As consumers turn to digital platforms to fulfill more and more of their basic needs, smaller, more traditional businesses are forced to adjust their operations to meet the changing needs of their base.
According to PYMNTS data, 40 percent of consumers shifted their retail shopping online last year, and these consumers expect to stick with their new habits for some time to come. Independent grocery stores, whose appeal comes from their ability to build lasting connections with their customers, have been forced to adopt new technologies to preserve these relationships, transforming the physical store to work in concert with digital channels.
“I would say, in general, industry is lagging here,” John Ross, president and CEO of the Independent Grocers Alliance (IGA) said of U.S. independent grocery stores in an interview with Karen Webster. “If you look at some of the stores in in Asia, for example, where eCommerce has been double-digit penetration for six, seven years, those stores, ground-up, are being built differently… We have a lot to learn about what a new model store will look like.”
Specifically, Ross cited pick-and-pack stations, dark stores and aisles designed to enable speedy fulfillment as digital-physical integrations that would begin to take the physical store into the future. Still, even as the U.S. lags behind global leaders in the adoption of grocery technology, many independent grocers are seeing a sales boost as they begin to integrate new digital services.
A Relationship-First Approach To eCommerce
Large grocery chains and independent stores approach digital technologies from very different perspectives. Large chains, according to Ross, might approach new technologies from the perspective of, “How much capital, how much incremental labor, what’s my return on this new service?”
On the other hand, an independent grocery store might “see it through the lens of customer service,” rather than the lens of technological innovation. In this case, Ross said, store leadership might think, “All of a sudden, my shoppers want something new for me. I better figure out a way to deliver it because … our relationship with the shopper is a competitive advantage versus a national chain, and so if that service expectation grows, we better figure out a way to fulfill it.”
Still, even if return on investment is not the driving force behind these local grocers adopting new technologies, Ross said in his view, it still leads to significant sales growth, with digital channels growing faster than their brick-and-mortar counterparts. Increased delivery options either through platforms like Instacart or through in-house vehicle fleets, as well as optimized online presences, are driving sales for IGA’s stores.
Social media has been one way that independent grocery stores are able to establish their following online. Ross reflected, “We have retailers that are posting specials … and they’ll put the specials up through social media, and they’ll be sold out before they ever leave the stock group. And they’ll tell me, ‘John, I would never have guessed.’”
Working Hand-In-Hand
Digital channels do not take these sales from traditional channels in a zero-sum game. Rather, Ross observed, stores with stronger eCommerce presence also see more growth through their traditional channels, with an omnichannel shopping journey yielding the best results.
“The stores that are the most advanced in eCommerce, their eCommerce sales have been growing at double digits … three, four, five, six times faster than their stores, but their store traffic is still growing.”
Ross noted that the digital and physical channels “appear to be complements.” While digital channels offer unique benefits — analyzing shopper behavior to personalize recommendations, allowing consumers to browse from a safe distance and more — the store itself offers a sense of discovery that has not been replaced by the eCommerce experience.
Ross’s observations mirror those of Debbie Guerra, executive vice president of merchant payments and payments intelligence solutions at ACI Worldwide, who told PYMNTS in an interview last month, “I think we’re going to see consumer journeys across omnichannel shopping experiences continue in the future.”
Independent Grocers In The Post-Pandemic World
Ross described independent grocers as high service retailers who can build trust with consumers in a way that some of the larger chains cannot, an essential quality especially during the pandemic, as fear and uncertainty pervade the shopping experience.
“Our stores have picked up market share relative to the big national chains,” Ross explained, “because during a period where people were concerned about safety, they believe that their local family business was going to take safety more seriously than a big impersonal chain.”
Of course, the vaccine rollout will necessitate another round of mass adaptation as consumer behavior shifts again in response to new circumstances.
In Ross’s words, “As grocers, we now have to make sure that we earn that continued loyalty. We can’t just merchandise the same way we did before and expect them to continue to do it once all the restaurants are back.”
However, the economic downturn spurred by the pandemic may prove a boost for these local grocers. Ross pointed out that the past year has seen “the largest growth in SNAP and WIC usage in our stores since the housing meltdown.” As consumers seek more affordable options to feed themselves and their families, independent grocers have an opportunity to hold onto consumers who may otherwise have returned to restaurants.
“There’s an enormous population of Americans that are forced to figure out how to feed their family with less dollars than they did the same period last year,” said Ross. “…Learning how to cook at home … learning how to feed a family of four for a third of what it would cost had you gone out to a Red Lobster or something.”
Ross said he is hopeful for the future of the industry. He pointed to both young consumers who have begun cooking at home for the first time and older consumers who have adopted digital grocery technologies they may have otherwise resisted as indicators that more consumers are committing to the grocery industry long term.
“So,” Ross reflected, “the metrics are in our favor.”
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More