Proof that we are on the brink of a supermarket revolution came in 2017, when e-commerce giant Amazon invested US$13,7 billion (about R191 billion) in acquiring supermarket chain Whole Foods Market.
The move promises to be a game-changer in food retailing. And it is not only in trendy offices in Seattle that the supermarket is being reimagined: other specialised enterprises already fulfil online grocery orders by delivering directly to customers’ front doors, and more businesses will jump on the bandwagon.
Traditional brick-and-mortar supermarket chains, realising that they are at risk of losing power and profit in this revolution, are strengthening their own e-commerce capabilities.
The value attached to Whole Foods Market by Amazon will have come as a wake-up call: established food retail chains must use customer relationship management (CRM) data to increase sales.
It is true that Whole Foods Market has stores only in the US and UK, but the shift to selling more food online will quickly sweep through developed nations.
Asia to lead the way
During the next decade, the global grocery e-commerce market is forecast to expand at a compound annual growth rate of 13,5%, from an annual value of R688 billion today to R2,16 trillion by 2025.
Business analysts note that although e-commerce players are making efforts to establish a foothold in the US and Europe, they face serious challenges on these continents because the existing grocery market is saturated and margins are low.
This means that global growth in food e-commerce will be driven by Asia, where there is the highest consumer willingness to purchase groceries online, combined with rapid urbanisation, low labour costs, and a relatively undeveloped retail market.
To give just one example of growth potential: e-commerce share of the grocery market in China, the world’s most populous nation, is only 4,2%.
To put this into perspective, e-commerce share is 7,2% in nearby Japan and 16,6% in South Korea.
Widespread food shopping online and fast deliveries to customers’ front doors will be just the beginning of this brave new world. Computer codes and algorithms will enable supermarkets to personalise their offering to customers, using data gathered about shoppers’ individual habits and preferences.
The ‘Recommended for you’ web page so familiar to buyers of products such as books and electrical goods can also direct shoppers towards the foods they like.
In turn, food shoppers will develop higher expectations and a more critical eye when buying fresh fruit or vegetables. More will want to know how fresh the produce is and whether or when it is ready to eat.
The growing number of people around the world with middle-class incomes and lifestyles will become more aware of food safety and more curious about how their foods are being sourced and screened.
Discerning ‘foodies’ will even be able to check information about the origins and nutritional value of produce, and see suggestions for recipes and food pairings.
This will attract and lock in greater numbers of customers while cleverly making each feel as if he or she is being treated individually.
The ad hoc demand created through these online ‘nudges’ will challenge the traditional food supply change. To meet demand, processing lines will need to know in precise detail what is coming in from the land and what is in storage.
Quality and safety standards will have to be higher than ever. In the past, consumers might have ignored a defect or made a complaint only seen by the grocery chain or food manufacturer, but social media will change that.
A photograph of something like a frog in a bag of lettuce can quickly go viral and global, reaching enough people to cause brand damage.
Technology to ensure quality and safety
These opportunities and threats mean that machines such as optical food sorting lines and peeling equipment, produced by companies such as TOMRA, will play an increasing role in meeting customers’ expectations and protecting suppliers’ reputations.
Grading and inspection equipment, at point of origin, prior to shipment to the supermarket or from the online dispatching warehouse, can ensure that the produce has the desired size and ripeness without bruising or mould.
In order to remain relevant, traditional supermarkets will have to make greater and cleverer use of information about shoppers’ preferences and habits.
Consumer-facing technologies, such as shopping-cart-mounted devices or smartphone apps, will steer shoppers towards the aisles and shelves from which they are more likely to make purchases.
Sensors on shelves will keep track of the items customers put in their carts and bill their mobile payment system as they exit the store. This live data will enable supermarkets to rely, to a greater extent, on ‘just-in-time’ stock deliveries, minimising the cost and space of keeping stock on site.
Live data will also help suppliers make the packaging and transportation of foods more time-efficient. Supermarkets and specialised grocery stores will have the option of reducing on-site running costs by becoming smaller, while dedicating a larger proportion of their shelves to displaying fresh produce.
Another likelihood is that supermarkets will remain the same size but change in concept, becoming destinations for ‘click and mortar’ shopping. Because retailers need to offer consumers a consistent omnichannel experience, stores will connect the physical and digital worlds.
Consumers will then be able to see and feel products they might order online. The online product offering could also be accessible via interactive screens.
These changes align with the forecast growth in consumer demand for healthier, high-quality produce, greater choice, and more convenience.
This is a demand that will increase massively as household incomes rise in developing nations, bringing 70 million more people into the middle class every year.
The views expressed in our weekly opinion piece do not necessarily reflect those of Farmer’s Weekly.
TOMRA Food designs and manufactures sensor-based sorting machines and integrated post-harvest solutions for the food industry. For more information, email TOMRA senior marketing communication coordinator Marijke Bellemans at [email protected].