Food shopping – a taste of the future

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How is grocery shopping changing as more of us opt for convenience and speed? And what do these changes mean for the online grocery business and the traditional bricks-and-mortar store? Professor Gino Van Ossel shares his thoughts in this special edition guest blog.

Author

Professor Gino Van Ossel

Vlerick Business School, Brussels, Belgium

How people shop for food has changed significantly over the years. The traditional consumer profile was that of a married couple with children, who would a do a large weekly shop at a larger supermarket or hypermarket by car. Behaviour is different now as 60% of European households are living without children, and more people live on their own in cities without a car. These consumers have less structured lives than the family unit and do not shop in the same way.

Some things never change though, as two out of three consumers say price remains the major factor when buying goods. That said, convenience is also important to the new consumer who shops to the phrase: “I want what I want, when I want it!” These people are driving the growth of the “butler economy”, in which food is delivered to them, not necessarily by someone in a smart suit of course.

Changes in consumer behaviour are inevitably transforming food retail, and we see more store formats popping up. These tend to be smaller than the ones we’re used to, which is bringing the average shop size down, though we’re currently still seeing an increase in total food retail square meterage.

We all know about the rise of discount stores like Aldi and Lidl, which carry fewer lines and operate in smaller units than traditional supermarkets. Meanwhile, convenience stores continue to rise in number with these small shops expanding rapidly in our city centres.

Other store formats are taking a hit, however. As I’ve mentioned, families with children typically go to larger supermarkets and hypermarkets, but with this type of customer in decline, some of these stores are no longer needed. A good example is Carrefour, the French retailer and inventor of the hypermarket. In my home country Belgium, over the past 20 years, the company has closed one third of all its hypermarkets, whereas the number of convenience stores in its network has exploded from seven to over 330 outlets.

The world of e-groceries

The frequency with which we shop for groceries online is less than biweekly, remarkably low compared to our offline grocery shopping behaviour. It is also lagging behind in terms of penetration compared to the much higher popularity of online shopping for other product categories, such as fashion or consumer electronics. There are several reasons for this. First of all, it is not necessarily the cheapest way to buy food: prices may be higher than in-store and often you have to pay a delivery fee. Also, it can be time consuming to fill an e-basket (particularly the first time around) and there is the tactile element as some consumers want to see how ripe their bananas and avocadoes are in person.

As we know, there was an acceleration in online shopping thanks to the pandemic, and this included groceries. So, what does this mean in the long term? According to one survey carried out in 2021 , 41% of regular users of e-supermarkets said they are going to order more groceries online.

There are some new developments in the sector that will satisfy the demands of those who want what they want, when the want it. Online grocery shopping is normally for next-day delivery at best, but with the rise of quick commerce companies, deliveries are promised in as little as ten minutes.

Such businesses operate from dark stores, which are in essence empty units in city centres. However, we know that traditional retailers currently have too much floorspace, which provides them with an opportunity to tap into new markets. For example, the UK supermarket chain Tesco has opened up its floorspace to quick commerce specialist, Gorillas. So, now you can order food for delivery within ten minutes from the Tesco range through both companies’ apps.

The current problem for the e-grocery sector is that it’s burning cash – it’s not profitable, and yet retailers know it’s where future growth lies. These issues are really about e-fulfilment, where there are difficult trade offs to be made.

Many online retailers started from store picking, which benefits from being close to the customer and requires little new investment or working capital. The ultimate downside is that staff have to move through the store collecting goods, so operational expenditure is high, and as volume grows, online orders can interfere with regular store operations.

Building a dark store is an obvious alternative, which can improve efficiency as products with a high rotation can be grouped together. However, other costs go up because now there is a dedicated warehouse to operate and inventory to buy.

What’s “in store” for the future

For the food shopping sector, one size doesn’t fit all, and the future looks fragmented for retailers. We can expect to see an enormous growth in micro-fulfilment centres, as food retailers automate to meet the demand for rapid online deliveries.

Nevertheless, more e-commerce will not mean the end of the physical store, which will also have a role to play in digital fulfilment activities such as click and collect. So the larger supermarkets won’t disappear, but there will be less of them. A flexible approach will be needed to offer different value propositions to different customers for different nodes in the retailer network.

This was the first blog on the future of food shopping. In the second blog we will look at the challenges retailers face when meeting different customer expectations, as well as dealing with issues such as land scarcity and selecting warehouse automation. Read more

About Gino Van Ossel 

Professor Gino Van Ossel is one of Europe’s leading thinkers on retail management, opti/omnichannel developments, e-commerce and shopping behaviour. He has developed an unrivalled understanding of the customer’s journey from the earliest buying intention to the purchase and beyond.  

Along with teaching duties, the professor helps branded goods manufacturers with their channel management and go-to-market strategy issues. Among others, he has worked for Ahold, Delhaize, Carrefour, Kraft, Spar, Toyota and UPS.  

The professor is also an accomplished author. His book “Omnichannel in retail” (2014) won both marketing and management book of the year in The Netherlands – to date the only publication ever to win both awards. Its successor “Optichannel retail: beyond the digital hysteria” (2018) also became marketing book of the year. 

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