Grocery Trends 2023: Navigating Sea Changes with Innovative Technology by Rethink Retail

Navigating Sea Changes with Innovative Technology

TABLE OF KEEPING GROCERY OPERATIONS SAFE IN AN ERA OF UNPRECEDENTED COMPLEXITY By Alex Lindstrom / Managing Editor, RETHINK Retail x Fortinet

PG. 06 04 INTRODUCTION

By Alex Lindstrom / Managing Editor, RETHINK Retail

PERSPECTIVES ON 09 VIDEO: RETAIL MEDIA NETWORKS IN 2023

Interview with Ana Cabrera from PepsiCo Labs, Evan Mbaka from Albertsons Media Collective, and Matt Nichols from Commerce Ventures

FOCUSING IN ON 05 VIDEO: DATA-DRIVEN STRATEGIES Interview with Kirat Anand, Chief Community Officer at Rethink Retail

2023 BRANDSPARK 10 THE GROCERY TRUST STUDY: BUILDING TRUST WITH SHOPPERS

By Philip Scrutton / Director of Consumer Insights, BrandSpark International

CONTENTS BUILDING 16 VIDEO: SUSTAINABILITY IN THE

MODERN GROCERY INDUSTRY Interview with Suzanne Long, Chief Sustainability and Transformation Officer at Albertson’s Companies

SHOPPERS 17 GROCERY REDEFINE VALUE By Doug Baker / VP of Industry Relations, FMI

19 VIDEO: LEVERAGING TECHNOLOGY TO EXCEED CUSTOMER EXPECTATIONS Interview with Scott Langdoc, Global Head of Grocery, Chain Drug & Convenience Retail at Amazon Web Services

THE STATE 20 EXAMINING OF SELF-CHECKOUT IN 2023

Contribution from TruRating

ON ZABKA 23 VIDEO: GROUP’S SUCCESS IN

AUTOMATION-POWERED EXPANSION Interview with Pavel Grabowski, Zabka’s Head of Unmanned Solutions

TAILORING IN-STORE TECH TO ADAPT TO CHANGING CONDITIONS IN GROCERY By Alex Lindstrom / Managing Editor, RETHINK Retail x Diebold Nixdorf

PG. 28

24 VIDEO: NAVIGATING THE CHALLENGES OF HIRING FOR THE WORKPLACE

Interview hosted by JD Dillon, Chief Learning Architecht - Axonify with: Tom Rudar, Talent Manager - Heinen’s Grocery Store & Jeffrey Berquist, Learning & Development Manager - Heinen’s

REGIONAL 25 CONSIDERING PERSPECTIVES ON INFLATION: AN UNEVEN IMPACT Contribution from TruRating

SOLUTION-SEEKING 31 VIDEO: APPROACHES TO TECH IN THE GROCERY INDUSTRY

Interview with Anna Barber from PepsiCo Labs and Matt Nichols from Commerce Ventures

SUPERMARKET GURU 27 VIDEO: DISCUSSES INFLATION AND SHRINKFLATION

Interview with Phil Lampert

GROWTH STRATEGY: 32 ALDI’S THRIVING BEYOND THE COSTOF-LIVING CRISIS Contribution by IGD

Design by Diane Zeise / Creative Director, RETHINK Retail

INTRODUCTION The opportunity for innovation that deepens and broadens the customer experience in the grocery sector is unprecedented heading into 2024.

disruptive climatological events loom over industry analysts, to say nothing of growing predictions of a broader economic downturn.

From ChatGPT to ‘smart’ shelving units, from virtual experiences to advancing IoT technology, and from automated assistants to faster and better seamless, frictionless checkouts, the possibilities for truly omnichannel customer experiences that will excite and engage are tremendous, and all necessary to properly engage with industry-wide trends and challenges.

Yet, retailers should always keep their eyes on the future and take steps to prepare for potential disruptions. Businesses that are proactive today are in the best position to weather the trials of tomorrow, and as ever, it pays to keep positive.

Indeed, the retail industry—including the grocery sector—has gone through a variety of accelerated changes in the last several years. While one of the most obvious drivers has been the effects of the pandemic and its effects on consumer behavior, many of these changes are the result of technological trends that have been developing for decades. There does remain uncertainty; the impacts of inflationary monetary policy have been more pronounced and prolonged than many assumed. Some technologies are also proving more disruptive than anticipated, sooner than anticipated, such as ChatGPT’s globe-shaking release into the public eye. To boot, lingering concerns about supply chain disruptions and an increased incidence of

“ Businesses that are proactive

today are in the best position to weather the trials of tomorrow, and as ever, it pays to keep positive.

By integrating the algorithmic personalization of eCommerce with the experientialism and instant gratification of the brick-and-mortar experience, grocery can not only remain competitive with a growing eCommerce sector but continue to thrive in the provision of value to share-and-stakeholders. Indeed, by leveraging digital solutions and data analytics, retailers can gain the customer insights key to sales conversions and achieve real personalization; consumers are seeking that digitized store experience that provides a wide array of product information at their fingertips in much the same way eCommerce might. Patrick McIntyre, Head of Global Retail for Mars Retail Group, contends that “With the continuous evolution of technology, immersive experiences both in physical stores and online will revolutionize consumer-brand interactions. This evolution transforms shopping from a mere transaction into an enchanting voyage of exploration and joy.” It’s the future of grocery: a consumer-focused lens through which tech innovation and digital transformation are understood, with the ultimate goal of a more experiential, frictionless, and engaging in-store experience that encourages shoppers to continue journeying to physical locations. This process of hybridization has already seen significant growth in the grocery industry. For example, Michael Fiddelke, CFO of Target, notes

By Alex Lindstrom // Managing Editor at RETHINK Retail

that “Fulfillment mix has…seen a permanent shift. Our same-day services have seen explosive growth. They now account for more than half of our digital sales and more than 10% of our total sales. And that trend shows no signs of reversing.” By gradually developing these AI-powered, hyper-personalized in-store metamorphoses, grocers can evolve the in-store experience to not only better respond to those growing customer demands, but develop a more robust strategic posture of adaptability and resilience going into the challenges of 2024.

