“Disrespectful retail is the death of physical retail.”
Writing for McMillanDoolittle, a Chicago retail consultancy, Neil Stern stated, “We may have seen the future…and we’re impressed.” This was a reaction to the launch of the first Walmart Supercenter in Washington, Missouri, which revolutionized food retailing and grocery shopping.
Speaking on March 2 at the Annual Meat Conference, a trade exhibition that unites meat processors and retail buyers, Mr. Stern stated that ninety percent of grocery stores had a traditional layout in 1988. Twenty years later, the percentage drops to 44%, with non-traditional forms accounting for 40% of the market share. These formats include supercenters, club shops, and dollar stores. Suppliers and retailers need to adapt their business models in order to thrive.
Retail sales in 2019 were around $5 trillion, according to Mr. Stern, “having grown at a compound annual growth rate of 3.5% over the past ten years.” You really believe that everything must be fantastic? Three retail bankruptcies, namely Fairway, Lucky’s, and Earth Fare, marked the beginning of 2020.
“Physical retail isn’t dying,” he informed the audience. Poor quality of retail is.
Mr. Stern stated, “With the rise of millennials, urbanization, digitalization, and Amazon, the retail industry is in a state of extreme disruption.” “And even though food and alcohol account for a larger portion of total online sales, retail sales overall are still dominated by these two categories.”
In 2016, it was only 2%, and by 2021, it is expected to increase to 5%. However, he stressed, it’s accelerating quickly as the face of the consumer changes. The shift is being driven by Amazon Prime, whose membership tripled to 150 million customers between 2015 and 2020. Higher income households are drawn to Prime members because they have purchasing power. However, households with lesser incomes also long for the ease of doing their grocery shopping online. In response, retailers like Walmart are launching their own pick-up in-store initiatives. It is anticipated that 14% of sales of food and drink will occur online by 2025, with drive-up and click-and-collect fulfillment centers driving the majority of this development.
He stated that although brick-and-mortar stores will account for 86% of food and beverage sales, significant changes to the physical layout of supermarkets are anticipated. Anticipate diminished human engagement, increased automation, and an increase in foodservice platforms within the stores.
“More people are dining out,” he claimed. Retailers need to react.
Retailers need to address three areas of disruption, the first of which is “extreme value,” if they hope to maintain physical and mortar businesses.
To quote Mr. Stern, “It’s the treasure hunt.” It’s discovering something unexpected. The motivator is value. Both private label and Costco are treasure hunts.
It all comes down to being the least expensive retailer with the lowest sustainable expenses, fostering an atmosphere of exploration and novelty, and developing strong, dependable substitutes for well-known brands.
Mr. Stern declared, “Aldi is the retail elephant in the room.” By 2022, the company plans to have 2,500 stores. To draw in new customers, it is enlarging the present stores and developing a novel format.
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“Low pricing do not always equate to a lack of excitement. Compared to conventional, private label is probably going to rise much faster.
Extreme convenience is the second area where brick and mortar is being disrupted. That’s what shoppers who purchase online are receiving. The encounter has to be more pleasurable for them to continue visiting the store.
Mr. Stern advised concentrating technological efforts on streamlining the client experience. “Take away the uncomfortable aspects of shopping.”
Future developments might include plant-based or organic only products, as well as smaller shop formats targeted at particular food and beverage categories like grab-and-go and items for single families. Give customers the option to conveniently order coffee on their phone, ready to go when they go shopping.
Mr. Stern stated, “Packaging and displays need to work harder.” It still comes down to solutions.
The third disruptor is the need for an intense experience. The customer is unable to purchase that online.
Mr. Stern asserted that “great displays and experiences have the power to change the game.” “Shops are offering moments that can be shared on Instagram during crucial parts of the encounter.”
Add components that encourage customers to linger in the store. He advised creating product wows in a certain segment.
Customers can try samples of potential purchases by dining in-store in each department. Food preparation in-store demonstrates the cooking process. Consider the freshly made mozzarella found in the cheese section. A veggie butcher cleans and chops produce. Provide a self-serve dry-aged beef case with age and primal cut tags on the meat.
“Incorporate theater into the show,” Mr. Stern said. “And concentrate on selling solutions. Provide information and expertise to help with purchasing decisions.