Do indie grocers need a big tech upgrade to compete with chains for customers?

The scene on The NGA Show floor on Feb. 28 - Photo: NGA
Mar 07, 2022

Larger supermarket operators are taking the incremental cash they made from much higher sales volumes during the pandemic and investing it in a myriad of technologies, including micro fulfillment centers, personalization systems, analytics and more. Community-based retailers, working with their wholesaler partners, need to make similar investments in order to stay competitive in the coming years.

That’s the message that attendees from last week’s National Grocers Association meeting in Las Vegas heard loud and clear from speakers.

In a session titled “Start with the Customer and Work Backwards,” Dave Wendland, vice president – strategic relations at Hamacher Resource Group and RetailWire BrainTrust member, said independent grocers need to deploy new technology to understand customers as individuals. They must engage with shoppers wherever and whenever they want and on their own terms because the buying journey has become splintered with consumers using a combination of digital, physical and hybrid channels to learn about, shop for and buy products.

To take advantage of trends accelerated during the pandemic, grocers need to redefine their core values and invest in digital and analytics. Mr. Wendland suggested personalization and other systems that strengthen relationships, solutions that focus on the marketing of fresh categories and automation tools.

An example of a technology that is widely used by larger chains and has yet to penetrate smaller retailers is demand forecasting. A session titled “Demystifying Demand Forecasting in Grocery:  Strategies to Address the Unique Challenges,” highlighted three critical demand forecasting issues facing independents that are leading to unprecedented top and bottom line erosion. The first is a dramatic increase in out-of-stocks, which were between five and 10 percent of items pre-COVID and are now hovering about 15 percent. Next is waste, which now accounts for about 30 percent of all food. Last is the cost of excess inventory, which is estimated to be about 30 percent of margin.

Traditional demand forecasting is simply not effective in addressing changing consumer behavior, which has led to unpredictable and volatile demand, new convenience requirements and price sensitivity, said Amit Bhardwaj, vice president of CX & product consulting at Algonomy. Grocery retailers need a framework for agile and intelligent demand planning that includes capturing a wider variety of data points, tailoring forecasts based on a more granular level of information by category and store and adopting the forecast to react to market circumstances with minimal manual intervention.

DISCUSSION QUESTIONS: What technology solutions are most critical for independent supermarket operators to deploy in 2022?  What role do wholesalers have to play in helping independent grocers narrow the technology gap with large self-distributing chains?

Please practice The RetailWire Golden Rule when submitting your comments.
"Smaller grocers likely have the advantage of strong customer relationships."
"The biggest problems today for high-traffic brick & mortar retailers are all related to optimizing digital commerce."
"Investing in a website/app is also something even Main Street stores need to consider — so that they can keep pace with consumer behavior."

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15 Comments on "Do indie grocers need a big tech upgrade to compete with chains for customers?"

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Neil Saunders

Smaller grocers do need to invest in systems that will allow their customers to shop digitally. That’s about so much more than having a transactional website, it’s about getting everything in place for the expansion of online: inventory control, staff rostering, picking and packing automation, fulfillment scheduling, systems to analyze and manage customer data, and so forth. All these thing shift and change as online grows. It is possible for smaller retailers to outsource most of this to platforms like Instacart, but it is worth exploring the rationale of doing this in-house.

Dave Wendland

Thanks for sharing highlights from the National Grocers Association event, Ron. The entrepreneurial spirit is alive and well across independent grocers and was in full display at this year’s event (so great to be back live and in person!).

My presentation topic, “Start with the Customer and Work Backwards,” seemed to resonate with attendees and underscored the importance of meeting the new (and emerging) shopper when and where they want to interact with your retail brand. There’s lots of opportunity and challenge ahead for indie grocers and retail at large. Despite some good performance during COVID-19, this is definitely not the time to rest on your laurels.