FOCUSING IN ON DATA-DRIVEN STRATEGIES Interview with Kirat Anand: Former VP of Pricing Strategy at Walmart Talks Tech and Trends

Indeed, notes Kirat Anand, Former Head of GM Pricing and Promotion Strategy at Walmart, “AI pricing strategies allow you to simultaneously track your competitors, analyze customer behavior, collaborate with suppliers, and adjust prices, not only to maximize profit, but also to maintain competitive advantage.” Adds Greg Buzek, President of IHL group, the future of retail indeed includes a radical deployment of AI technologies, further noting that “Worldwide expected financial impact of AI from 2022-2029 we forecast to be $1.9 trillion or 20.6% of the total.” What all of this means for grocers looking to adjust their strategic postures or take concrete steps forward can be a complex web of considerations to untangle. For that, Rethink Retail is here to help. In this multimedia report, Rethink Retail has partnered with retail leaders and industry experts to provide an insightful multimedia rich look at where grocery is, where it’s heading, and what you should be thinking about to prepare for that next challenge around the corner.

SUMMARY: In this interview, Rethink Retail’s own Kirat Anand– former Head of General Merchandising, Pricing, Promotion, and Markdown Strategy at Walmart, and currently Chief Community Officer at Rethink Retail–discusses the ways data and technology can shape the grocery retail industry. He emphasizes that data-driven strategies are crucial for enhancing customer experiences and satisfaction, highlighting several key technologies surrounding automation, personalization, predictive analytics, real-time store monitoring, and price optimization, all aimed at a streamlined operation that offers better personalized experiences for shoppers. Kirat also discusses AI and some of the challenges facing the industry—such as inflation—in this informative interview.

KEEPING GROCERY OPERATIONS SAFE IN AN ERA OF UNPRECEDENTED COMPLEXITY By Alex Lindstrom // Managing Editor at RETHINK Retail x Fortinet

The trials of the last many years have been myriad for the retail sector. The industry has been shaken; a few won, many lost, and the challenges are ongoing in an inflationary climate.

Those challenges have developed at a rapid pace due to a variety of factors, whether climatological disruption, supply chain issues, the pandemic, or quickly evolving consumer preferences in response to all of the above.

“[Because of inflation]…People have been trading down in terms of both the number of items in the basket and…in certain categories,” notes Chip Molloy, CFO of Sprout Farmers Market, on the way consumers have responded to socioeconomic challenges. Meanwhile, technology continues to develop at a blistering pace, and while retailers and grocers can adopt new, advanced technologies to help solve problems, they’re also tasked with managing a swiftly complexifying cybersecurity landscape. When you combine those security concerns with the demands of the ‘new,’ post-pandemic consumer, grocers have their work cut out for them when modernizing their network capabilities to meet those demands in a more efficient manner,

and all in the name of keeping up with eCommerce growth. Notes Yael Cosset of Kroger, CIO and SVP, “Efficiencies are vital to create continued growth and achieve scale, and we need technology and data at the service of our associates to create an awesome customer experience.” To investigate how retailers can continue to grow while upholding cybersecurity standards in an AI-powered threat environment, Rethink Retail sat down with Shad Taylor, an Architect for Retail and Hospitality and Fortinet, about those challenges and what they really mean for decision-makers. Shad argues that tackling the problem requires a twofold approach: 1) optimizing back-of-house

“ While retailers and grocers can adopt

new, advanced technologies to help solve problems, they’re also tasked with managing a swiftly complexifying cybersecurity landscape.

Grocery Trends 2023: Navigating Sea Changes with Innovative Technology

operations while 2) meeting changing consumer expectations.

wherein a platform-based approach is taken to ensure a more seamless management environment.

Back-of-house operations need to be streamlined not only so that you can eliminate mundane tasks that eat up labor time and cost, but “[creating] business functions that have more maturity” for businesses to build their growth off of, argues Shad.

Specifically, he describes Fortinet’s ‘convergence’ approach, describing systems such as FortiOS (their operating system) or their next-generation firewalls as “[pieces] of a puzzle when it comes to tackling systems or ideas and architectural principles like Zero Trust.”

Optimizing back-of-house processes directly impacts the store’s ability to meet changing consumer expectations. It’s a process that might include integrating technologies and networking to facilitate real-time inventory management; more efficient customer reach operations through technology such as sensors, beacons, and robotics/AI; and better online delivery services to compete with eCommerce.

These puzzle pieces all work together to centralize security management across various systems within a given organization, with the FortiGate firewall serving as a central control point integrating switches, wireless access points, and cellular routers, thereby enabling the application of robust security policies at the ‘point of ingress,’ making those policies that much more effective.

Yet, it may be more than just installing new technology, Shad warns; the shift to online and remote ordering may also necessitate that the traditional store layout is reimagined to cater to both in-store shoppers and remote pickups. In order to accomplish those goals while maintaining an active and effective cybersecurity posture, Shad recommends an integrated strategy

“

It’s that kind of secure-yet-modernized network infrastructure that plays such a pivotal role in the customer experience, crucial for grocers in such a competitive landscape.

A reliable, secure, and resilient network infrastructure that’s highly performant is critical to grocery operators today. Shad Taylor // Architect for Retail & Hospitality at Fortinet

“What that means to a grocer is one configuration per store, no matter how many switches or how many APs or how many devices are connected to your network, and you can apply policy [anywhere you need it],” Shad argues.

