Inflation, product shortages and economic uncertainty are on everyone’s mind, from the White House to your house. Even for an industry that has been characterized by change over the past two years, it feels like grocery — and especially digital grocery — is poised to experience upheaval in the coming 12 months. So what changes should we expect to see in 2022? Here’s my take:
1. Ultra-rapid grocery delivery will gain further influence.
Outfits like GoPuff, Gorillas and 1520 took the grocery market by storm in 2021, offering a limited menu of consumables, delivered to your door in an incredible 30 minutes or less (and commanding multi-billion dollar valuations in the process.) These players will continue to expand in 2022, reshaping consumers’ expectations of an acceptable wait time for groceries. Long-term, I predict that ultra-rapid delivery of fresh produce from geographically strategic farming operations will become the de facto market model, decentralizing production and personalizing product assortments.
2. Merchandise assortments will shrink dramatically.
The supply chain crisis means an out-of-stock crisis for grocers, and empty shelves means unhappy and disloyal customers. Meanwhile, rising energy, shipping and labor costs means higher prices for many grocery items. To operate profitably and satisfy customers, grocers will optimize their assortments with far fewer, but more reliable and affordable products.
3. Personalized substitutions will become a big priority.
Out-of-stock issues and the bad substitutions associated with them were already a problem before COVID. They were made painfully obvious by the growth of online grocery and will only get worse with the supply chain crisis. In 2022, grocers will focus on providing smart substitutions when items are out of stock and offering recommendations of what else shoppers can purchase, based on each shopper’s individual preferences
4. Artificial Intelligence will define winners and losers.
Picking the right merchandise assortments and recommending the right products on a 1:1 basis requires artificial intelligence. With the likes of Walmart and Amazon as competitors, the quality of grocers’ AI will determine the winners and losers in grocery. Being digitally capable will no longer be enough. In 2022, grocers will need to become digital-first. Part of being able to do this successfully will be to better predict what shoppers actually want. As Mark Cuban said recently, “We have bifurcated into an economy where there are companies that are good at AI and then there is everybody else.”
5. Grocery shopping experiences will become more specialized.
Brick-and-mortar grocery customers choose their favorite stores largely based on proximity. Since digital grocery has grown, however, many have strayed to Amazon, Walmart and other providers because location no longer matters. To retain their customers, grocers will provide unique and personalized online shopping experiences that foster customer loyalty — or else go out of business.
6. Grocery trade spend will be resolved or replicated in the digital world.
Trade spend is a quarter-trillion dollar industry and critical to profitability in grocery. As more customers order online, that critical source of income is in decline. Making matters worse for most grocers, CPG brands are realizing that nobody can compete with Amazon in terms of bang for their buck. As a result, grocers need to learn how to deliver extremely personalized, effective product recommendations online.
7. Mobile commerce will define the next evolution of grocery shopping.
More than half of online grocery shoppers already use their mobile devices to shop. In 2022, we should see more and more of them using touchless checkout in-store and mobile payment systems like Apple Pay, Google Pay and Venmo across channels. For grocers, this means not only ensuring that they have the appropriate technology but also deciphering the convenience and speed mentality of the shoppers who prefer m-commerce.
If 2020 was online grocery’s “debutante party,” then 2022 might be viewed as its genuine coming of age. Nearly all of the developments mentioned above signify a maturation of digital grocery from “trendy new option” to “commercial mainstay.” We’re going to see a lot of wheat separated from chaff in 2022, and the result is going to be a stronger, more functional and more competitive industry. Grocers certainly need to stay on their toes in 2022, but those that perform well should finally see profitability and loyalty return to this dynamic sector.
Spencer Price is Co-founder and CEO of Halla. He leads Halla’s strategic vision, growth plan and value offering, and works to build robust, symbiotic relationships with customers, vendors and investors. Price has been a speaker at Groceryshop and Euroshop and received a 2021 GenNext award from Progressive Grocer, recognizing the best and brightest young leaders of the grocery industry.