Whether it’s about personalizing the shopping experience, changing the way stores are set up or shoppable recipes, most folks in the food industry have an opinion about what will drive future growth for grocery retailers. This week, another voice joined the conversation and offered a new take on where retailers should be looking in terms of future growth.
CircleUp CEO Ryan Caldbeck left a gargantuan Twitter post where he recapped a three-hour conversation he’d had with the CEO of a large grocery chain (he didn’t say who). CircleUp is a financial tech company which uses machine learning to identify up-and-coming consumer brands in which to invest, and has previously helped the likes of Halo Top Creamery and Back to the Roots raise equity. It’s no surprise, then, that Caldbeck has a lot to say on the topic of the grocery store and believes the key to success for retailers in future will come down to the products on their shelves. Other factors — price, convenience, and experience — matter, but they won’t be enough to make a retailer truly stand out.
Here’s a quick recap of his, er, recap:
Price is no longer a game-changer.
As Caldbeck and the CEO see it, price can’t really help a retailer compete anymore because of low margins (1 to 3 percent, typically). Big CPG brands also now lack the status their names used to carry, making it less meaningful for consumers when a store carries, say, General Mills brands or Red Barron pizzas.
A convenient location won’t guarantee success.
Convenience means different things to different people, but it more or less boils down to location. In the physical realm, Caldbeck suggests there’s not much room left for optimizing location. Delivery and in-store pickup, meanwhile, are a must for the future. But with everyone offering some kind of online ordering and pickup or delivery service, they’ll quickly become the norm.
7/In store pickup and delivery seem like the future. BUT – I think it is table stakes. I foresee every grocery chain needing to nail in store pick up or delivery (depending upon how pricing shakes out, which will be driven by adoption curve and where else margin can be stolen)
— Ryan Caldbeck (@ryan_caldbeck) October 18, 2018
Convenience, then, is necessary to compete, but it won’t guarantee one retailer’s success over another.
Experience may matter less than many think.
In business strategy, “experience” is a major contender for buzzword of the year, but Caldbeck seems less enthusiastic about it than many others (including pretty much everyone at SKS 2018). He reasons that, like convenience, experience can mean different things to different people. More importantly, experience “can be complimentary [sic] to convenience or contradictory.” Which makes it harder to standardize and scale, something large retailers have to be able to do.
Conclusion: The future of grocery is all about the products.
Caldbeck calls this “assortment,” or the products retailers choose to stock on their shelves, from cereal to sunscreen.
But it comes down to more than simply sending buyers around the world to manually pick the most innovative products they can find. That isn’t cost effective or efficient. Not surprisingly, data seems to be the answer. Caldbeck noted that his CEO dinner companion is searching for a solution that “leverages non-commoditized data”:
18/ So if this CEO, or any grocery store, can turn assortment into a true machine – a systematic advantage – then that advantage may be able to persist over the long-term because of how dynamic the industry is w/ consumer tastes, product innovation etc.
— Ryan Caldbeck (@ryan_caldbeck) October 18, 2018
Caldbeck doesn’t hint at how a solution like that might look in the future, but given CircleUp’s reputation as an innovative tech company, he probably knows more than he would let on in a single Twitter thread. He also notes, towards the end of the thread, that finding that “systematic advantage” will “require real visionary investment.” CircleUp might just be that visionary. But whether his company actually has the next great grocery innovation already in hand, he’s certainly added a fresh take on the ever-evolving conversation about how we’ll buy our food in the future.
Leave a Reply