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May 18, 2022 | Report O By Bill Aull, Becca Coggins, Sajal Kohli , and Eric Marohn The emergence of new challenges will force grocery retailers to adapt their strategies and operations. Executives should focus on ±ve priorities in 2022. DOWNLOADS Article (13 pages) Full Report (89 pages) ver the past two years, grocery retailers have had to reassess and adapt nearly every facet of their operations. Changes to the grocery landscape will continue, shaped by both macroeconomic factors (such as supply chain challenges and in²ation) and mercurial customer preferences. To keep pace, retailers should focus on a handful of trends: the rise of the value-conscious, healthier-eating consumer; elevated consumer expectations for omnichannel; an increased emphasis on sustainability; strategic workforce planning and Retail We use cookies to give you the best possible experience with mckinsey.com. Some are essential for this site to function; others help us understand how you use the site, so we can improve it. We may also use cookies for targeting purposes. Click "Accept all cookies" to proceed as speci±ed, or click "Manage my preferences" to choose the types of cookies you will accept. Cookie policy Accept All Cookies Manage my preferences
investment in tech and analytics; and the growing importance of ecosystems and partnerships. In our conversations with CEOs, "volatile" was the word used most frequently to describe 2021. Since 2019, the market has grown at an impressive 15 percent, a rise that was the product of increases to both prices and volumes. But these top-line numbers belie the roiling retail landscape beneath. Signi±cant shifts in share of stomach, supply and labor shortages, unprecedented investments in e-commerce, and rising in²ation created widespread disruption for grocers. Acceleration of pandemic-related consumer trends According to recent McKinsey consumer insights, the trends that took hold at the start of the pandemic have gained momentum. Total e- commerce sales have grown nearly 60 percent since the beginning of the pandemic, though penetration rates have leveled o³. At the same time, consumers are making fewer trips and visiting a smaller number of stores: they are 20 percent more likely to go to just one grocery store a week. As such, consumers are increasingly seeking out one-stop shops and have expressed an interest in buying everything in one place even more frequently in 2022. Meanwhile, the food-at-home market, which had been slowly losing share to food away from home before 2020, has surged 8.7 percent, four times its historical growth rate. The move to food at home coincides with a growing emphasis on healthier eating. [1] We use cookies to give you the best possible experience with mckinsey.com. Some are essential for this site to function; others help us understand how you use the site, so we can improve it. We may also use cookies for targeting purposes. Click "Accept all cookies" to proceed as speci±ed, or click "Manage my preferences" to choose the types of cookies you will accept. Cookie policy
Together, these trends suggest consumer behaviors have fundamentally changed—and grocers should take notice. A steadying but still-fragile supply chain Disruptions to supply chains during the pandemic have increased out- of-stock rates by upward of 15 percent, compared with historical rates of 5 to 10 percent. Issues over the past two years have been attributed to a host of factors, including bottlenecks at ports, labor shortages, and huge, unanticipated spikes in consumer demand. The good news is that some of these challenges, such as overseas vessel delays and container shortages, will pass. Others—such as labor shortages and the ongoing shift toward automation—have been a long time in the making and will require a sustained commitment to resolve. Signi±cant shocks to the labor market The grocery industry employs nearly three million people in the United States. Every aspect of the industry's people model—corporate, in- store, and across every part of its operation—is experiencing an upheaval caused by a rise in absenteeism and attrition as well as by employee demands for ²exible labor scheduling. The workforce participation rate plunged dramatically during the pandemic; as of August 2021, it was still 1.6 percentage points below prepandemic levels. The accelerating adoption of automation (such as the increased use of self-checkout, image technology to perform in-stock checks, and automated picking in warehouses) is also changing the workforce dynamic. Emergence of unprecedented in²ation [2] [3] We use cookies to give you the best possible experience with mckinsey.com. Some are essential for this site to function; others help us understand how you use the site, so we can improve it. We may also use cookies for targeting purposes. Click "Accept all cookies" to proceed as speci±ed, or click "Manage my preferences" to choose the types of cookies you will accept. Cookie policy
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