Knowing you have a secure network means you can ensure the ‘always on’ customer experience that so many came to expect from the eCommerce-rich lockdown period, where consumer expectations shifted dramatically. Indeed, it’s because consumers expect seamless interactions with total reliability that stable networks are so critical; failures can often result in damage to customer loyalty, and customers will go elsewhere. With that modern network of course comes concerns around data privacy and compliance, something retailers and grocers must remain especially aware of at a time when the public is increasingly aware of major network breaches that concern their data. A unified solution such as Fortinet’s aids in compliance with regulations such as PCI DSS and GDPR. To boot, working with an expert cybersecurity partner ensures you know what the best practices and configurations are, ensuring that your data remains encrypted and compliant.

PERSPECTIVES ON RETAIL MEDIA NETWORKS IN 2023 2023 Interview with Ana Cabrera from PepsiCo Labs, Evan Mbaka from Albertsons Media Collective, and Matt Nichols from Commerce Ventures

Furthermore, it’s with the emergence of computer vision and video analytics that new layers of complexity have been added, necessitating even greater levels of data protection, yes, but also the expertise to manage it and the new forms of data that are rapidly normalizing, such as biometrics. The grocery sector—like the rest of retail— has a lot to contend with heading into the rest of the decade. Cybersecurity—while an ever-evolving effort that requires a strategy posture of vigilance and preparedness— shouldn’t also be keeping managers up at night. Selecting the right partnerships to maintain your security operations can be the difference between a costly PR disaster and the security of knowing that you can keep up with the network demands of the modern consumer.

SUMMARY: Anna Barber from PepsiCo Labs and Matt Nichols from Commerce Ventures sit down with Rethink Retail to discuss their approaches to various industry problems from a technological perspective, particularly regarding leadership and varying strategic postures. The prioritization of partnerships, testing methodologies, scaling concerns, and common, urgent industry goals such as sustainability and efficiency gains are all covered—in addition to investor perspectives, innovation, how to overcome challenges as a startup, and how to remain flexible in an ever-changing industry by tracking the right metrics—in this insightful interview.

THE 2023 BRANDSPARK GROCERY TRUST STUDY: Building Trust with Shoppers By Philip Scrutton // Director of Consumer Insights at BrandSpark International

The BrandSpark Grocery Trust Study surveyed 10,082 Americans for 2023 to identify which grocery retailers they trust most and why. Trust leaders were identified for 8 store formats, in four major regions and across 36 specific attributes or departments. The study also revealed changes in shopper penetration and trust share, including meaningful shifts since before the current period of accelerated inflation. In 2022, three in four American shoppers reported that they changed their grocery shopping routines in response to inflation. Despite that, most stuck with the grocery banners they trust most, with 74% reporting they visited their most trusted grocery retailer more than any other in the prior 3 months.

Trust plays an integral role in this decision of where to shop. Customers who switch retailers now they may not return even if cost of living pressures ease. Periods of market disruption present important moments for retailers to deepen the relationship with their shoppers and reinforce why they deserve their trust. Responding to unique challenges doesn’t require losing focus on primary competitive strengths: the drivers of trust in grocery retailers are remarkably stable. This underscores the necessity for primary grocers to build trust on fundamental drivers of value, while being ready to adapt to market challenges in order to continue delivering it.

States Drivers of Trust in a Grocery Retailer (% Selecting as 3 Most Impactful)

43%

Low prices 20%

Handling of price inflation Loyalty program rewards

14% 41%

Quality of fresh produce 36%

Quality of fresh meat 19%

Quality of private label products 11%

Quality of fresh prepared meals

24%

Selection of food & bev products Selection of non-food products

Service quality / friendly staff

20%

Well maintained / updated stores

19% 11%

Self-checkout

10%

Store layout / organization

‘Handling of price inflation’ was added to the 2023 edition. / Other results were stable vs. 2021.

“

Periods of market disruption present important moments for retailers to deepen the relationship with their shoppers and reinforce why they deserve their trust.

Grocery Trends 2023: Navigating Sea Changes with Innovative Technology

Even with increased focus on price, quality-driven conventional grocers ranked highly in each region, including Kroger (South and Midwest), Safeway (West), Publix (South) and ShopRite (Northeast).

Trust Rank

Far West

Rocky Mountain

Southeast

Southwest

Plains

Great Lakes

Mideast

New England

Walmart 16%

Walmart 26%

Walmart 31%

Walmart 32%

Walmart 35%

Walmart 25%

Walmart 17%

Stop & Shop 20%

Safeway 12%

Kroger 23%

Publix 15%

H-E-B Grocery 24%

Aldi 13%

Kroger 21%

ShopRite 12%

Walmart 14%

Costco Wholesale 10%

Safeway 8%

Kroger 12%

Kroger 11%

Hy-Vee 13%

Meijer 14%

Aldi 8%

Hannaford 13%

WinCo 6%

Costco Wholesale 7%

Food Lion 8%

Albertson’s Sam’s Club 3% 6%

Aldi 10%

Wegmans 7%

Market Basket 8%

Trader Joe’s 6%

WinCo 6%

Aldi 4%

Sam’s Club 3%

JewelOsco 4%

Giant Food Stores (PA) 5%

Shaws 8%

Target 5%

While the resilience of America’s leading grocers was undeniable, specific banners were able to seize the opportunities of the past year more than others. Walmart, Kroger, and Aldi consolidated their strong positions nationally, buoyed in part by private label options that Americans view as great value, and which became even more attractive to shoppers trying to stretch their grocery budget. Meanwhile, retailers that continued to invest and expand saw continued success, including Aldi expanding in the south, and dollar channel leaders Dollar Tree and Dollar General adding fresh grocery to attract a new segment of shoppers as well as growing baskets.

