David D. Stone is CEO and founder of Forager, a digital local food procurement mobile and web platform that helps grocers and co-ops source and share local foods.
Retailers are pushing customers online from all directions. Whether it’s click and collect through Walmart and Kroger, or the numerous meal kit services on the market, online ordering and delivery is here to stay and will continue to grow.
And while a recent Reuters survey found that customers overwhelmingly preferred seeing and feeling food prior to purchase, mobile technology, Google Home and Alexa voice ordering continue to make it easier to purchase center of the store items with convenience and confidence. The other night, when we were out of plastic wrap, I ordered a roll from Amazon’s Alexa. Not only was it 5% cheaper than Walmart — it was delivered the next day at no cost.
Grocers are not going to beat Amazon at this game.
What do customers care about more than prices and convenience? According to a recent survey by A.T. Kearney, 93% of shoppers prioritized fresh over all other attributes. Likewise, customers are increasingly eco-minded, concerned about the environmental impact of getting food to their plate. While emerging technologies like blockchain show promise for transparent sourcing, the old adage of “know your farmer” is the truest way to aid consumers in this process while providing the freshest food through hyper-local sourcing.
For years, grocers have lagged behind the produce selection and adept display tactics of Whole Foods Market. They are just beginning to catch up even though we’ve known for quite some time that consumers put fresh, local produce at the top of their shopping list. So why does produce only represent 10% of a grocer’s sales when it makes up over a quarter of consumers’ dinner plates?
Technology is revolutionizing the supply chain. Efficiency is more important than ever.
Grocers have been historically weak when it comes to technology. Multichannel retailers, e-tailers and increasingly, restaurants have been digitizing on all three sides of the demand chain — from delivery to online to inventory management.
Local, fresh produce is perhaps the most important yet also greatest challenge in the procurement process. With no barcodes, huge variability in supply and quality, and with the majority of suppliers still using phone, fax and email to sell, local food sourcing is woefully inefficient and error prone. Current procurement processes just won’t scale to meet market demand and therefore sales will be lost to grocers who are already offering a wide variety and abundant supply of local, fresh food, even in the winter months. Grocers should investigate new technologies that streamline and improve sourcing and collaboration with local suppliers — enabling them to improve margins and increase the number and quality of local products on their shelves.
To compete with the Amazons of the world, grocers also need to focus on making the in-store experience more personal and effective. This is an area where online retailers can’t compete.
Contrast this approach with employee-free stores of the future. Time will tell if Amazon Go will take off. Certainly, technological innovations continue to take shopping convenience to a whole new level. Even if grocers have the capital to invest in these technologies, it’s doubtful they can win against the likes of Amazon, Walmart, Target and new foreign competitors like Lidl.
The writing is on the wall. Or should I say, the drone is on its way.
Go fresh or go home.