Prime Day Spotlights Grocers’ ‘New Normal’
Amazon Prime Day is known as one of the best days of the year to pick up a new tablet or smart speaker, but this year’s event integrated a new element — groceries.
A Whole New World
Amazon.com's acquisition of Whole Foods last year rocked the grocery market, which had remained relatively unscathed by the rise of e-commerce. Now, grocers and food brands must compete with the massive scale and technological prowess of Amazon, forcing them to take a hard look at their businesses.
To understand how grocers are evolving in this fast-changing retail landscape, we conducted a survey of 200 grocers and food retail executives. Our findings revealed their plans for Prime Day, views on competition, and predictions for the future. Of those polled, one-third of respondents said they had food and beverage sales planned to compete with Prime Day discounts.
Cutting Costs Won’t Cut It. The Shopping Experience Proves to Be ‘Priceless.’
Competitive discounts aren’t uncommon. Retailers like Bed Bath & Beyond, J.C. Penney, and Home Depot all said they would match Amazon’s Prime Day prices for most goods. This can be a successful tactic for many retailers, but the grocery business — with its already razor-thin profit margins — is a very different game. Grocers simply can’t sustain competing on price against Amazon’s deep pockets.
The true differentiator comes in grocers’ ability to create an intuitive and convenient experience for customers. Grocers are moving in this direction, with 70 percent of respondents classifying their organizations as "proactive" in implementing new technology.
However, grocers still struggle with execution. Almost half of food retail executives said they haven’t yet figured out how to use technology like other retailers and, in an earlier survey we conducted of consumers, 50 percent of them agreed.
Optimizing Store Layouts
Reports show that consumer spending around the perimeter of the store — produce, deli goods and prepared meals — rose $140 billion between 2013 and 2017. This shift toward freshness and convenience, combined with a growing trend toward grab n’ go “micro-visits,” must dictate how the stores of tomorrow are designed — and grocers seem to agree.
More than half of the food retail executives polled confirmed that offering more prepared foods would perform best. This aligns with shoppers’ views. Ninety-two percent of consumers reported a desire for efficient grocery-buying experiences, and 68 percent said they would try new products if they were accessible at checkout.
The Grocery Store of the Future
With online shopping an ever-present option, consumers are no longer willing to circle the store to find their goods. Grocers that wish to survive will adapt accordingly.
More than half the executives we polled feel that frozen and refrigerated goods will soon be distributed throughout the store, enabling easier and more flexible shopping for consumers and more lucrative placement options for grocers and brands. New technologies are making it possible to free refrigerated and frozen goods from the back of the store and place them with natural pairings (think chips next to cold salsa or berries next to ice cream). Similarly, frozen goods can now be placed right at the point of sale to drive impulse buys on a food sector surging in popularity.
Walmart’s recent investment in self-driving technology to shuttle customers to stores proves physical retail space isn’t going away. However, it does need to change. Our findings show that grocers are open to embracing their new normal, with 85 percent anticipating physical stores to begin offering auto-replenishment of basic goods and 65 percent believing that supermarkets will become social gathering places with bars and restaurants.
Amazon, game on.
Tony Atti is the founder and CEO of Phononic, a global leader in solid-state cooling.