Paper or Plastic: The Hidden Competitors Threatening Grocery Retailers

Business.com / Industry / Last Modified: February 22, 2017

For the first time ever, restaurant spending has surpassed grocery. But there are other competitors to worry about, too.

For the first time ever, restaurant spending has surpassed grocery sales.

Grocery stores are finding it harder than ever to thrive — or even survive — in the new grocery world, where they need to be quick and innovative in meeting customers’ needs outside the store walls.

In an industry as old as grocery, innovation is imminent and paramount to continued success.

A generational shift in our consumer mindset may be the cause of the industry’s unrest. Millennials are more willing than previous generations to spend money on dining out; and they appreciate the social aspect of sharing a meal together. Just like industries such as technology and education have seen, personalization and convenience are key to attracting the biggest consumer generation ever.

Related Article: Farm to Table: Must's for Building a Green Strategy in Food and Beverage

This may also be due to quiet competitors slowly invading the grocery arena: “meal-ready” commerce and “warehouse” commerce. Consumers of today’s convenience-craving and instant gratification culture are bucking the model of large weekly grocery buys for a week’s worth of dinners. Dinner decision-makers used to hitting the drive thru want quick and easy meals, and grocery stores cannot afford to acquiesce on this opportunity. It represents billions in revenue potential.

Enter: QSRs, Fast Casual, etc.

While traditional grocery stores have been competing with each other and superstores, the restaurant industry has experienced exponential growth. With the new rush on the restaurant industry, the grocery industry has no choice but to begin sighting restaurants in its competitive crosshairs. The industry has all of the capitol, the overhead and the resources to compete; it just has to get in the game.

Enter: Amazon

Although we want fast and easy, consumers also realize that most of what we purchase is not something we immediately need. And every day, more and more customers are willing to wait a day or two for items to arrive at their doorstep. So, when deciding between spending 10 minutes online or an hour in the store, we’re beginning to choose the online or smartphone option, not caring that the products are shipped directly from a warehouse.

While retailers have been smart to move into click-and-pick and delivery options, they must also be prepared to be “all in” in terms of resource allocation. Amazon’s CEO, Jeff Bezos will absolutely invest more than the entire grocery industry if necessary to make its grocery delivery system more scalable (and profitable). Additionally, Amazon is notorious for hiring some of the smartest people in the world — which ensures they’ll move forward in the space much quicker than traditional grocery retailers.

So, how can the grocery industry rise together to compete against their new competitors and give consumers exactly what they want? Here are two ways:

1. Start Leveraging Venture Capital-Backed Companies to Help With Innovation

Gone are the days where the pace of innovation can move at the speed of the retailer. By doing business with VC-backed companies, the grocery industry will bring people just as smart as those at Amazon and introduce cutting edge services just as quickly. A grocery retailer’s enterprise value isn’t going to be based on the technology it owns, but on its ability to adapt at our, the customers’, speed. Once it does this, it can then again use its real estate and scale to its advantage.

2. Unite to Tell a New Story About Dinner

The value proposition for grocery stores in 2016: not only are its dinner options just as reliable and convenient as the drive-thru, they’re a better value. But the value proposition needs to be backed up with a mobile commerce and execution system that can deliver on this promise.

Fast food alone (an industry that barely existed 50 years ago) generates more than $100 billion in dinner sales each year. Imagine if the grocery industry was able to pull 10 to 20 percent of that spend away. And it could absolutely be done with the right programs and tools.

Related Article: Fast Food 2.0: What Can We Learn From the Business of Food Trucks?

With the grocery industry’s rich history of over 150 years, it’s clear it won’t be going away any time soon. But the grocery industry can truly thrive if it focuses its sights on the competition and innovates faster!

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