Shopped for Grocery in Past 6 Months % Shoppers Nationally (n=10,082) 62%

Walmart 21%

Target 6%

Meijer Dollar General

26%

Aldi

25% 23%

Dollar Tree 7%

Save-A-Lot Grocery Outlet

Sam’s Club

16%

Costco Wholesale

16%

BJ’s Wholesale Club

5% 20%

Kroger 11%

Trader Joe’s Amazon Fresh

Safeway

Whole Foods Market

9% 9%

Publix 6%

Albertson’s Food Lion

H-E-B Grocery

Sprouts Farmers Market

Hypermarkets

ShopRite

Discount & Dollar

Stop & Shop

Club

WinCo

Core Traditional

Winn-Dixie

Specialty

Grocery Trends 2023: Navigating Sea Changes with Innovative Technology

While total reach among shoppers is important, it is necessary to measure the depth-of-trust among existing banner shoppers: it is this metric that correlates with resilience and loyalty. Leading traditional banners excel here, delivering value that their shoppers believe justifies a premium over the discount channel. H-E-B continues to set the gold standard nationally for shopper trust and loyalty.

Looking at these results, a channel hierarchy is seen where pure discounters and specialty grocers are not expected to deliver as comprehensively on Americans’ grocery needs, and consequently are less likely to be a shopper’s most trusted grocery retail destination. It is most meaningful for banners to look at trust benchmarks within their channel.

Most Trusted for Grocery % Past 6 Month Own Shoppers 65%

H-E-B Grocery 47%

Kroger Publix

46%

ShopRite

45%

Walmart

41%

Food Lion

40% 39%

Meijer

37%

Stop & Shop

35%

WinCo

32%

Safeway Costco Wholesale

26%

Amazon Fresh

25%

Albertsons

25%

Whole Food’s Market

25% 24%

Trader Joe’s

23%

Aldi

22%

Grocery Outlet Winn-Dixie

20%

BJ’s Wholesale Club

20% 20%

Sprouts Farmers Market Sam’s Club

17%

Hypermarkets

Save-A-Lot

17%

Discount & Dollar

Target Dollar General Dollar Tree

5% 2%

Club Core Traditional Specialty

TOP

KEY LEARNINGS FROM THE 2023 BRANDSPARK GROCERY TRUST STUDY

1. Trust matters grocery shoppers and is at the

6. There is a basic difference in expectations of

heart of the customer-retailer relationship.

discount grocers and traditional full-service grocers, among whose shoppers quality remains even more important than price.

2. Understanding depth-of-trust is essential, as well as trust share. Understand relative performance among your shoppers and their unique drivers of trust.

3. Price and quality are the most important trust drivers to shoppers of all leading banners. Establishing these fundamentals permits brands to deepen trust with higher level drivers.

4. Price was already an essential trust driver, so price inflation had little impact on what shoppers ‘say’ is important, even as it impacted behavior.

5. Being trusted for low prices prepared discount banners to grow.

7. Convenience is still prized: the traditional leaders who offer a one-stop-shop have maintained trust.

8. Regionality reveals potential to challenge the dominance of national leaders (or of macroregional leaders).

9. Dollar stores have shown significant growth – this is expected to continue as long as there is increased price pressure on consumers.

10. Online grocery plays an important role in building trust as consumers now expect that convenience from traditional grocers.

ABOUT BRANDSPARK INTERNATIONAL Founded in 2001, BrandSpark International is a marketing research firm that uniquely combines real world omni-channel consumer insights with a deep understanding of competitive context, providing our clients with highly actionable insights. We are strategic thinkers and storytellers that fuse our passion for insights with our clients’ need to drive results. Our multi-disciplinary, highly-responsive team takes a customized consulting approach to solving brand and marketing challenges, refining brand positioning, building consumer trust, and improving success with new product launches.

Grocery Trends 2023: Navigating Sea Changes with Innovative Technology

BUILDING SUSTAINABILITY IN THE MODERN GROCERY INDUSTRY Interview with Suzanne Long, Chief Sustainability and Transformation Officer at Albertson’s Companies

SUMMARY: In this detailed interview between Rethink Retail and Suzanne Long, Chief Sustainability and Transformation Officer at Albertson’s Companies, we discuss commitments to sustainability, including how one can better integrate it into the structure of business-wide decision-making. Long explains that consumer attitudes towards sustainability, driven by concerns about climate change, water stress, plastic pollution, and affordability of food, are influencing shopping and purchasing habits, and outlines Albertson’s Recipe for Change initiative, an important blueprint for retailers seeking to better their sustainability efforts.

GROCERY SHOPPERS REDEFINE VALUE By Doug Baker // Vice President, Industry Relations, FMI – The Food Industry Association

Value represents the cornerstone of the food industry’s proposition to consumers. As universal as the word is across the consumer landscape, recognizing what value means to consumers and how to meaningfully deliver it to them can be challenging. Understanding value in today’s shifting cultural context is imperative for the food industry, particularly as shoppers adjust their purchasing patterns and habits amid continued inflation and uncertainty.

The latest survey of grocery shoppers by FMI— The Food Industry Association in our U.S. Grocery Shopper Trends 2023 series reveals the meaning of “good value” and how it is becoming more complex as consumers navigate grocery aisles. Although definitions vary, value is often understood in terms of price and quantity. However, shoppers are increasingly expanding their notions of value to include quality, relevance, convenience, and experience.

Grocery Trends 2023: Navigating Sea Changes with Innovative Technology

62% of millenials increasingly say

they prefer to minimize food waste by buying only what they need, a strategy that speaks to relevance. Quality reflects the importance of personal food standards and goals around eating well and includes an emphasis on freshness, minimal processing, health and nutrition, product sourcing, and ethical considerations such as sustainability and labor standards.

shifting definition of value toward a more holistic measurement that goes beyond the traditional price-to-quantity ratio. For example, 62% of millennials increasingly say they prefer to minimize food waste by buying only what they need, a strategy that speaks to relevance.

