RETAIL INNOVATION OUTLOOK

PG presents the Top 10 Innovations expected to transform grocery in 2023.

By Progressive Grocer Staff

e don’t often get to sit back and take a deep peek at the future of the grocery industry. Progressive Grocer’s Retail Innovation Outlook for 2023 attempts to do just that, however. Over the past three years, grocery retailers have had to reassess and reinvent nearly every facet of their operations. Digital transformation, pandemic disruption, economic uncertainty and unpredictable consumer behavior have left the grocery industry at a tipping point. The future of the industry depends on innovations that increase efficiencies, drive growth and create a next-gen grocery shopping experience.

The power of PG’s annual Retail Innovation Outlook lies in offering a practical look at how grocers are thinking about meeting these challenges in the future. We narrowed down a long list to 10 areas where innovation is occurring in multiple dimensions. These are areas where, over the course of 2022, we witnessed profound change and expect more change in the coming year.

In 2023, foundational changes to the grocery landscape will continue. We expect food retailers to focus their innovation value propositions on foodservice, private brands, social commerce, customer loyalty, store design, retail media, labor solutions, personalization, sustainability and consumer trends.

Changes to the grocery landscape will continue, and grocers will be looking for ways to solve big and important challenges. The innovations in PG’s Retail Innovation Outlook all aim to change the industry in a profoundly positive way, and retailers have amazing ideas about how to do just that. We hope that these big ideas kindle further optimism regarding the future of the grocery industry, where there’s never a lack of excitement about what kind of transformations the future will bring.

1CONSCIOUS CONSUMERISM Sustainability-minded shoppers are increasingly scouring grocery aisles in search of brands and products that provide environmental, social and economic benefits. Companies that share stories about the origin of their products, prioritize people over profit and provide transparency about their business practices are getting a lot of attention from these consumers, and are expected to see even bigger business in the coming year.

When it comes to purchasing packaged foods, sustainability considerations now influence the majority of the world’s grocery shoppers, according to a recent study from food corporation Cargill. Specific claims, including “sustainably sourced” and “conservation of natural resources,” topped the list of those most sought after by consumers, along with other specific claims such as fair trade certified or reduced packaging.

While today’s grocery customers clearly aspire to be more sustainable, behavioral research firm InsightsNow found significant differences between what consumers desire and what they actually buy when shopping in stores. The company found that 42% of shoppers aspire to shop for sustainably sourced products, but only 5% are able to actually do this.

A lot of wiggle room is available for grocers and manufacturers to provide more sustainable options at lower price points. In addition to the products that they offer, grocers should be able to walk the walk and talk the talk when it comes to sustainable business practices ranging from food waste reduction and electric vehiclecharging stations to using more environmentally friendly refrigerants and prioritizing animal welfare.

—Emily Crowe

2CUSTOMER LOYALTY 3.0 How do you keep a customer loyal when the path to purchase is more fragmented and dynamic than ever before and shoppers are constantly changing their behavior as a way to fight off inflation? According to Ethan Chernofsky, VP of marketing at Placer.ai, it’s all about customer experience and value right now.

“The power of repeat visits was incredibly clear over the course of the pandemic, with wholesale club leaders like Costco, BJ’s and Sam’s Club leveraging the inherent stickiness of their business model to drive consistent visits and revenue growth,” notes Chernofsky. “Even in the grocery space, chains that thrive on high numbers of visits per visitor, like Publix, Albertsons and Kroger, were among the most successful and effective supermarket banners in recent years. The key is to ask what drives loyalty. In the current environment, value is one obvious component, but the ability to deliver a positive experience, both in terms of what can be accomplished during the visit itself and the quality of the goods purchased, is equally critical. A final piece is asking what chains can offer to differentiate, whether it be exclusive products like Trader Joe’s, focused merchandising to specific markets, or even more immersive promotions and in-store experiences. Loyalty is key, but the path to loyalty needs to be tailored around a specific chain’s unique attributes.”

Another way to differentiate is by acknowledging that consumers may be overwhelmed with engagement from retailers and brands right now. This is where customer experience comes in. Retailers that deliver authentic, meaningful value to shoppers by prioritizing personalization, customized deals and timely offers will win loyalty in this — or any — competitive environment. —Gina Acosta

Trader Joe's inspires loyalty through its exclusive product offering. 3FLEX WORK When the workforce gets tough, the tough get flexible. The tight labor market over the past two years has certainly caused grocers to rethink recruitment and retention tactics. One of the more notable approaches that has emerged — and promises to be a big topic in HR departments in 2023 — is the flexible workforce, in which employees have more input into their schedules, and employers provide more options. A study from the ADP Research Institute found that 67% of workers feel empowered to take advantage of flexible working arrangements, compared with 26% before 2020.

