Study reveals top priorities for grocery retailers embracing digital transformation

Nov 8, 2017 3 min

Many grocers have struggled with challenges in recent years that range from price wars to shrinking margins and from aggressive new players entering the marketplace to omnichannel shoppers demanding costly new conveniences. The competition within the grocery sector is fierce and will not likely get easier. For many, this means looking at new ways to step up their game and shifting to the next phase of their digital transformation journey.

In the recently released 2nd Annual Grocery Tech Trends Study, RIS News and Progressive Grocer conducted a poll of 50 grocery and supermarket chains. The report revealed that this traditionally conservative retail segment in setting tech budgets is today rapidly adopting new business models, new customer services and innovative digital technologies. The study uncovered five key findings as grocers embrace digital transformation.

Safety and Security Head the List of Industry Challenges

Many of the challenges that grocers face have appeared in the industry time and time again. Notably, food safety (52%) and cyber security (52%) head the list of issues that grocers say are driving technology investments over the next 18 months. In addition, global retailers, such as Lidl and Aldi, entering the U.S. market and disrupting brick-and-mortar stores are a challenge. They are seen as a larger and more immediate threat than Amazon and Whole Foods, which is still largely viewed as a web-based power play.

Digital Capabilities Are a Priority

A majority of grocers (85%) believe that developing their own digital capabilities, such as online, mobile, and omnichannel, should be at the top of their technology investment priority list. Grocers looking to shape their IT strategies should focus heavily on improving digital capabilities, upgrading store capabilities, deploying new payment alternatives and expanding into new products and services.

Click-and-collect Technology Surpasses POS

POS hardware and software have traditionally dominated grocers’ IT budgets, serving as the core of the store. The POS not only manages checkout and keeps a record of transactions, but also connects information to essential applications, such as accounting, supply chain, analytics and more. Forty-two percent (42%) of retailers reported that they will start a major upgrade of their POS hardware and software within the next 12 months. However, click-and-collect technology has surpassed POS investment plans and emerges as the top investment choice at 47%. The movement toward click-and-collect is a direct sign of digital transformation and the convergence brick-and-mortar and online.

Fulfillment is Critical

As grocers expand beyond physical retail, fulfillment has become a critical component of omnichannel retail. Robust fulfillment options are key for click-and-collect services and home delivery of web orders, which both show strong investment this year. To fulfill web purchases and ensure customer satisfaction, IT systems have to manage individual orders accurately, reliably and profitably. Most grocers cannot accomplish this with the technology they currently have in place.

Shift to Third-party Services

In the rush to become omni-everything, grocers are carrying the load themselves. In fact, nearly three quarters (74%) say they manage their own click-and-collect services and 62% manage their own home delivery. Grocers are absorbing higher costs as they attempt to successfully blend the immediate gratification benefit of brick-and-mortar stores with the 24/7 convenience of web-based shopping. As digital transformation matures, the shift to third-party services could significantly grow as new service suppliers meet a much-needed demand.

The digital transformation can be seen all over the grocery industry and there are a number of opportunities for grocers who pick their transformation battles wisely. For those interested in knowing more about the trends, you’ll find the full Grocery Tech Trends Study here.

Written by

Michael Falck