IGD Predicts Key Global Trends for Grocery Retail

By John Karolefski

Genuine revolutions in global food retailing are rare, but one is already underway.

So says Joanne Denney-Finch, the chief executive of the food and grocery researcher IGD, who believes increasing population growth, urbanization, and rapid technological changes, will drive four key trends that will shape the future of global food retailing:

  • The reinvention of stores
  • The link between the online and offline world
  • New ways of marketing
  • Changing supply chains.

“Change is sweeping through every part of international food retailing. The revolution is so big and powerful, that no-one knows exactly what the future will look like. While this is creating the most challenging conditions for food retailers I’ve ever seen, there are many opportunities too. Retailers around the world are responding creatively and starting to build a new future,” she said in a presentation at the Asia Pacific Retailers Convention and Exhibition (APRCE) conference in Manila.

She said technology in the form of robots are starting to appear in stores around the world to improve the customer experience. In some Japanese shops, they meet and great shoppers and give them advice on where to find products, while in Spain they are being used to give nutrition advice.

“Beyond technology, retailers are finding various ways to make shopping easier, more exciting and informative. Various British retailers have set up convenience sections within their largest stores where everyday items like bread and milk are grouped together to save time for top-up shoppers. Thailand’s Central Food Group has an expert Australian butcher to give shoppers advice on international product that they’re not familiar with.”

She said many retailers are viewing online and offline as two complementary ways to help shoppers buy whatever they want, anytime, anywhere and in the most convenient way to them.

“It’s what’s known as ‘omnichannel retailing’ and gives retailers the opportunity to regain loyalty,” she said. “Phone apps are one way to link the online and offline worlds. People using the Walmart app, for example, shop there twice as often and buy 40% more than other shoppers. Alliances are another way to utilize omnichannel shopping. The Chinese online platform Yihaodian, now owned by Walmart, has partnered with Family Mart stores to offer product collection.”

There is more uncertainty about food supplies, she said, due to climate change and quickly-growing demand. So some retailers are looking further out and developing partnerships with suppliers. For example, Tesco has agreed to buy the whole banana crop every year from some regions of South America.

In general, Denney-Finch said she expects shopper expectations to continue to rise, causing retailing to become more flexible and personalized as new solutions emerge every day from every part of the world.

“So the challenge for retailers is not just to reach the world class standards of today, but to set and deliver new standards for tomorrow,” she said.

Meanwhile in the U.K., IGD’s chief economist James Walton predicts fierce competition, deflation undermining performance and weak overall volume growth for food and drink retailers. He sees five “hot spots”:

  • Hybridization: “Retail ‘hybridization’ uses physical stores to bridge real-world and digital operations by offering pick-up points for online orders. It also describes the development of stores which offer both retail and foodservice, either through partnership with specialists or not,” he says.
  • Microconvenience: “After years of contraction the UK’s convenience store portfolio is expanding once more, with openings exceeding closures. Multiples such as Tesco Express and Sainsbury’s Local are driving this,” he says.
  • Go Faster, Way Faster: “Online retail continues to develop across multiple markets, with particular attention being devoted to quick and flexible fulfilment. Services such as Argos Fast Track and Amazon Prime Now are great examples of development in fulfilment streams; Argos offers same day delivery for small items to 90% of households, 7 days a week, while Amazon delivers food and drink in under an hour for £6.99, or under two hours for free to Prime members in certain locations, with a minimum basket spend.”
  • Robotrucks: “The U.K. is a leader in development of driverless vehicles and road tests have already taken place. Looking ahead, it is easy to envisage much of the work within food and drink supply chains being done by fleets of such vehicles – large ones on the motorway and small ones to cover the final leg to the shoppers’ door.”
  • Health: “Health and good nutrition are still high priorities, not just for shoppers but also for government. A new government Obesity Strategy is expected in 2016. It is not yet clear what it may contain, but it will presumably include measures intended to reduce calories consumed. This may be seen as a threat to food and drink businesses, but it might also represent an opportunity for innovation and product improvement.”

                                                                        January 2016
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