Relevance refers to shoppers’ needs versus wants and reflects their decision-making around necessary versus indulgent items. Questions about how well a product aligns with personal/household preferences, its usefulness, and its potential for waste have taken on greater importance as shoppers seek to meet the preferences and needs of individual household members while sticking to their budgets.

Convenience and a pleasing shopping experience are also key drivers of value for younger shoppers: 47% of millennials say that they are willing to spend more money to avoid shopping at multiple stores, while 50% say they’d spend more to shop at more pleasant stores, compared to just 16% of Baby Boomers.

Experience captures the importance of pleasure, enjoyment, novelty, variety, and discovery as well as the physical aspects of shopping such as store cleanliness and the friendliness and knowledge of store employees. Lastly, convenience continues to be a key element of value, including more typical criteria such as speed, ease, and accessibility (which shoppers sometimes trade for lower prices) as well as expectations around engagement, flexibility, experience, and relevance. While shoppers say that getting good value is a priority across all income and demographic levels, younger shoppers are clearly driving the

Younger shoppers are also more willing to buy the best quality items regardless of price. 52% of millennials and 42% of Gen Z-ers express that sentiment, compared to just 22% of Baby Boomers. Across generations, shoppers also note benefits related to convenience and experience as factors for choosing in-store versus online. For example, while some shoppers appreciate amenities such as in-store cafes, pharmacies, and banking, which help them save time by combining grocery shopping with other household tasks, others appreciate not having to deal with crowds and lines. Store cleanliness, ease of navigation, familiarity, and employee treatment also play roles in decisions not just about which stores shoppers trust and prefer but also whether and when they shop in person or online.

Food retailers’ private brand programs are another opportunity to create value for grocery shoppers. Our research finds 41% of consumers reported buying more private brands—which are typically more affordable than national brands—since the COVID-19 pandemic began. While 63% of private brand shoppers consider private brands to be a good value and 55% buy them because they are less expensive, additional value-added factors—including quality, taste, sustainability, and contributions to health and well-being— are also driving consumer affinity for private brands. Given inflation-driven price increases, it makes sense that shoppers continue to shop private store brands as a way to both find value and stretch their grocery dollar further.

LEVERAGING TECHNOLOGY TO EXCEED CUSTOMER EXPECTATIONS Interview with Scott Langdoc, Global Head of Grocery, Chain Drug & Convenience Retail at Amazon Web Services

Ultimately, grocery shoppers’ desire for more flexibility and control over their shopping process shapes their decisions about which methods they employ. While the search for “value” remains a priority for most shoppers, how they define it has evolved. Today’s shoppers see value through the lens of a broader range of considerations that reflect the complexity of their lives, habits, values, and priorities. Loyalty has a distinct connection to value, so understanding value from a consumer perspective is imperative for the food industry. Retailers can differentiate themselves by thinking about value more holistically. Developing a unique identity by embracing multiple dimensions of value that go beyond specific categories or departments can help retailers stand out by standing for more than just good prices and deals—although both remain a top priority. To download the U.S. Grocer Shopper Trends 2023—Value Matrix report and to sign up to receive updates on future reports in the series, visit www.FMI.org/GroceryTrends.

SUMMARY: In this interview, Scott Langdoc, former CIO at Raleys SuperMarkets and current Global Head - Grocery, Chain Drug & Convenience Retail at Amazon Web Services (AWS), discusses the evolving landscape of the retail industry, particularly in the grocery sector. He emphasizes the importance of technology in meeting and exceeding customer expectations, highlighting the need for technology to enable brand experiences. He also touches on the adoption of cloud computing and digital innovations to improve operations, customer engagement, and data-driven insights in the grocery retail sector before delving into the challenges of inventory management and the role of forecasting tools in reducing waste and optimizing inventory.

EXAMINING THE STATE OF SELF-CHECKOUT IN 2023 Contribution from TruRating

Originally a grocery innovation, self-checkout stations are now commonly found in stores of all sizes and verticals. These machines are now so ubiquitous a part of the modern retail experience, that few seem to challenge the thinking behind them (the global market for self-checkout is projected to grow from $4.51 Billion in 2022 to $12.01 billion in 2029).

checkout both in terms of spend and CX is widely understood. TruRating data from over 40,000 consumers across the globe provides a unique insight into the state of self-checkout in 2023.

While the cost-saving incentive for retailers is clear, it’s less apparent whether the true cost of self-

While 96% of customers responded that selfcheckout was ‘easy’ (though a split emerges when

WHY DID YOU USE SELF-CHECKOUT TODAY?

the data was broken down by vertical revealing only 86% found SCO easy in a convenience environment—this doesn’t really get down to the more granular question of why a consumer might choose self-checkout over a manned till. TruRating data revealed that in 45% of cases, consumers used a self-checkout till because they felt like they had no other choice. While ‘speed’ was revealed as a key driver for customers to choose SCO generally, the illusion of convenience is brought into question when it seems many customers feel like they have little other choice than a self-checkout terminal in many retail environments. It’s essential to remember that customers value choice - as much as speed and convenience when this is taken away from them the negative impact of an overall customer experience is simply left as an unquantifiable question mark—not ideal in an increasingly competitive retail marketplace.

45% of customers used self checkout because they felt they had no other option. according to TruRating data

self-checkout. For retailers in apparel, this preference for self-checkout dropped to just 25%.

WHICH CHECKOUT EXPERIENCE DO YOU GENERALLY PREFER?

It is perhaps not surprising that the fewer the number of items in the basket the higher the preference for self-checkout. But what is interesting is that the tipping point at which more than 50% of customers prefer assistance was in one convenience retailer as low as just 4 items in the basket.

