By Meghan Hall
Grocery stores, marked out early on in the pandemic as essential, have remained at the forefront of the retail industry, in both terms of solvency and innovation. While current circumstances and consumer demands have ushered in a number of new ways to shop, these changes—and their implications for how retail space is used—were already underway even before 2020. The future of grocery retail is already here, according to a recent webcast hosted by Cushman and Wakefield and Irvine, Calif.-based integrated services firm WD Partners, and there are a number of changes the industry should expect as a result.
“Grocery is one of the hottest segments in the retail industry today,” explained Cushman and Wakefield’s Head of Retail, Americas, Barrie Scardina. “Grocery has been shaping and redefining the consumer experience, launching new paths to purchase and investing in digital capabilities since the beginning of pandemic. Actually, even before the pandemic began.”
Demand for private label brands grew due to scarcity, and delivery became critical as safety became a concern for many consumers. Based on Cushman and Wakefield research, Scardina stated that during the first half of 2020, online sales for grocers grew 30 percent, while online ordering and pick-up in store initiatives grew by 67 percent.
Scardina added, “Early in the pandemic it was clear that grocery stores would be the heroes… In mere months, the grocery industry has undergone change that would have happened over years.”
While “Buy Online, Pick-Up In Store”—known as BOPIS for short—offerings have been available for years, such options are now more popular than ever. Additional data indicated that now about 86 percent of consumers prefer to use BOPIS, and 62 percent of consumers have used BOPIS within the last month. Of those who use BOPIS as a shopping option, 35 percent reported that they use it primarily for safety. Speed and savings on shipping were also listed as major drivers for BOPIS’ increasing popularity.
WD Partners’ Head Executive Vice President on Thought Leadership and Marketing, Lee Peterson believes that the projected size of online grocery could exceed $100 billion by 2025.
“Grocery was one of the flash points of the last two to three months,” said Peterson. “We were thrown into a world that we were just preparing for. COVID-19 was not really a disruptor, but an accelerator.”
As a result, changes within the grocery industry are happening at “hyperspeed.” Technology use in the grocery space has become ubiquitous, said Peterson, thanks to rapidly emerging technologies from business messaging to radius technology which tracks delivery time or consumer arrival. The use of grocery-related applications has increased 63 percent since March, enhancing tech-based models of shopping.
“Technology enables the unthinkable. Consumers are ready to adopt like never before,” noted Peterson. “With radius type of technologies, you can understand where the customer is and how much time you have, which allows you to plan for labor.”
Cushman and Wakefield and WD Partners predict a number of changes to grocery-related real estate as a result.
Automation—particularly in warehouses and distribution centers—is likely to become much more commonplace. Fully automated systems can reduce warehouse-related costs by 65 percent, and reduce logistics related costs by 60 percent, while increasing max output capacity. Manual micro fulfillment centers, which combine a mix of automation and labor, are also expected to become common.
Dark stores—a term which is used for retail outlets or centers that cater exclusively to online shopping—will also become more popular. 40 percent of consumers said they would shop at a dark grocery store, explained WD Partners.
However, the grocery stores could look like a combination of all of these factors, with grocery outlets having sections for grab and go, where you pick up meals ordered via app, a showroom section—with scan and go technology—and fulfillment center space, where full online orders can be picked up. Other amenities like teaching spaces or children’s playgrounds are all possible. The ultimate goal is to allow consumers a number of different options when it comes to completing their shopping, whether online, in person, or a combination of the two.
According to WD Partners, the large majority of consumers would be open to frequenting one of these “stores of the future,” an outstanding number stated Peterson.
“This entire model, as described, had an 80 percent approval rating. Which to me is off the charts,” said Peterson. “It is the center of the bell curve and well beyond; it has so many options for ways people want to shop.”