoption coupled with the increasing variety of online buying options marked a “dramatic upheaval” for the grocery landscape
However, as we slowly emerge out of the pandemic, the rise of hybrid retail has shifted consumer expectations for both online and in-store shopping. Additionally, consumers now mix and match buying in-person and online, responding to comfort, time savings, quality and price sensitivity. This means grocers now have several areas they can address to improve hybrid shopping and optimize operations for price-sensitive shoppers.
Price Sensitivity and Cost Optimization
Food inflation has continued at a persistent trickle over the past several months, leaping nearly 12% over the last 12 months, according to the U.S. Bureau of Labor Statistics’ Consumer Price Index (CPI) data for May. This marks the largest 12-month increase in 43 years. We can now see signs of consumers reacting to higher food prices in small but significant ways.
Advertisement
Price-sensitive consumers are shifting where they shop and what they’re buying, with implications for both food manufacturers and the retailers that stock their products. According to Symphony RetailAI, the most price-sensitive consumers — approximately one-third of all shoppers — are turning their back on the products they have been loyal to and have traditionally purchased.
Another study by Dunnhumby found that seven in 10 in-store and online grocery shoppers rated it important that a grocery retailer had prices that were lower than other retailers. When forced to make trade-offs, the survey showed that ecommerce grocery shoppers balance time savings with money savings, while brick-and-mortar shoppers are 2X more likely to choose a store because of prices.
In responding to this price sensitivity, grocers can optimize their growing online programs to reduce operational costs and still provide a great shopping experience for their consumers. Take for example microfulfillment centers (MFCs), which are relatively small-footprint automated fulfillment areas placed within stores (or near stores) to get closer to customers, reduce transportation costs and shorten delivery times. This can be an excellent opportunity for grocers to reduce overhead while increasing the long-term profitability of stores.
Additionally, the use of more efficient approaches for store fulfillment, such as proper planogram integration, multi-order fulfillment and zone picking, can enable grocers to optimize order fulfillment when picking orders from their physical store locations (which is still the most common form of online order picking for grocers). These solutions can make picking orders faster, cut down on picking errors, make it easier to identify substitutions and more, further bringing down operational cost.
Some other innovations currently in use globally include the use of electronic shelf labels (ESLs), which are digital versions of the paper price labels on each shelf. With ESLs a single person can instantly change prices and monitor inventory throughout the store from a computer terminal, saving significant labor hours and thus helping grocers reduce operational costs and pass those savings on to consumers.
Hybrid Shopping and Grocers
While online shopping can help customers save time, more easily compare prices, discover new products and avoid the in-store checkout process, it lacks the sensory experience customers still highly value. Some customers have less trust in others to shop for them. As a result, even as ecommerce grows, in-person shopping still remains the most popular buying option for consumers because it gives them more control over their experience.
Even so, stores have long struggled with the checkout experience for customers, and as shoppers become more accustomed to buying online, they want an easier process to buy their items. On in-store trips, digitally experienced shoppers now expect this step to be frictionless, if not invisible. Shoppers have expressed frustration with the online checkout process being cumbersome in multiple industry reports. As a result, shoppers now expect checkouts to be more efficient regardless of how or where they shop.
Scan and Go is a way for grocers to potentially speed up the checkout process in stores and cut down on lines. Numerous retailers have started adding self-checkout terminals to their stores, and manufacturers of these systems are innovating to make self-checkout as accurate and frictionless as possible.
Supermarkets can also take advantage of new data-gathering tools to offer personalized shopping experiences for their customers. FMI noted that for online grocery shopping, 68% of surveyed consumers look at product reviews, 65% use list-building tools based on prior purchases and 62% filter for specific product attributes. Offering customers the ease of online shopping with these tools, personally targeted promotions, as well as curated and intuitive product recommendations, will go a long way in cementing the grocer-consumer relationship.
In order for grocers to meet consumers where they are, they must extend the benefits of online and in-store across channels. They should look to make online personalization more readily available for in-store shopping via in-app product recommendations, enable customers to leverage technology while shopping at stores, blend online and in-store experiences and use customer data to provide custom promotions. It will now take more than just fully stocked shelves to maintain repeat customers.
As Chief Product Officer at Orckestra (powered by mdf commerce), Frank Kouretas leads product strategy and management, driving the next wave of commerce innovation and beautifully simple shopping experiences. Kouretas is passionate about building and marketing innovative technology products and brings over 15 years of leadership experience in product development, product management and marketing. Prior to joining Orckestra, Kouretas was VP of Products and Marketing at Radialpoint where he led the development of innovative customer experience products used by some of the world’s leading service providers to support millions of customers.