The model has been effective in the gig industry as shoppers for Instacart and DoorDash drivers have been able to generate a revenue stream largely based on their own timing. In November, an independent owner/ operator of a Chick-fil-A in Florida made headlines when he received nearly 500 applications in a matter of days for one full-time position. The hook? A three-day work week.

While that may not work for grocers that have to staff large stores, the positive response to flexible workforces and the realities of a labor shortage that may not return to pre-pandemic levels anytime soon are enough to spur more creativity in hiring and scheduling at stores, distribution centers and even corporate headquarters. Improving technologies will accelerate that movement as tech providers refine scheduling programs and apps that enable more flexibility without onerous spreadsheets. It’s already happening: In October, Schnuck Markets introduced its Shnucks Flexforce employment option at some of its St. Louis locations, allowing workers to choose their shifts and store sites.

4FOODSERVICE AT RETAIL “Foodservice at retail” is one of those concepts that seem to ebb and flow, depending on the time and circumstances — remember when “grocerant” was such a big buzzword? Given the convergence of convenience, price and elevated expectations, however, innovative food retailers have fresh opportunities to distinguish their offerings and engender loyalty with restaurant-style meals, snacks and drinks.

FMI — The Food Industry Association underscored this potential in its recent 2022 “Power of Foodservice at Retail” report, which showed that 25% of shoppers are buying more grocery foodservice items than a year ago and have exceeded dollar and unit sales volume from 2021 and 2019. The ubiquitous factor of inflation is driving many orders, as 53% of shoppers report that grocery foodservice is a good value compared with traditional restaurants.

Capitalizing on these trends into 2023, grocers can revamp their menus to offer items beyond the usual fare (nothing against fried chicken and mac and cheese, but —Lynn Petrak

those are pretty basic); change up formats and store design to make the in-store dining experience more satisfying; and promote the heck out of meal deals for busy, budgetconscious and discerning shoppers.

Kroger is one retailer that has enhanced its foodservice program, recently expanding its Mix Food Hall concept created in tandem with Kitchen United. Meanwhile, smaller operators have also found success, like Standard Market in Westmont, Ill., which draws crowds to its on-site restaurant serving up items like pork belly tacos and margaritas. Expect more innovations and strategic partnerships from national chains and indies alike in the coming year.

—Lynn Petrak

Looking to the Future:

Accelerating Innovation

80% of shoppers were interested in trying non-traditional checkouts. ¹

35% of shoppers were very interested in switching retailers if more digital capabilities were available. ² 80% of retailers agree it’s important to offer unified eCommerce experiences across digital and physical stores, but 65% have not yet implemented technology to do so. ³

As we look to the future, we know that in a digital age, things are constantly changing, and new technology is always emerging. In a recent survey conducted by Toshiba and PYMNTS, data found that 80%¹ of in-store shoppers stated that they would like to use nontraditional checkout options, and 66% ¹ reported that these checkout experiences are the options that they most want to try. The growing interest in self-checkout is clear, so retailers must adapt by delivering self-service experiences that give shoppers more control, resulting in less time spent in the checkout line.

Whether your shoppers are looking for contactless payment, mobile shopping, curbside delivery, in-store ordering, traditional checkout, self-checkout, or any other shopping or payment method, you need the flexibility to scale and evolve.

When your technology is adaptable and scalable, you don’t have to incur the cost of ripping and replacing your entire technology infrastructure when it’s time to implement new systems, peripherals, or advanced technology. A broad range of retail technology designed with the future in

• Artificial Intelligence • Computer Vision • Smart Carts

• In-Store Navigation • Live Item Inventories

• Produce Recognition

Your Success Depends on Unifying Physical and Digital Experiences

As visits to brick & mortar stores become increasingly pre-planned, retailers must convert fleeting physical transactions into long-lasting relationships. This means making adjustments that would allow them to reach people at home. A disappointed shopper is one click away from abandoning engagement with a retailer, so retailers can no longer afford to have channel-locked experiences and capabilities. They must embrace a “unified commerce” approach to succeed in this new world order.

New Technology Experiences Will Differentiate Your Store

Adding new technologies and experiences will not only ensure a positive experience for your shoppers but they will also help you stay ahead of the competition and differentiate your store. With a drastically changing retail landscape full of innovations and shopping experiences, now is the time for grocers to create their direction for the future to not only deliver shopping experiences customers expect but create new shopping experiences they’ve never seen before.

