What Lies Ahead For The Retail Industry

What a decade it’s been since FMI and Oliver Wyman came together to create the first “Boardroom” journal. Who could have guessed then that we were going to experience a global pandemic, or that we’d find ourselves in a time of such widespread political unrest, stubborn inflation, and disrupted supply chains?

If executives had known then what was to come, some may have raised their hands to surrender — but fortunately, an impressive number of retailers, suppliers, and other key stakeholders found ways not only to survive but thrive during this challenging time. And now those leaders are armed with new perspectives, as well as greater resilience to help them lead going forward.

Indeed, it will take a culture of change management to succeed in the next 10 years, and beyond. One thing we can expect for certain is a continuation of uncertainty. The labor market will be dramatically transformed, climate change will continue to impact our earth and spur more sustainability initiatives, consolidation will continue unabated, and more competitors (both physical and digital) will get into the business of selling groceries. With these changes, we’ll also welcome a new generation of leadership and innovation that presents an exciting breadth of possibilities.

Let’s explore some of these key themes (what FMI defines as its “imperative issues”) as we prepare ourselves for what lies ahead.

Navigating labor and workforce challenges in food retail

A few years ago, our industry was consumed with a labor shortage. Fast forward to today: While we’ve somewhat stabilized the frontline worker situation, we have an aging workforce that’s transitioning to a younger generation with very different expectations about the work that they do and where and how they’re going to do it.

We’re also seeing a noticeable generational shift in leadership. With this new breed of leaders comes different viewpoints, which is having a dramatic impact on strategy, as well as go-to-market and execution. Just look at what’s happening from an omnichannel standpoint, or in the innovation of retail media.

In addition to new leadership, there are more stakeholders with a vested interest in our industry. The ability to communicate with those stakeholders in a way that we can explain our position, and in some cases leverage our common interest, is going to be more important than ever before, so high emotional intelligence will be mandatory for leadership going forward.

Lastly, we’ll continue to see technology playing a bigger role in the labor sphere, as automation and robotics affect everything from manufacturing facilities to distribution centers, down to the store level.

Overcoming supply chain disruption in the food industry

When I think about our journey over the last 10 years, early on our industry was relentlessly focused on efficiency and just-in-time. And that served us really well — until it didn’t. COVID hit, we experienced massive supply chain disruption, and we found ourselves with no safety stock or ability to connect the dots between the various segments of the food industry ecosystem. We had an increase in food insecurity and had a harder time getting product where it needed to be when it needed to be there.

We have since then restored stability to the supply chain, but now we need to future-proof and reimagine it with a much more holistic view across all of the industry segments and the entire fast-moving consumer goods ecosystem.

The growing importance of sustainability in a changing climate

Sustainability has moved off stage and closer to center stage. This issue will only become more important as climate change becomes more evident. One of the questions we have to ask ourselves is, what is the role of our industry in feeding and caring for a more crowded and hotter planet with finite resources? I think we’re going to be on a journey for the next 10 years to try and come up with the answers to this question.

Evolving consumer behaviors in grocery retail

Consumer preferences have evolved from the three basic product attributes — price, taste, and convenience — to a whole new set of cost drivers and behaviors on the path to purchase. And while price is still very important — as we’ve seen with the stubborn inflation over the last couple of years — today that’s just table stakes.

A new, evolving set of drivers around things like health and well-being are more heavily factoring into consumer choices. We’ve seen our share of food recalls in the past few years, but fortunately, we’ve had the privilege of consumers enjoying the presumption of safety within their food supply. Now there’s a longer-term view of not just foodborne illness, but also how specific foods and consumer products may impact health.

Consumers will increasingly want to know the values of the companies they’re doing business with; in fact, these values will become as important as the products and services they’re buying. With this trend, we can certainly expect to see more scrutinous label reading, which will be accelerated with the help of technological advancements such as the Sunrise 2027 date for 2D barcodes and next-generation symbology.

Another important consumer behavior to consider is the redefinition of meal occasions. While historically we’ve had three basic meal occasions (with a little snacking thrown in for good measure), today younger people may eat seven or eight small meals a day.

As the world continues to change, there’s going to be a greater need for personalization and customization when it comes to knowing your consumer and their behaviors. In an ideal world, we’re going to get to a market of one.

Navigating societal dynamics in a changing retail marketplace

In the past 10 years, we’ve gone from having a relatively stable marketplace to an atmosphere of volatility and unpredictability. And in an omnichannel world, the industry marketplace is going to continue to shrink. We’ve seen a lot of consolidation over the last 10 years, and that will continue unabated. We’ll also continue to see more “nontraditional” competitors enter the grocery retail playing field.

There are shifts in the tectonic plates of retailing as well. Companies that were in the winner’s circle 10 years ago may not necessarily be there today, and some that fell out of the winner’s circle are back in. In essence, this is a business where you can never afford to stand still. To be a successful grocer today, you need to have a 19th century local merchant philosophy armed with 21st century state-of-the-art technology and tools.

Accelerating technology transformation to succeed in retail

Ten years ago, the industry was starting to become much more technology-oriented. Today we have mainframe, enterprise resource planning systems, and a plethora of point solutions across the board, as well as more relational databases to understand how to better mine consumer insights, and distributed ledger to enhance traceability. The next generation of CEOs would be wise to also take on the perspective of CIO as they lead their companies.

FMI’s role in navigating the future of retail

As FMI continues to advise our expanding membership on how to best navigate the issues that will shape the future of the retail industry, we’re excited about some of the newest initiatives in the pipeline, such as “Daunting Data Dilemma” and a new Chief People Officer forum, as well as a growing number of committees that are dedicated to studying imperative issues from all sectors of the business, from private brands to store safety.

Our ultimate goal is to help our members look up and out strategically so that they can make any necessary changes culturally, operationally, and strategically within their companies, mitigate risk going forward, and also identify opportunities for growth. Our hope is that in 10 years from now, our industry will be stronger than ever so that we can provide nutritious and delicious opportunities for an ever-evolving society.