The entire world is just beginning to see the other side of the worst global pandemic in a century. Vaccines are available, and new cases are down in most parts of the world (except India, unfortunately).
Many businesses were not able to survive the downturn, specifically those that were not deemed “essential.” Restaurants were probably hit hardest. Other businesses – notably tech companies – had record revenues and profits. Facebook, Google, Zoom, Netflix – the list goes on – all profited mightily from stay-home directives.
The grocery industry is broken and has been for years.
Retailers were mostly on the upside side, apart from clothing stores. How many pairs of sweatpants do you really need anyway? Supermarkets were definitely a beneficiary, with prices and profits both up, and employees who were suddenly being hailed as heroes.
But the grocery industry is broken and has been for years. While 2020 injected some interest (financial and emotional), myriad challenges remain, and the industry has been loath to address most of them.
Let us focus on the top three problems for the sake of brevity:
- Labor costs. Reducing the cost of getting work done on the average supermarket has been job number one for going on 50 years. Everything from multi-layer contracts to on-call part-time to the now ubiquitous self-checkout have come about as tactics in the war against rising labor costs.Waiting in line to check out is and has been the number one customer complaint for as long as anyone can remember. Why can’t it be fixed? Oh yes – it’s expensive. What was the solution? Pass checkout duties on to the shopper. Somehow, we’re all okay with this.
Many Walmarts have removed all but a token two or three full-service checkstands; the rest are for shoppers to use. One the Saturday night before Mother’s Day a local Kroger had no traditional lanes open and a sad, circuitous line of husbands with flowers waiting for self-checkout.
Little wonder that shoppers are flocking online. It’s not that they don’t want to leave the house. It’s just that they aren’t going to stand in line when they can sit at home and have stuff delivered.
- Online shopping. No supermarket really wanted to go all-in for online shopping. For most this was a single-digit portion of the “real” business. Then Covid came along and upended the status quo in two weeks flat.Instacart was ready when the retailers were not. The little startup that could, did, signing up supermarkets as fast as they could, tacking on exorbitant surcharges, and paying its gig workers as little as possible. Mid-year this company that held virtually no physical assets had a greater market cap than most of its host clients, even those with thousands of stores.
Now those same clients are scrambling for a way out. Good luck. You sold your soul to the Instacart devil and your customers’ loyalty along with it.
- Out of stocks. Another age-old challenge in the grocery world. Kroger tried to address this one 20-odd years ago with a “zero tolerance” policy, but quickly found that it was prohibitively expensive. It wasn’t long before they reverted to the industry standard of 8.3 percent out of stock.The real problem is two-fold: 1) out of stock items tend to be the popular ones, so the eight percent average feels more like 20 percent to shoppers; 2) blank spaces on the shelf – despite all sorts of gimmicky fixes – tend to fill in with the wrong item, making a one-time out of stock permanent.
Walmart famously admitted to a $1.5 billion out of stock problem a decade ago. Even world’s largest retailer hasn’t been able to fix it.
None of these problems is new. Two of them (labor costs and out of stocks) have haunted grocery retailers for at least two generations. E-commerce – while newer – is a challenge old enough to vote if it were human.
The underlying problem is the retailers themselves, and where they out their focus (and resources).
How much money has been spent on self-checkout technology, setting up every single item to include its weight, along with swapping out checkstands? Imagine if that had been spent on labor.
That is labor for stocking shelves, finding out of stocks, and good old fashioned customer service. It is labor that leads to a better shopping experience and greater loyalty (don’t get us started on the loyalty fiasco).
Supermarkets collectively have a massive inferiority complex. They know shopping for dinner doesn’t generate the same excitement with most consumers that shopping for shoes does. The industry is all about cost, savings, low prices, sales, weekly specials, and coupons.
What the industry should be about is: food, service, creativity, education, nutrition. None of those things are even in the top ten list. If our great grandmother walked into the local supermarket, she would be right at home. The out of stocks would be familiar, as would the wait to checkout. Self-checkout she would likely find appalling – and rightly so.
Anyone who can’t see the problem herein is probably part of the industry. We can do better than this.