Melissa Minkow

Smaller grocers likely have the advantage of strong customer relationships. In addition to demand forecasting systems, having an app would be a great tool to maximize already-established relationships with shoppers. Shoppers could check how much product is in stock, they could order virtually in advance, etc.

Dr. Stephen Needel

I’m not sure I agree with the assumption that independent supermarket operators need to be up on technology. Their strength has always been that they knew their customers and didn’t rely on averages, trends, etc. – their customers told them. I miss Tony Orlando.

Craig Sundstrom

That was my thought exactly; and at the risk of putting his words in my mouth, I’m sure he’d remind us that the concerns of indie grocers are usually a lot more prosaic than most of us realize: having a good hot foods counter trumps being able to accept bitcoin on your website.

Brandon Rael
With the emerging competitive forces and disruptions, the risk of remaining idle is stagnant growth and irrelevance. Most independent grocers have partnered with wholesale distributors for their procurement, distribution, and merchandising needs. However in these uncertain times, deliberate disruption is a strategic path to sustainable growth and success. Independent grocers and their wholesale distributor partners can achieve competitive advantages without disrupting their daily operations. The most successful companies can self-disrupt while continuing to deliver and execute against their brand promise. Self-disruption requires accelerating your speed of execution as well as your agility to adapt and capitalize on new opportunities. There are five key areas where independent grocers and their wholesale distributor partners could strengthen their collaboration model to de-invest to reinvest, drive sustainable change, reduce the cost to serve, increase revenues, and improve profitability: Enhance digital technological capabilities to meet the needs of a competitive landscape; Drive cost improvement opportunities in micro-fulfillment, logistics, and transportation; Rationalize assortments, increase private labels, drive localization and profitability; Optimize procurement processes, resulting in a lower cost of goods; Identify… Read more »
Jeff Weidauer

Dave is right on target. Indie stores are closer to their customers and should play to their strengths. Use the tech that helps, but don’t try to mimic the big players.

Dave Wendland

Thanks for the shout out, Jeff. As I mentioned during my presentation in Vegas, if the technology doesn’t provide value to your customer, avoid it. Technology for technology sake is seldom a victory. My encouragement is always to put the customer at the center of every decision.

By the way, I’m not only talking about today’s customer, as my friend Jon Koch, dean of business school at WCTC, suggested, his university is planning for the next generate of students … likewise, grocers should be preparing and investing for the next generation of shoppers!

Ryan Mathews
First of all I’m not comfortable with two of the assumptions here. First, I don’t assume that independents are necessarily operating in the backwaters of technology and, second, I definitely don’t think that many chains are using the technology they do have to their full advantage. Adding technology for technology’s sake isn’t an effective strategy if you don’t optimize it, it’s just a drain on your CapEx budget. Next, out-of-stocks are a problem accelerated by breaks in the supply chain caused by the pandemic. The “technological” solution here is mass vaccination. Waste has always been a problem as has demand forecasting – not surprising since both waste and out-of-stocks exist in direct relationship to the effectiveness of the demand forecasting model. There are a ton of highly-sophisticated demand model technologies out there and – based on the numbers Ron quoted – they don’t seem to be working all that well. Can wholesalers help? Sure — at least in theory, but only if they know how to optimize the technology as well or better than self-distributing… Read more »
Lucille DeHart

Niche grocers need to maintain a balance between staying local/small and personalized and becoming more efficient with processes and technology. Customers have become accustomed to convenience and speed, so small stores will need to adapt to maintain their base. Large brands like Walmart are now offering their home delivery services to local stores, particularly grocers. This is a good alternative to developing their own complex logistics systems for delivery. I am a firm believer that brands/retailers need to stay true to themselves and not just keep up with the “Joneses.” Independent/local grocers need to find their own path forward and do have the advantage of better catering to the local demands with inventory/selection/merchandising. I do think they need to invest in agile forecasting based on seasons, demand, social circumstances and local preferences. Investing in a website/app is also something even Main Street stores need to consider — so that they can keep pace with consumer behavior.