The preference for self-checkout also differs considerably by sector—while convenience customers are less likely to report their checkout experience as easy, 70% would still prefer to use

This is especially pertinent for grocery where retailers need to focus on ensuring that at the very least, self-checkout tills are a viable and preferred channel for at least a full basket of shopping.

“

The illusion of convenience is brought into question when it seems many customers feel like they have little other choice than a self-checkout terminal in many retail environments. Grocery Trends 2023: Navigating Sea Changes with Innovative Technology

WHAT DO YOU LIKE BEST ABOUT SELF-CHECKOUT? In both Convenience and General retail, the majority of customers responded that less wait time was the key immediate benefit of using a self-checkout terminal. Whilst having the ability to check prices & discounts and pack at their own pace took a third of the customers’ votes, the data shows that when it comes to self-checkout, speed is key.

CONVENIENCE

GENERAL RETAIL

78% less wait time

65% less wait time

22% can check prices

21% can check prices 15% scan at my pace

“ 22

Retailers need to balance tech advancements with operational efficiency to truly enhance the checkout experience.

One less obvious and indirect benefit for customers from the move to more automation at checkout should be the ability for retailers to redeploy staff members to focus on other factors that improve the overall customer experience. This could be having staff more available to assist customers on the shop floor; ensuring the store is kept clean; or that shelves are stocked and merchandise is always properly presented and priced. While this in theory is a good thing for retailers, TruRating data revealed that in one retail chain, the implementation of SCO saw the numbers of staff greeting customers in the store drop from 70% to 50% Why does this matter? Because in many cases—staff greeting customers has a direct positive correlation with increased basket spend.

ON ZABKA GROUP’S SUCCESS IN AUTOMATIONAUTOMATION POWERED EXPANSION Intervierw with Pavel Grabowski, Zabka’s Head of Unmanned Solutions

KEY TAKEAWAYS When it comes to self-checkout, one size does not fit all. Customers highly appreciate the ability to choose from various checkout options that suit their individual preferences. The number of items in the basket directly impacts lane selection—know your tipping point. Understanding the tipping point, or the threshold where customers opt for a specific lane, is crucial for efficient management. Surprisingly, two-thirds of customers choose self-checkout because they think it will be the quickest way to complete checkout. It’s essential to acknowledge that selfcheckout can remove the only opportunity for interaction with staff for many customers and have a knock on impact on their spend and basket size.

SUMMARY: In this interview, Pavol Grabowski–Head of Unmanned Solutions at Zabka–discusses the experiences and lessons learned during his time with Zabka Group, a retailer based in Poland that is rapidly expanding its stores using automated store technology. Launched in June 2021, Zabka Nano has already expanded to multiple locations in Ireland. Grabowski emphasizes that their focus is on providing customers with a unique shopping experience, including customized product selections, privacy, and security. He further touches on the customization of inventory based on demographic data, the importance of fostering trust in the deployment of these technologies, and other key takeaways.

NAVIGATING THE CHALLENGES OF HIRING FOR THE WORKPLACE Interview hosted by JD Dillon, Chief Learning Architecht Axonify with: Tom Rudar, Talent Manager - Heinen’s Grocery Store & Jeffrey Berquist, Learning & Development Manager - Heinen’s

SUMMARY: In this interview hosted by JD Dillon, Chief Learning Architect with Axonify, he discusses the state of labor in the retail industry with Tom Rudar, Talent Manager at Heinen’s Grocery Store, and Jeffrey Berquist, Learning & Development Manager also at Heinen’s. They discuss how retailers can better manage the challenge that is hiring in the modern labor market, discussing what some of the best strategies are to align strategically while attracting needed talent during a tight market with changing values and priorities among the labor pool.

CONSIDERING REGIONAL PERSPECTIVES ON INFLATION: An Uneven Impact

Contribution from TruRating

While we tend to view the world as a global marketplace, it’s important to remember that inflation rates are not equally felt in every region. TruRating surveyed consumers in each of its core market regions around the world. The results revealed some of the varying impacts inflation is having on basic habits, including driving and food consumption. Survey responses indicate a varying degree to which discretionary spending is impacted. A key consideration was revealed from this survey: Location is key. In areas where consumers have a higher reliance on private transportation to get to the store, customers are attracted from a much broader geographic area. Those grocers and convenience stores operating in densely populated and Urban areas are seeing returns on their strategic investments in location. Younger consumers tend to view inflation much differently than families and seniors. Younger, more affluent consumers are also more likely to inhabit urban areas and feel the impact of increasing lifestyle costs, such as transportation, much less than seniors and families.

Grocery Trends 2023: Navigating Sea Changes with Innovative Technology

ARE YOU DRIVING LESS DUE TO PETROL PRICES?

ARE YOU COOKING AT HOME MORE THIS YEAR?

of families & seniors

in Australia & New Zealand of youth

Governmental responses to inflation are localized in many ways. Grocers and retailers at large are being forced to factor in the impact of wider economic trends as part of their strategic response to inflation. Costs that bite heavily into consumers’ discretionary spend may be perceived as negative, however, there are some essential actions that grocery retailers can take to build long-term substantial loyalty from consumers in times when prices are increasing across the board:

By helping your consumers weather the storm of temporary cost increases, you can win long-term customer trust. 26

in the United Kingdom

customers are going the “ Ifdistance to visit the grocery

store, the retailer needs to ensure that it delivers on fundamentals while the customer is there at the store. If customers are going the distance to visit the grocery store, the retailer needs to ensure that it delivers on fundamentals while the customer is there at the store. Customers are unlikely to forget that the grocer has gone the extra mile and exceeded customer expectations in such a significant time of need.