Self Checkout System 7

Create a more innovative and customer-focused self-service experience today - and be ready for your tomorrow as store and operational needs evolve.

Online storefronts, as well as physical supermarkets, have become prime venues for retailers to gain unprecedented ad dollars.

5NEXT-GEN RETAIL MEDIA Retail media is changing the game for both retailers and the brands that advertise with them, and is gaining steam across the industry. Online storefronts and physical supermarkets have become prime venues for retailers to gain unprecedented ad dollars, and according to

Placer.ai VP of Marketing Ethan Chernofsky, this segment that operates on very thin margins is being empowered to leverage channels that improve operational efficiency and drive high-margin revenue.

Many grocers have undertaken cutting-edge partnerships to harness the power of retail media, including

Albertsons, which recently linked up with

The Trade Desk to help ad buyers better understand the connection between ad campaigns and customer sales. Kroger is offering advertisers a software suite through Pacvue that gives them access to programmatic bidding, analytics and automation on Kroger.com.

Other third-party companies are helping smaller food retailers dip their toes in the retail media pool, including Brandcrush (see CEO Teresa Aprile’s comments in the

Grocer’s Guide to Tech, starting on page 52), which is working with independent food retailer Woodman’s Markets and others to make it easier for grocers’ brand partners to manage in-store, out-of-store and online advertising assets.

“[T]he ability to empower CPG brands with a high-value promotional activity so close to the point of purchase, to users with such high intent and leveraging far more effective segmentation tactics, is a potential game changer in the physical environment,” says Chernofsky, “and while these tactics are exciting in and of themselves, it is the wider potential they offer for rethinking the value of the store that could truly reimagine brick-and-mortar success.”

—Emily Crowe 6 PERSONALIZATION Of late, “personalization” has become a mantra of sorts with regard to all facets of the shopping experience, from offers tailored to individual consumers’ tastes to the ability to have their groceries delivered when and where they want. In fact, more than a “nice to have,” personalization has become an absolute must when it comes to connecting with today’s consumer, as Bloomreach Chief Strategy Officer Brian Walker told attendees during his GenNext keynote speech at Progressive Grocer’s Grocery Industry Week event last month in Orlando, Fla. (see page 64 for more of Walker’s thoughts).

The recent collaboration of food and nutrition digital technology company Sifter and nonprofit organization FARE (Food Allergy & Education) has upped the ante on personalization, however, bringing it into the realm of potentially lifesaving measures. With the aim of making grocery shopping easier and less time-consuming for the more than 85 million Americans with food allergies and intolerances, the two entities joined forces to offer Sifter’s science-based shopping platform to enable this population to make better food decisions and save hours of time when grocery shopping. The partnership also recognizes that many people with food allergies are also living with other diet-related health conditions. Sifter’s platform, available on the FARE website’s homepage, allows a consumer with complex diet needs — for instance, a dairy intolerance, a nut allergy and diabetes — to identify a wider variety of appropriate foods when shopping online or in-store.

“The FARE-Sifter partnership will help millions of people shop with ease and confidence for allergenfree foods,” noted Judy Seybold, chief nutrition officer at Sifter, when the collaboration rolled out in November.

Expect to see more such solutions that don’t just surprise and delight consumers, but also help them improve their lives. —Bridget Goldschmidt

7PRIVATE LABEL Store brands have been in the spotlight lately as record inflation has taken hold of the U.S. economy. At least one CEO has pointed to private label specifically as a source of earnings growth: Kroger’s chief executive, Rodney McMullen, said during the company’s second-quarter earnings call that the retailer has been seeing “record engagement” with private brands. For 2023, expect to see continuous attention to this area of the business, especially as major retailers, including Amazon, Kroger and Walmart,

Fine wines will continue to have a place in the world of private brands.

enhance their offerings to encompass the latest market trends.

Last month, as the Private Label Manufacturers Association’s Private Label Trade Show returned to an inperson format for the first time in three years, the sold-out audience in Chicago was treated to a multitude of new products. Overarching trends included plant-based foods and packaging, sustainable sourcing, permissible indulgence, flavor, and, of course, value. Meanwhile, upscale items permeated the “Idea Supermarket,” suggesting that items like raw honey and fine wines will continue to have a place in the world of private brands.

As FMI — The Food Industry Association noted in its 2022 “Power of Private Brands” report, most grocers recognize that they still need to find ways to set their store brands apart from national brands, particularly when it comes to their e-commerce presence. For now, food retailers’ private-brand portfolios hold an average dollar share of 18.2% of total sales, but grocers and their manufacturer partners have an ambitious goal of raising those sales to 22.6% over the next two years.

