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The future of the british supermarket

 

Is the supermarket of the future one where you can pick and choose your groceries in person but from the comfort of your car? 

A drive-through supermarket isn’t a concept beyond the realms of possibility given that Russian inventor Semenov Dahir Kurmanbievich has filed a patent for it. His plans include aisles arranged with cascading shelves set up at different ‘stations’ for parked cars, allowing customers to pick products easily – a solution that seems to combine convenience with choice. Whether or not the idea becomes reality, the thinking behind it highlights the scale of change to have hit the grocery market in the past few years. The sector, worth around £179.1 billion in the UK according to IGD, has been shaped and influenced by shifts in consumer spending, ‘promiscuous’ shopper behaviour and the rising popularity of new formats.

Online, for example, has had a profound effect. Research from Mintel published earlier this year revealed that 48 per cent of Brits are current online grocery shoppers, with 11 per cent doing all their grocery shopping online. Online grocery sales are forecast to reach £9.8 billion this year, up 13 per cent from an estimated £8.6 billion last year. Sales are forecast to grow a further 73 per cent to reach £15 billion by 2020.

Whether the option is click and collect or home delivery, the customer is, in effect, outsourcing the picking stage of their grocery shop. And this is having a major impact on supermarket formats.  Gigantic warehouses that resemble regular stores - but which are eerily devoid of the noisy bustle of customers - now house only pickers, as online orders are speedily packed to be shipped out as fast as possible. This may seem to belong to some futuristic vision. However, this supermarket ‘underworld’ is here now and has been for a number of years.   So-called (and rather sinister sounding) ‘dark stores’ have been appearing across the country to ease the logistical demands of the rise of e-commerce for the likes of Tesco, Asda, Sainsbury’s and Waitrose.  They are facilities the public cannot access; yet as dedicated store picking operations they are proving to be key to the growth of online services.

Previously, grocery pickers for online orders would be based in supermarkets choosing products alongside customers.  Re-locating them in their own bigger depots reduces congestion in existing stores, facilitates dealing with bigger order volumes, improves efficiency through better layout and the use of technology and allows more choice because of added storage capacity. It also improves availability of products since there is a clearer view of stock levels and no competition from in-store customers.

The concept is proving popular and has since caught on in countries such as France and Germany. The trend indicates that dark stores are only likely to grow in number as new players continue to enter the online grocery market. But are these distribution centres really going to cause the end of bricks and mortar outlets?

While out-of-town hypermarket stores and weekly bulk shops may be on the wane, two store-based formats that are thriving are discounters Aldi and Lidl. These chains have been steadily eating into the market share of the big supermarkets, competing on quality products at a lower price but offering only a limited range. Squeezed disposable income as a result of the recession may have been the initial pull factor for discounters, but the proposition of quality over choice has proved to have staying power. Launches of premium ranges aimed at a more middle-class customer base and upgrading of stores, in the case of Lidl, have also been effective in maintaining momentum.

Last year, discount stores growth was three times as fast as the big four supermarkets, Tesco, Asda, Sainsbury’s and Morrisons, says the Local Data Company. Between 2010 and 2015 the top supermarket chains grew by 33 per cent. That figure reached 52 per cent for discounters. At the same time, shopping habits are changing. Smaller, supermarket- owned local convenience stores have been meeting shoppers’ demands for buying little and often.

The convenience sector is predicted to be worth £41.9 billion by 2021; it’s seen as a key area for fuelling overall growth of the UK grocery market. According to IGD, it’s the most used grocery format with customers visiting 12 times a month on average. Their large network boosted by ambitious growth programmes gives convenience stores visibility and high availability and so easy access, especially valuable for communities in population-dense areas or commuter towns.

As with all industries, technology has revolutionised the grocery sector and will continue to do so. Larger stores will undoubtedly fight back by harnessing new technology capability and already Aldi is dipping its toes into the online pool.

But for now it seems, and certainly for the next five years or so, customers still appreciate - or require - the physical shopping experience.

 

Posted 27 June 2016

 

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