Grocery 2053: A Data-Driven Gaze into The Future
Data 3.0
Table of Contents
SECTION 1
Executive Summary
- The adoption of new tech (what we call Data 3.0) is still nominal – existing in name only -- but it greatly appeals to younger generations. Winning the hearts (and wallets) of future post millennial generations will happen not only via offering self-checkout lanes used by four out of every five customers but integrating novel holistic virtual tech in day-to-day purchases and communications.
- In the near team, retailers can integrate Customer-enabling technology to position themselves to attract the consumer of the future. They can help customers locate products in store, enable shoppers to navigate aisles of a virtual store from the comfort of their homes, offer scan and go, develop a presence in the metaverse, and give shoppers more options to own their data and engage with other shoppers in online communities.
- Between now and 2053, we see retailers doing much more: innovating with all sorts of grocery, budgeting, and wellness AIs and by taking a deeper plunge e.g., launching their very own store in the metaverse with a full AR experience for Customers and developing partnerships to accelerate metaverse access.
So, in the end, Data 3.0, though in its infancy, still makes it to the podium with a bronze medal. New tech is the way to engage with younger Customers and the more retailers integrate new tech in their online and instore spaces and experiences, the more chances they have of attracting the GenZ Customer and generations to come.
SECTION 2
Current Market Forces Driving the Trend
Go-To-Consumer Strategy
How we manufacture and get products to consumers will change drastically. 3D food printing, synthetic biology to modify crops, gene editing, bioengineering to produce more sustainable products (72b$) ref will all help improve value chains. Getting products to consumers via drones (mobility tech is evaluated at 236b$) will become the new delivery method of the future. Even the global marketplace will evolve. The importance of ecosystems will grow -- think AI for replenishment and trusted market suppliers that can provide independent supply paths. This will help subdue future disturbances like the China lockdowns that have meant merchandize stuck at ports.
Insights 3.0
Understanding what shoppers want and how they want to be engaged with will be possible by a series of technical advances like advanced connectivity (valued at $166 B in 2021), quantum computing ($ 3 B), AI and machine learning ($165 B), and no-code next-gen software development ($ 2 B) ref. The more retailers integrate these elements -- not only to their vertical chains but to how they integrate insights from various sources -- the more they will be able to provide fully integrated customer experiences and come out up top.
Digital World
Engaging with consumers will look completely different in coming decades. Companies will be expected to have some form of presence in Web3, valued at $110 B in 2021 ref. Shoppers are increasingly requesting and expecting ownership of their data. Accelerated by the pandemic, communities have now moved online with 1.8 b users using Facebook groups ref. Devices are becoming smarter and replacing repetitive tasks previously performed by humans. Think of chatGPT, first launched in November 2022, which is causing both wonder and havoc. The development and widespread adoption of generative AI will of course drive change in the grocery sector, even if we don't know what the exact applications will be. But the really interesting opportunity is for grocers to get ahead of the innovation and plot a course to actively take part in the development, vetting, and regulation of AI-assisted grocery and commerce.
Finally, some shoppers may want to experience shopping in virtual reality. The way retailers and brands successfully engage with Customers based on their preferences will shape their future success. Although the metaverse has diminished in importance in the new-tech hype cycle, its steady evolution over the last two decades suggests that it may reappear in a future horizon. The question is, just how soon will we get to that future? Apple's recent announcement of a state-of-the-art mixed-reality headset is a strong indication that the technology world is still betting on the metaverse. Our position is that the metaverse is here, but still in the very early stages of adoption. It would be wise for grocers to keep track of all the innovation.
Labor Shortages
Labor shortages are here to stay, but there are solutions. The low labor force participation rate (62%) ref -- lower than pre-pandemic levels due to employees retiring during the pandemic and some not returning due to Covid -- may halt GDP growth. One of the solutions to this conundrum is to keep investing in AI and automation in jobs that cannot be filled. Another approach, which can also serve as a marketing strategy, is to invest in education, skills training, credentialing, and employment frameworks to help with skills and demand mismatch. The Kroger tuition program, Giant Food stores scholarships, Publix tuition reimbursement, Walmart $5 b upskilling initiative ref, and Amazon’s free education are all great examples of retailers investing in their people.