—Jenny McTaggart

8SOCIAL COMMERCE EXPLOSION Over the past six months, the grocery industry has seen several examples of food retailers finally fully embracing social commerce as a way to drive excitement, engagement and loyalty among shoppers. Retailers such as Albertsons, Kroger, The Fresh Market, Walmart and Sam’s Club have stepped up their strategies around shoppable content, video and livestreams.

For instance, Sam’s Club has launched a new live shopping platform, samsclubshoplive.com, which hosted a series of live shopping events in November. To boost engagement with digital browsers and buyers, the wholesale club chain sponsored a Scan & Go holiday sweepstakes with a grand prize of $50,000.

Over at Sam’s parent company, Walmart Connect, the retailer’s closedloop media business, revealed several strategic partnerships to help create a robust, diverse ecosystem in an effort to expand advertiser support, increase services and deliver access anywhere advertisers need it. The Innovation Partners program includes TikTok, Snapchat, Firework, Roku and TalkShopLive, each of which will provide “test and learn” social, entertainment and livestreaming opportunities for Walmart sellers.

For its part, The Fresh Market is seeing success with Firework, which has brought its full suite of livecommerce and short-form shoppable video capabilities to the grocer’s owned media channels.

In further examples of social commerce, Whole Foods Market used a trending audio clip to promote its popular Berry Chantilly Cake, while Sprouts Farmers Market went viral on TikTok when a user praised the grocer’s $5 deli sandwiches.

Whether through social media, back-end upgrades that make the buying process more seamless, or myriad other tactics, investing in ways to engage the digital shopper has never been more paramount for retailers.

—Gina Acosta

9SUSTAINABLE STORE DESIGN As more grocers commit to planetsaving policies, store design has become an important part of their sustainability strategies, along with sourcing practices, recycling initiatives and corporate responsibility actions. Much of this imperative is driven by current consumer attitudes: A recent study from Mood Media found retailer sustainability to be a driving factor for shoppers worldwide, with two in three consumers (66%) saying that these practices influence their willingness to stay longer, return to the store, tell friends and buy more. Further, the study discovered that most shoppers want to see retailers lower their energy usage by closing doors to air-conditioned spaces (57%), and enclosing refrigerated spaces and shutting off display lights when closed (54%).

As evidenced by a new Colorado Natural Grocers store, which opened this past September with such “energysaving innovations … as non-toxic building materials and 100% LED lighting,” in addition to being the retailer’s “first new store featuring a CO2 refrigerant system designed to save energy and provide enhanced environmental protection compared to conventional refrigeration technologies,” these types of features have become table stakes for most grocers eager to prove their eco-friendly bona fides.

Certifications also add credibility, as when Amazon Fresh revealed earlier this year that one of its Seattle stores had become the world’s first supermarket to pursue the International Living Future Institute’s Zero Carbon designation. The 35,000-squarefoot store, which opened this past March, features more than a dozen store design upgrades that Amazon expects will save nearly 185 tons of carbon dioxide annually and help the company achieve its Climate Pledge commitments.

Indeed, attaining company-wide net-zero carbon emissions status has become a stated goal for a number of major grocers, among them international retail conglomerate Ahold Delhaize, with consumers best able to view this progress at store level, one location at a time.

—Bridget Goldschmidt

10 ZOOMERS AND ALPHAS Remember when everyone was worried about the grocery shopping habits of Millennials? Turns out they loved shopping in person for food as much as the previous generations. It’s actually the Zoomers of Generation Z (68 million born 1997-2010) and the Alphas of Generation Alpha (2.5 billion born 2010-present), the first generations who grew up with the internet, who are poised to transform the way that food retailers operate.

That’s in part because Zoomers and Alphas spend a lot of time on TikTok and other social platforms. According to a new report from Cassandra, an insights and strategy group within ENGINE Group, 53% of Zoomers say that they find inspiration for groceries through TikTok.

“Gen Z is truly leaving its mark on everything it touches — and the food industry is no exception,” observes Cassandra SVP Kathy Sheehan. “Gen Z is changing the face of the industry, putting a greater emphasis on a holistic approach to food and using it as a way to express themselves.”

While Gen Z will have massive buying power very soon, it’s Gen Alpha, the largest generation ever, that will truly impact grocery. Alphas are not just digital-first — they’re also sustainabilityfirst. This group will likely prioritize buying from companies with measurable social responsibility cred. While retailers are focused on Gen Z now, they should also start paying attention to Gen Alpha, as that demographic will have the highest expectations of any generation regarding the products and brands that they choose.

—Gina Acosta