In-store grocery shopping has hardly changed for three decades. Even after 20 years, online purchasing is well behind most non-food sales and loyalty cards haven’t moved forward this century. But this is changing. The way retailers operate and how we shop could soon be very different.

The spread of discount supermarkets had more impact than online food shopping but health concerns around COVID-19 have boosted online grocery demand globally while technology will allow greater interaction between retailer and consumer.

Enhanced in-store Wi-Fi allowing customers to use their own devices to self-scan and increased functionality of mobile apps can give consumers a more personalised shopping trip while also improving the retailers’ supply-chain efficiency and cost management.

Low profit margins have constrained innovation by the food retailers and deterred new competitors. But increased online sales and the economies of scale are attracting new providers, including major tech players – even though these players may bring little to the industry that incumbents cannot do beyond their ability to absorb huge losses or exploit customers’ data.

But new entrants can drive innovation. We expect new models such as quick-commerce, while retailers partner with taxi firms or fast-food delivery businesses.

However, logistics need addressing most for online to truly disrupt the grocery sector. Immediacy solutions are the latest innovation, even if they disrupt only by adopting gig-economy practices. Autonomous vehicles and drones may be a solution, but the biggest change will be deploying technology and automation closer to the consumer.

This advancement in technology, accompanied by consumer demand for immediacy, has led to more compact autonomous solutions being utilised at smaller sites nearer the end consumer within online grocery, allowing for speedier deliveries.

Previously there has been a trade-off between automating centrally, with longer delivery, and picking goods in local stores. Now more compact automated solutions are coming to market that can be deployed closer to the end consumer: handheld devices assist in-store picking, click-&-collect technology will automate and speed up collection, innovative ways will allow deliveries when customers are absent. And some retailers are trialling technology such as smart coolers and voice-shopping.

Meanwhile, machine learning is improving forecasting and sales-based ordering, which could reduce waste in the supply chain, while automation improves efficiency. And blockchain could aid traceability to reveal a product’s origin.

Many of these technologies will be available to most retailers. But scale and reach are important. Technology is itself an economy of scale: it costs less for retailers that can spread it over a larger sales base. And retailers with better reach should have more ways to interact with customers, so have more ways to benefit from new technologies.

This could be particularly true in fragmented markets like the US with many small, family-run businesses. A new wave of technology could leave them facing a high capital spending to compete. A major shift in technology could thus prove a catalyst for consolidation.

First published 1 June 2021.

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