SECTION 3
Customer Motivations Driving the Trend (dh proprietary research)
Fifty-four percent of Customers try to choose stores that actively protect their data. That is significant and constant across age groups.
Although there are few Customer barriers, most behaviors are still nominal in terms of their adoption, except for using self-checkout lanes which are used by four out of five Customers.
There are much bigger adoption rates across lower age groups across each of the behaviors below. What this means is attracting younger age segments can be driven via new tech and communicating with them via social tech and other new media that may come to life in coming decades. We can assume they will be early adopters.
SECTION 4
What Customers Have to Say
“My biggest challenge is stores with only self-checkout or if I have to wait in line too long. I expect excellent customer service, being greeted by cashier. I hate also having to put my own groceries back in my cart after they have been checked out. I have been known to leave a basket of groceries in the line and walk out in stores with unacceptable customer service. (After more than 10 minutes in line)”
- 55-74, 50-75K, Rural, No kids
“I wish I could find everything I’m looking for all in one place, so three different stores were not necessary. The most annoying thing to me is when products my family loves are suddenly discontinued by the store and no longer carried. This happens ALL the time at Trader Joe’s and I have to run around to different places looking for a substitute product which can’t always be found. I waste a lot of time and energy on this.”
- 45-54, 100-150k, Suburban, 4 Kids
SECTION 5
What Can Retailers Do?
All retailers should align their organizations to optimize performance amid the backdrop of Data 3.0. There are certain retailers who are better positioned to capitalize on this trend than others.
Retailer 2053 Ranking Methodology
To determine which retailers those were, we looked at:
- Which retailers have more of the “customer of the future” currently in their stores? In other words, which retailers skewed higher on a shopper base that was younger than 44?
- How much do the needs of their shoppers align with the given trend? In other words, do their behaviors and desires indicate the trend is highly relevant to them?
- How much work does the retailer need to do to better align their value proposition with this trend, so they can ride its currents over the next 30 years?
- How well does the retailer perform on Fiscal Conservatism? Since finances will likely remain the most immediate need for shoppers, any retailer who makes a trend affordable is more likely to win.
Given how distant we are gazing into the future, we are choosing to focus on our 1st and 2nd quartile retailers from the overall RPI ranking ref, as well as other household names in grocery.
Amazon has clearly positioned itself for the next 30 years as the most tech savvy retailer. It is true that the online nature of the business means it has been able to focus on these capabilities more than other retailers. But even in physical stores where it has implemented scan-and-go tech, Amazon has shown us that it deserves this top spot. It isn’t only pureplay players that can top the list. Those who top the list in Making it Seamless (like making shopping easier via their app), are the same retailers that have best positioned themselves for the future in Data 3.0. As we advance in coming decades, it will be about much more than the app. Think virtual reality, the metaverse, and whatever extends the instore experience to other platforms.
Over the next 30 years, all retailers can benefit from some or all the following actions:
Visionary structural moves
1. Get innovative with budgeting, wellness, and other AIs
See our Fiscal Conservatism and Affordable health & wellness sections.
2. Develop partnerships to accelerate metaverse access.
Adopting the metaverse is dependent on other elements of life, at least for groceries to be relevant in the metaverse. Partnerships may be the answer to accelerate penetration. Housing developments and corporations could be the retailer of choice for companies in the metaverse. Take this example, a retailer’s store in Netflix’s metaverse location. Maybe Customers find your store in a Bank of America metaverse location, or a Customer takes a flight in a virtual airline and accesses your retail space. This would be an easy way to capitalize on the metaverse with a much lower investment than the go-it-alone method. After all, what are partners for?
Good consistent hygiene moves
- The key to attracting younger Customers is integrating Customer-enabling technology and increasing touchpoints – helping customers locate products instore, enabling shoppers to navigate aisles of a virtual store from the comfort of their homes, more seamless apps, scan and go, and voice-activated AIs like Alexa, Siri, and Google
- Develop a presence in the metaverse, the future is around the corner
- Give shoppers more options to own their data
- Engage with shopper in online communities that will have the biggest impact on your brand
- Not new, but help Customers find substitutes when products are not available
