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GROCERY DIGITALIZATION Specialist


Kevin Ryan Founder and CEO Malachite Strategy and Research


US GROCERY BEHIND OTHER COUNTRIES, BUT GROWING


The way it’s (digitalization) has been incorporated mostly is in the ordering process. Compared to Europe and China, Americans are not picking up on online grocery as they are on other things. We’re lagging behind compared to others. It has a lot to do with distribution chains being different compared to Europe and the full force China has taken on its supply chains. Just 3% to %4 of US grocery spending is online. It’s small, but it’s projected to grow quite a lot over the next 10 years. A lot of consumers would rather have delivery. There’s an inconvenience in going through the whole process of ordering online and then stopping and picking it up. However, some consumers do it because it saves costs. Most of the cost of delivery is passed along to the consumers. Click-and-collect, however, adds labor costs to the retailer. It’s a huge negative, but it’s seen by retailers as a way to remain competitive. As these services mature, getting it right—whether it’s a complete delivery option, which can be expensive and consumers don’t want to pay for it, or figuring out click-and-collect and making it profitable—will be necessary.


In Europe, some retailers are partnering together for delivery service. It saves them money. At the end of the day, cost is the biggest barrier for consumers to use delivery options. Today’s consumers view online shopping as both convenient and cheaper. If retailers can find a way to make delivery at least price-neutral and consumers see it as a benefit to them, they can get over the hump.


A grocery store start-up called Farmstead in California owns micro-warehouses and offer delivery through artificial intelligence and automation; their stores are also small. Overall, they’re able to keep their costs low and getting a better sense of what their customers want through artificial intelligence.


In Italy, Coop Italia operates the ‘Supermarket of the Future’, which has pieces to it that I see coming elsewhere, such as in-store digital displays that lets consumers double-click into the display and get a lot of product information on the transparency of the supply chain, animal welfare, and carbon footprint. Digital displays and having the ability to interact with your food will probably be the biggest next advance.


Kroger’s OptUp app is a nutritional program that helps users learn more about what’s in their cart and how it fits within your particular diet and dietary needs. You’re seeing an aging population and people more concerned with their different dietary needs. It also speaks to wellness, which is even more important to today’s consumer than health. It’s now a blend between health and well-being.


WHAT’S IN STORE | 2020


© 2019 International Dairy Deli Bakery Association


Industry Landscape


25


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