SUPERMARKET GURU DISCUSSES INFLATION AND SHRINKFLATION Interview with Phil Lampert

By understanding which products and product lines have the strongest impact on your customers’ perception of brand value, you can mitigate potential losses by strategically increasing prices for products that have a less noticeable knock-on effect. And remember—your most loyal customers are likely to notice any price increases first.

SUMMARY: This interview with ‘Supermarket Guru’ Phil Lampert offers insights into ever-changing market conditions for grocers. Lempert is an expert analyst with 25 years of experience in consumer behavior, marketing trends, new products, and the changing retail landscape. He highlights varying key challenges such as climate change, labor shortages, geopolitical conflict, and other supply chain-related factors, tying them into inflation and the impacts it is having on consumers. He concludes with the steps retailers and grocers can take to mitigate these challenges, with technology and AI leading the way to help maintain affordability and drive efficiency.

TAILORING IN-STORE TECH TO ADAPT TO CHANGING CONDITIONS IN GROCERY By Alex Lindstrom // Managing Editor at RETHINK Retail x Diebold Nixdorf

For retail managers navigating the challenges of 2023, the rapid pace of industrial and technological change can be overwhelming. From supply chain concerns to inflationary behavior to ChatGPT’s emergence and market uncertainty, there’s a lot to be considered.

and negotiating costs—frankly, questioning cost increases and pushing back.”

At the moment, it’s inflation—including the particularly acute inflation that’s hit grocery—that seems to sting the most. Notes Jeremy Gosch, CEO of Hy-Vee, “We’re spending more and more time than we’ve spent in the past negotiating prices

To discuss the changes facing the industry and what that means for grocers, RETHINK Retail sat down with Matt Redwood, Vice President of Retail Technology Solutions with Diebold Nixdorf.

Yet, the basic question remains: what to do, and how do we get there? How can grocers—given present constraints—increase efficiency?

“Retail is obviously going through a fairly turbulent time,” Redwood begins, noting that many of the present trends were driven on by COVID-19, further noting pressures from supply chain issues and the cost-of-living crisis, something that’s hit American families hard in late 2023. Part of the challenge of running the next generation of stores, Redwood explains, has been attracting and keeping competent staff, particularly those who can respond to the growing demands of customers who’ve become accustomed to algorithmic personalization and instant checkouts in the eCommerce world.

“

retailer managers may understandably feel that they’re in a bind. This has turned a lot of industry attention toward self-service and automation technologies, notes Redwood: “Now it’s actually more of a necessity… because retailers don’t have the staff available at the front end to actually transact.” The industry has begun to expand the technology to other touchpoints as well, such as cafes and QSR areas, to enhance the overall consumer experience, reduce waiting times, and increase front-end efficiency at a time when the front end is less staffed than ever.

“If you look at consumer trends pre-and-post COVID, they’ve been very different,” explaining that customers went from more frequent visits and smaller cart sizes to “a kind of reverse of that trend…we’ve seen some consumers come back to the store. Others have stayed online.”

“The number one bugbear for all consumers is queuing, so retailers are doing a lot to reduce queues at the front end because they know that’s a key metric for how consumers rate their experience within the store,” Redwood emphasizes.

That creates that pressure, Redwood explains, and when combined with the ongoing labor crisis, many

“I think we’ve really reached a bit of a tipping point in consumer adoption or acceptance of self-

OpenAPI means that we can easily integrate third-party innovations into our solutions easily and quickly. That means retailers can take control over their innovation strategy and the overall solution they deploy into the store. Matt Redwood // Vice President of Retail Technology Solutions with Diebold Nixdorf

Grocery Trends 2023: Navigating Sea Changes with Innovative Technology

service, and that’s primarily driven by the fact that they associate it with a faster exit from the store,” he continues. Yet, if your self-service ecosystem is lacking or in need of a revamp, where do you begin? How do you begin? Redwood explains how having the right partner can help to address these challenges and implement necessary changes through a data-driven and consultative approach for grocers. For example, at Diebold Nixdorf, they begin by looking to better understand the pain points, consumer behaviors, and varying requirements of a given retailer. Using new analytics technologies and methodologies, they can work to predict customer flows, behaviors, and preferences, which in turn produces a recommendation for the right mix of technologies to facilitate the retailer’s goals. No matter who your partner, however, the emphasis for retailers who want their solutions to work longterm should be modular, open, and adaptable to

ensure that they don’t get locked into to legacy hardware and software. “OpenAPI means that we can easily integrate third-party innovations into our solutions easily and quickly. That means retailers can take control over their innovation strategy and the overall solution they deploy into the store,” explains Redwood, adding that Diebold leverages remote capability and predictive monitoring to ensure a quick recovery and optimal performance in case of breakdowns. When asked how grocers could best prepare for the future, Redwood contends that the present level of industry uncertainty makes it particularly difficult to predict, yet notes that the ethos of an OpenAPI architecture allows for greater resilience when unpredictable changes do occur, “to be able to handle whatever comes along.” “Deploying hardware to a store is expensive. It’s disruptive to a store. You don’t want to be constantly changing hardware…the idea is that you flex, you evolve, you change your technology on the fly,” he elaborates.

While technology continues to advance— particularly AI, which Redwood explains may soon become the ‘technological backbone of the storefront’—that strategic posture of flexibility and preparedness will remain essential for retailers as they introduce technology to create more seamless, frictionless store visits and ensure consumers are engaged in a more omnichannel ecosystem. “Creating a great customer experience in retail beyond a transactional relationship; it’s about fostering genuine connections, anticipating needs, and leaving lasting impressions that turn customers into loyal advocates of your brand,” notes Patrick McIntyre, Head of Global Retail for Mars Retail Group. No matter what the future throws at grocers, with the right tools in hand, they can respond while keeping an edge on their competition, creating memorable experiences, and reclaiming customer loyalty.

