Revamping the
Grocery Retail Market

Scanning through the various domains around market trends - the growth, the strengths and the menaces of the grocery retail segment in 2023.

The products manufactured by the food and beverages industry when sold in the market create a remarkable impression on the grocery market. The future of grocery merchants and food, however, depends on global trends like e-commerce, lifestyle, sustainability, strategic partnerships, and experience economy as the food sector continues to change. Food manufacturers and grocery merchants often form strategic alliances to widen their customer bases, enhance their brands, and offer value. For instance, Swiggy, a restaurant and food delivery service, few years back acquired the grocery platform for organic and healthy food, Supr Daily to increase its market reach. Foodtech companies also partner strategically with well-known grocery shops to increase their customer reach. Today, the selection of a grocery supplier is increasingly influenced by several factors including stock shortages brought on by COVID-19, geopolitical upheavals, the increase of online shopping, rise in prices and value sensitivity. Consumer lifestyle agendas havealso driven the focus on sustainability and health. The grocery industry is thus flexible enough to respond to consumer demands as well as shopping preferences, including online, in-store, home delivery, and pickup.

Drivers of Choice in the Grocery Industry

Grocery is currently the most widespread industry worldwide. As online becomes the norm, value is sought once more, and customer preferences promote a focus on health, sustainability, and convenience. The modern customer is eager to employ whichever method is most practical at any given moment. Less personal interaction with the things on offer is still required, although it has decreased. Knowing when a customer is shopping in-store and online and ensuring that the data allows for real-time decision-making regarding offers, products, and services are the challenges facing businesses today. Some of the significant navigators that influence the choice of the customers in the grocery segment include:

1. Consumer Wellness: As consumers have started to focus on their lifestyle, they are becoming more concerned with becoming fitter, healthier, and better. They are drawn to businesses that can show how their products help people adopt healthier lifestyles. Healthy eating habits, diet planning via apps, and emphasizing eating nutritious food to live well have all become staples of grocery offerings. More than 60 percent of Indonesian customers chose healthier items and consider their diet and health when making purchases.

2. Sustainable Ecosystem: Concerns about packaging, sustainability, and single-use plastics are at an all-time high when it comes to the state of the world. Over two-thirds of consumers are willing to spend more for products that can be proven to be environmentally beneficial.

3. Digital Comfort: Since customers of all ages have mastered using e-commerce, the quality of the digital experience has become crucial to customer connection. Customers hold digital experiences to high standards that companies have helped to create. As per our research, ~67% of customers claim that pop-up mobile notifications on in-store product offers persuades them to make a purchase from a company, while over 65% suggest that use of interactive store technology influences their choice of retailer. Similar to what we've seen happen offline, multiple forms and banners are beginning to emerge in online groceries. Additionally, we observe consumers making purchases from multiple online stores, just as they would offline. It's crucial to focus on a certain consumer demographic and shopping situations while also honing the value proposition. An further key lever to boost profitability is operational excellence and automation. Using all the customer data they have to enable better targeting, retailers sell CPG firms advertising space on their websites as another example of retail media. These advertising sales, which have grown to be a significant addition to some of the biggest players' bottom lines, currently account for 10% of their online sales.

Strength to Rely on for the

Growth of Grocery Retail Market:

1. Nobility - While the initial emphasis on staff and employee safety is still important, there is also a rising consumer focus on sustainability and hygienic packaging. Consumers are questioning the company's mission, ideals, and dedication to environmentally friendly practices and products.

2. Commitment - In order to keep people nourished throughout the pandemic, the supermarket business responded to the challenge and has been intensely focused on supplier and consumer problem-solving. As customers look for reasons other than just making a purchase to visit a physical store, the brick-and-mortar business's traditional function as a compromise between value and inspiration is increasingly leaning more towards inspiration.

3. Forecasts - Customers have been kept informed at a time when the level of uncertainty was at its maximum thanks to regular letters from CEOs to customers and press communications. The sector has become highly skilled at creating and resetting customer expectations. For many, this meant daily analysis of client feedback and prompt message customization.

4. Work and time - Due to the significant shift towards online shopping, grocery stores were able to drastically cut down on the time and effort required of their clients.

5. Customization - Grocers can transition from mass to targeted promotions and from standardized to store-specific assortments thanks to advanced analytics. With major pricing differences on essential products arising for reward scheme members and non-members, the function of the loyalty program is evolving.

6. Compassion - The casual conversation at the checkout has grown in importance to both parties as a result of staff concern for consumers and vice versa.

Technological Interventions in Retail

Grocery players are in a good position to offer tailored advertising options and help increase their profitability as retail media (RM) emerges as the third wave of digital advertising. Because it enables considerably more precise targeting than other forms of advertising, RM is very alluring to advertisers. Additionally, by utilizing the retailer's sales and website data, it enables marketers to assess the return on ad spending (ROAS) much more precisely at the product level. Up to 11% of online food sales in the US are made through RM, which generates EBIT margins of over 51%. Also, the technological change of food retail is also being facilitated by IT modernization, which strains investment resources. IT modernisation include moving outdated legacy systems that are no longer maintained to new systems, speeding up IT development to keep up with pure players, implementing omnichannel, and using cloud computing. By 2030, these measures will have cost grocery retailers up to ~USD 20 billion. If IT modernization is set up and carried out as a meaningful business transformation, it also presents a significant opportunity for value generation. There is a need for distinction as customers build new priorities. This is essential in a sector when the offerings of the stores, experiences, and products are essentially identical. But the possibility of achieving such targets is significantly small. Consumer habits have eventually aligned around new norms as the disruption caused by the outbreak around four years back have slowly faded away. It is predicted that the market of food and grocery will reach over ~USD 17 trillion by the end of this decade. Grocers must act rapidly to grasp and direct the process, establish a distinctly unique position, and use it to dominate their markets over the next decade. In the future, consumers may be influenced by useful and practical technologies to favor one grocery store over another.

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Swara Keni

Head- Global Business Development

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