An increase in capital expenditures was also noted for 2021, with grocers increasing investments at an amount 1.3 times their historical levels, according to McKinsey. “As investments continue to pour in, we expect these enhanced capabilities to disrupt the food ecosystem,” the study reported.
McKinsey expects grocers to see the following trends throughout the remainder of 2022:
1. A Consumer Balancing Act Between Value and Health Consciousness
The pandemic and heightened inflation have forced shoppers to seek out the best value for their dollar, benefitting private brands, with 90% of CEOs anticipating increasing pricing pressure from consumers to continue throughout the year. Indeed, 45% of consumers plan to find more ways to save money and 29% will actively research the best promotions more frequently.
Additionally, about 40% of consumers plan to increase their focus on healthy eating and nutrition – a trend that is most prevalent among Millennial and Generation Z shoppers. “The emergence of this younger, value-conscious, and healthier eater in 2022 creates opportunities for grocers to tailor their value-priced private-label products to include healthier offerings,” the study found.
2. Heightened Omnichannel Expectations
A customer preference for online and delivery orders increased about 50% amid the pandemic and is expected to rise further this year. Many still prefer to shop in-store, however, because of a desire for personal contact and expensive delivery charges.
Grocers are urged to invest more money in a seamless online experience, especially as shoppers expect similar assortments, pricing and promotions across all channels. App user experience, loyalty and personalization are also becoming increasingly important to consumers.
3. The Sustainability Imperative
With consumers becoming increasingly aware of the consequences of their purchasing behaviors, more companies are making decisions based on social and environmental issues. Some 44% of Fortune 500 companies are integrating environment, social and governance practices into their core business strategies, as McKinsey also found that 76% of shoppers buy or boycott brands based on values.
4. Further Investment in Tech and Analytics, as Well as Workforce Planning
Changing workforce requirements are spurring grocers to find ways to re-skill their employees, including tuition reimbursement programs at The Kroger Co. and Publix Super Market, Walmart’s Live Better U program, and Amazon’s free education to employees through its Career Choice program.
The report further found that 54% of current work activities in retail can be automated, placing even more emphasis on technology and artificial intelligence.
5. Building Broader Ecosystems and Partnerships
Improving margins and creating business growth are imperative for today’s grocers, and customer loyalty, data and partnerships can be leveraged to broaden their ecosystems. Joining forces with technology and third-party delivery companies can help retailers gain cost efficiencies and eCommerce reach, as well as innovative value propositions for customers.
“The year ahead is already full of challenges. Leading grocers will be defined by the differentiation, innovation, and defensibility of their strategies,” the study found. “Grocery executives that can successfully navigate these five issues will be poised for better performance in the years ahead.