Shep Hyken

First and foremost, the customer experience that an independent supermarket provides must be similar or better than any competitor, be it a large chain or local store. Specifically, the technology that impacts the user experience, which includes self-service checkout lanes, cash registers, online ordering, etc. needs to meet the customers’ expectations based on their experiences with other retailers — even outside the grocery industry.

Regardless of technology, the local/independent supermarket retailer has an opportunity to “do local better” than a national chain. (That was already mentioned in the article.)

As for technology supporting the store — and not the customer — the retailer needs what is necessary to run their store efficiently. Some of the areas technology supports is forecasting inventory, planning, pricing, etc. And I’ll emphasize that regardless of any advanced technology that helps run the business, it’s more important that the customer experience be managed properly.

Brad Halverson
As a former independent grocer myself, and fortunate to consider several independent owners as friends, Dave’s suggestions for technology are spot on, sensible. And are needed to remain relevant, profitable for the long-haul. Most independents are in competition for share of customers minds and dollars within a defined trade area, whether as upscale, price oriented or convenience driven. This even holds for the best who are differentiated, well connected to the community, and with a loyal following. Independent grocers increasingly find themselves without all the top-tier benefits enjoyed by big chain stores from strong CPG alliances, supply chain efficiencies and investments in cutting-edge shopping/experience technology. These are helping chains with additional cost and margin improvement, toward the top and bottom line. For sure, a hallmark of independents is their customer connection. Technology offered today can accentuate and personalize their customer experience, while also improving product ordering, shrink and labor scheduling. None of this hinders independents special bond with customers and community. Used smartly, it helps independents give customers solve customer pain points, while helping find… Read more »
Ron Margulis

While I agree with several of the opinions that independents are more innately in tuned with their shoppers, I do worry about the next generation of operators. My grandfather knew who his best customers were in each of my family’s stores and, more importantly, what kept them coming back. Today, there are simply too many customers, too many products, too many promotions and too many other responsibilities for owners and managers to retain this knowledge AND be able to act on it when appropriate.

I’ve often said that if a tech company could create the insights my grandfather and his peers had and deliver it at the store every time, that would be real retail magic. For more than 30 years, I’ve been going to conferences and expos looking for it. Still haven’t seen it.

Karen Wong

Technology that gives you true omnichannel features that leverage POS data. That means modern, cloud platforms that let you easily sell in-store and online across all locations from shared inventory and customer data.

The biggest problems today for high-traffic brick & mortar retailers are all related to optimizing digital commerce. Unless a merchant is large enough to have separate DCs, if you’re fulfilling from store, you have to be able to showcase, market and sell online from store data. The best cloud systems will do this automatically.

Yes, many are still lacking the deep functionality of on-premise systems but a lack of a “single source of truth” and omnichannel functionality will kill you faster today than not having back office tools.

Anil Patel

To tap customers in 2022, supermarket retailers would need to prioritize these two tech concepts: checkout experience and omnichannel initiatives. Unfortunately, I have observed so many retailers still offering traditional payment and buying experiences.

These retailers should consider:

  • Modernizing store experiences by introducing self-checkout to help customers avoid long queues at the checkout counter.
  • Offer omnichannel initiatives like BOPIS and curbside pickup to ensure a seamless hybrid shopping experience.

Speaking of wholesalers, they can play a vital role in bridging the technology gap. Wholesalers have a large set of data across all regional stores and therefore can act as analysts to the grocery retailers. Wholesalers have the knowledge of customer preferences and can forecast demands. Based on that, they can suggest what products retailers should keep in larger quantities and which ones to give the least shelf space.

"Smaller grocers likely have the advantage of strong customer relationships."
"The biggest problems today for high-traffic brick & mortar retailers are all related to optimizing digital commerce."
"Investing in a website/app is also something even Main Street stores need to consider — so that they can keep pace with consumer behavior."

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