The grocery stores of the future will be smaller, healthier, and less focused on discounts, analysts say

Áine Cain

Dec 14, 2019, 01:21 IST

The grocery stores of the future will be smaller, healthier, and less focused on discounts, analysts say

Rick Wilking/Reuters

The era of "peak discounter" is mostly done.

In an industry with so many choices, how can grocers win over the "the empowered consumer" today?
A recent note from UBS analyzed the strategies that global grocery retailers are doubling down on to create a "pull" business model.
UBS analysts said the grocery industry will pivot toward smaller stores, "ready-to-cook" offers, and speedier online service.
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The idea of a futuristic grocery store may bring to mind the image of robots zipping through aisles or drones hovering above the produce section.

But a recent note on global food retailers and wholesalers from UBS gives a clearer picture of grocers' strategic priorities and how they are set to change going forward. UBS found that retailers are increasingly exploring how to attract "the empowered consumer," by establishing a "pull model" of business that wins over customers.

In other words, they're matching the store experience to consumer preferences to ensure that customers have reasons to shop at a grocer.

UBS based its analysis on 12 supermarkets in six markets: Walmart, Albertsons, Ahold, and Kroger in the United States; Woolworths in Australia; Tesco in the United Kingdom; Groupe Casino in Europe; Alibaba in China; and E-mart in South Korea.

When it comes to price, UBS found that grocers are increasingly prioritizing value over discounts. The financial services company found that the era of "peak discounter" is over in most places.

The industry is also pivoting away from increasing store sizes and shopping spaces and fully committing to online options, including delivery. UBS analysts said that shoppers will likely see smaller stores, "ready-to-cook" offers, more delivery options, and speedier online service from grocers.

"Online is outpacing sales in-store for all grocers we looked at, with companies unanimous in their view they will need to continue to invest in online to thrive (supply chain, platform, delivery)," the note reads.

Providing fresh, organic, and healthy options will also be an important focus going forward. In terms of seeking out "alternative grocery profit streams," UBS' analysis found that grocers would "aggressively" pursue options like moving into B2B wholesale.

"Supermarkets are arguably in the best position to operate a true retail pull model - and then expand these learnings into alternative areas to grow addressable markets," the note reads.