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Grocery Retail Challenges and Trends in the New Normal

4 min read

May 02, 2024

Bringing home the bacon looks slightly different for grocery shoppers and providers.

Grocers have been plagued by the same concerns other retail industries over the past several years, including the global pandemic, supply chain disruptions, and labor shortages. However, they have also had to contend with the additional challenge of being considered “essential businesses.”

Grocery stores are the most frequently visited retail outlets for shoppers who make weekly (and sometimes daily) pilgrimages to buy food and other necessary household items. Their expectations for each visit are high, and grocers have been forced to rise to the occasion in real-time as customer needs evolve. 

The world has irreversibly changed, causing lasting impacts on the global food service industry and consumer requirements. What have been the significant effects of the grocery industry transformation, and how can they keep up with the new customer experience? Let’s take a trip to the grocery store.

Labor Shortages in the Grocery Sector

While the global grocery sector saw increased sales during the pandemic, store associates – often considered essential workers – were hard hit. Despite stores’ bonuses or hazard pay offerings, many employees quit or were forced to leave due to increased COVID-19 exposure, angry customers, and workloads.

In addition, the Great Resignation of 2021 saw employees worldwide taking stock of their priorities and shifting their careers to match. Like others in retail, grocery associates often found themselves overworked and underpaid, leaving the industry for jobs with more perceived benefits.

Employee retention rates in retail are bleak, and the same goes for grocery stores. Overall, the global attrition rate for the grocery retail industry rose to 60 percent in 2020, up from 40 percent the previous year, according to McKinsey.

With the rise of online grocery shopping and retail automation, the required skill set for grocery employees has evolved. McKinsey found a projected 17 percent decline in the need for physical and manual labor in the US and Western Europe and a 64 percent increase in technological knowledge from 2016 to 2030.

In response, employers offer incentives like higher wages, training opportunities, and education stipends to attract and retain talent. They’re also capitalizing on automation to free up workers for jobs requiring a more personalized touch, such as assisting customers with product suggestions and distributing advice from multi-channel contact centers.

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Online Shopping Trends and the Impact of the Pandemic on Grocery Stores

One of the industry's earliest and most visible changes was the widespread shift to online grocery shopping at the beginning of the pandemic. While many chains had pickup and delivery options, like Peapod, Uber Eats, or DoorDash, most customers preferred shopping in-store.

However, as the pandemic progressed, online grocery services boomed. In Europe, 41 percent of consumers used online shopping as their primary channel, while online and delivery orders increased by about 50 percent in North America. McKinsey tracked the same trend in Asia, with 30 percent annual growth for online grocery retail in China and over 50 percent annual growth in India.

To capitalize on this valuable market segment, retailers are upping their game regarding the omnichannel grocery experience, as these shoppers tend to shop more often and spend up to 20 percent more, according to a study from Symphony RetailAI. Retailers must provide a seamless customer experience in grocery stores, spanning the digital and in-store realms.

The Rise of Sustainable Grocery Shopping

Customer priorities have shifted over the past few years in ways that at first might seem contradictory. Today’s consumer is increasingly focused on saving money on their grocery bill but is also willing to spend extra for sustainable or healthy ingredients.

According to McKinsey, 42 percent of shoppers in North America indicated they were looking for ways to save money, the same number as in Europe. For Europeans, this represented a 12 percent increase over last year, likely reflecting the impact of inflation on wages and prices.

While customers are getting thriftier overall, they are seeking out value-driven groceries. Thirty-nine percent of high-income Europeans and about 40 percent of Americans planned to focus more on healthy eating. They indicated they would pay more for local, environmentally friendly, organic products.

For retailers, the challenge will be to track client preferences and make personalized shopping experiences. Implementing workforce optimization technology that follows the customer journey and provides insights into their needs enhances the customer experience and allows retailers to anticipate the following grocery trends.

Grocery Shortages and Inflation in Food Retail

Over the past few years, high consumer demand, labor shortages, production delays, and shipping disruptions have caused historic global supply chain issues. For grocers, this translates to empty shelves, lost profits, and upset shoppers.

According to McKinsey, out-of-stock rates in North America increased by at least 15 percent over the past year. However, these tend to be limited to certain goods, and many underlying issues are expected to be resolved.

The more immediate and pressing concern facing grocers and customers alike is worldwide inflation in food retail. With increasing supply costs far outstripping consumer income growth, retailers must balance cost and pricing.

According to McKinsey, 63 percent of CEOs in the European grocery industry cited high inflationary pressure as one of their top concerns. This number has likely only increased with the added complications of the war in Ukraine.

Economic challenges aren’t going away any time soon. Inflation exceeded seven percent at the beginning of 2022, and 90 percent of American CEOs expected consumer pricing pressure to continue in the coming year. Grocers must face the predicament of providing necessities to shoppers without pricing themselves out of the game.

One thing grocery retailers can do is reassure consumers that they face these challenges together. The right communications system helps grocers easily keep customers up to date. Notifying shoppers about in-stock items so they don’t waste a trip to the store helps prevent frustration and shows the value placed on customers’ time. Trust is a precious commodity in the grocery business; clear communication helps build loyalty.

Delivering on Omnichannel Grocery Experience

Shoppers choose their primary grocery store based on multiple factors, such as convenience, range of products, prices, and helpful associates. When they go online, they want to receive the same services and goods they would in-store, and it’s up to providers to navigate both spaces.

While online or omnichannel grocery shopping may seem hands-off for store associates, customers may need personal assistance at many points. It’s essential for the same friendly faces (or, at least, voices) to be available to help clients when they need it.

That’s where contact center AI for grocery comes in. Virtual agents can use this technology in grocery retail to help customers with basic questions and direct more complicated queries to a real live store associate. Personal shoppers can also contact customers with questions about out-of-stock items or substitutions and keep track of the customer journey during the process.

Omnichannel analytics allow retailers to personalize the customer experience in grocery stores, capturing usage data and offering personalized options like promotions or product suggestions.

To remain competitive in an increasingly online market, stores must establish quality omnichannel grocery experiences, provide growth opportunities for employees, keep up with consumer demands, and manage supply chain disruption issues.

Investing in technology to improve customer and employee experience is an invaluable way for grocery retailers to maintain their edge in this evolving market.

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