“

Creating a great customer experience in retail beyond a transactional relationship; it’s about fostering genuine connections, anticipating needs, and leaving lasting impressions that turn customers into loyal advocates of your brand. Patrick McIntyre // Head of Global Retail for Mars Retail Group

SOLUTIONSOLUTION SEEKING APPROACHES TO TECH IN THE GROCERY INDUSTRY Interview with Anna Barber from PepsiCo Labs and Matt Nichols from Commerce Ventures

ALDI’S GROWTH STRATEGY: Thriving Beyond the Cost-of-Living Crisis Contribution by IGD

As value-seeking shoppers flock to discounters such as Aldi, helping to stretch their dollars further, they are primed to succeed in the current environment. However, Aldi is not dependent on tough economic times for success; its business model has propelled it to become the secondlargest grocery retailer globally, behind Walmart, trading through economic peaks and troughs. With a business spanning over 13,000 stores and 18 countries, we highlight the strategies that will power its growth over the next five years to become a $170 billion business by 2028.

To showcase its low price and value credentials, Aldi is increasing its investment in marketing. The communication is focused on the “Aldi price”— delivering unbeatable value for every occasion or need. The low-price image is also reinforced by showcasing the results of independent surveys from organizations such as Which? (UK) and Handelsblatt (Germany).

01 REINFORCING ITS LOW-PRICE PROPOSITION

Historically, discounters such as Aldi have focused on a simple everyday low-price strategy. Weekly price reductions of up to 50% and promotional offers on grocery products are now part of its pricing strategy. The aggressive prices, changing weekly on both private label and branded products, are used to drive footfall and frequency of visits.

In the current climate, Aldi’s low-price image is being challenged across several markets by other retailers as they ramp up their value credentials. Its strategy to add more quality and premium products has also had an impact. Aldi needs to keep prices significantly lower than its supermarket competitors to show that it remains a value champion and provides affordable products to shoppers.

To offer more competitive prices compared to its competitors, Aldi will also invest in its private label supply chain to reduce costs through economies of scale. The ongoing merging of sourcing for private label products with Aldi Nord in Germany is paramount to delivering more value. The sourcing of branded products across Europe is also likely to be impacted.

02 EVOLVING THE STORE MODEL Aldi has moved away from its one-store-fits-all model, creating more varied concepts as part of its strategy to enter new and more diverse locations across all markets. This provides it with greater access to sites and more flexibility with location decisions. We also see it continuing to evolve its model towards a more supermarket-like experience, with enhanced design and services to align with new shopper expectations.

go, prepared meals, and convenient solutions for top-up shopping missions. They form part of the retailer’s strategy to attract a wider and more varied base of shoppers.

03 CREATING A DIFFERENTIATED OFFER

Aldi’s focus on operating in diverse environments is leading to the need to flex its store model. New stores are becoming either bigger or smaller depending on the location. Aldi is also using the expansion and upgrade of its network as an opportunity to ensure the new buildings are more sustainable, using recycled materials, adding solar panels, and implementing more efficient energy systems.

Aldi’s assortment is expanding and becoming more complex. Beyond value-seekers, the retailer also appeals to savvy scratch cooks and those looking for inspiration and trying new items. The different Aldi operations globally are adding innovative and differentiating products to support this. These products, often exclusive, are usually from small and independent brand suppliers. Aldi has created an incubator for these suppliers and start-ups called “What’s Next,” supporting them through the entire process. This is another major area of focus for Aldi to better compete with major supermarket operators in the key markets where it operates.

The retailer is at the forefront of the “discountvenience” movement, blending discount and convenience concepts. New formats have been launched in urban areas in Australia, China, and the UK. These stores have a more modern design and a tailored assortment focusing on food-to-

Improving the sustainable credentials of the entire assortment is a priority. While some decisions are global, such as the reduction of packaging and plastics, some are local to align with shoppers’ expectations. The next generation of shoppers is more focused on sustainability, and increasingly

Aldi is not dependent on tough economic times for success. this will become part of the ranging decision process. The challenge for the retailer is often the ability to do it in a cost-effective manner. Aldi has the benefit of being able to leverage its global scale. The expansion in urban locations drives the need for more convenient food solutions. Aldi is rapidly expanding its prepared meals and food-to-go range. While value remains key for food-to-go solutions, more premium and seasonal products are listed for prepared meals. The UK is the most advanced market for this. This is also being supported by the rollout of self-checkouts to meet the needs of convenience missions.

04 ACCELERATING ONLINE TRANSFORMATION The pandemic triggered the need for Aldi to accelerate eCommerce development. Over the last three years, it has launched click-and-collect and home delivery with quick commerce operators in several European countries. Non-grocery remains a key footfall driver to stores and we have seen the price point lowered to 95% of the assortment being less than £20 / €25 during the cost-of-living crisis. Its online presence in non-grocery is mixed across markets with investment to strengthen in

continental Europe, but a closing of the service in the UK. In the USA, it is launching a fully-owned grocery delivery service and testing a home-delivery service in Germany. The retailer continues to test-and-learn quick commerce partnerships with operators such as Deliveroo, Instacart, and Roksh. This enables it to have a grocery delivery service in major cities without the upfront investment required for a home delivery service. However, due to the challenges quick commerce operators are facing, a major rollout remains uncertain.

ALDI 2028 Looking ahead over the next five years, we see a business with significant momentum. The current trading climate will see it win millions of new shoppers globally, and it’ll be working hard to hold onto them as household budgetary pressures ease. With plans to continue growing its store base at pace, flexing its offer to reach high-density urban centers, and leveraging its global scale and supply chain to further reduce costs, Aldi will remain a formidable competitor. Expect more disruption on the horizon.

Grocery Trends 2023: Navigating Sea Changes with Innovative Technology

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