April/May 2018 -Following Amazon’s acquisition of Whole Foods, the attention of the food industry has turned to omni-channel retailing. Add in Walmart’s purchase of Jet.com and the fact that virtually every retail chain is now aligning with a delivery service, and it is clear that this focus will continue and intensify.
Online purchases mostly remain a center-store phenomenon. Sure, in those areas with a specialized service, such as Fresh Direct or Amazon Fresh, the perishable numbers are higher, but the role these sales will play in the overall supermarket industry is still a question that needs to be answered.
Many younger consumers are omni-channel customers. Also, as technology changes with automatic ordering systems, Amazon Echo-type devices, etc., the integration of omni-channel retailing into daily life is predetermined.
Indeed, the very nature of retailing will change, as this technology is tied to advanced Artificial Intelligence (AI) systems. Right now, the “advance” is convenience — thinking about something one wants, placing an order and getting it delivered sometimes on the same day. But soon, one will be able to have a thought, such as, “I’d like to do a really nice cheese platter for 25 people. Please select a nice assortment of cheeses and accompaniments and have them delivered Friday.”
The role of the deli department is simultaneously made more essential and somewhat threatened by the move away from bricks-and-mortar retailing. On the one hand, the whole deli/foodservice assortment is absolutely crucial in keeping people coming in the door at brick-and-mortar locations. For all the advances of packaging and processing, the deli/foodservice department offers many products that are substantially different when served fresh at the service deli counter. Nobody, for example, has figured out a way to deliver an appetizing rare roast beef, except through a service deli.
Frequently, seemingly identical products have different sodium levels when sold fresh or when packaged. And sometimes people like to shop to see new things and try new tastes. Top-notch operations, which might have a chef on the floor whipping up shrimp scampi as a special, give out samples and thus expose people to new tastes.
So, in one sense, the rise of omni-channel retailing is a great gift to deli/foodservice. This department and, maybe, bakery — with the aromas and excitement of cooking in store and many unique products that are hard to duplicate when being shipped — is the logical focus for brick-and-mortar locations striving to remain relevant.
When you think about the idea that Amazon will use Whole Foods stores as depots for click-and-collect operations, knowing these stores are not very large, it is easy to envision stores that are click-and-collect operations for most center-store items with the remaining square footage devoted to a giant cafe/restaurant/prepared foods area.
Stores of the future will need more excitement and more “eatertainment” experiences, which one cannot package and ship — and deli/foodservice will be at the heart of this.
There is a flip side, though. It may well be that all the things driving deli/foodservice sales at brick-and-mortar locations will also reduce consumption of these items when ordering online. In other words, if people enjoy that rare roast beef from the service deli counter, they may simply not order roast beef when ordering from a delivery service. They may intend to buy it when they go to the store, but maybe they will go less frequently and so buy less.
Sometimes, the variability of deli/foodservice offerings can discourage consumers from buying these products from unfamiliar vendors. If a family books a cabin at a vacation destination and, instead of making the trek to a local supermarket, they may now order food from an omni-channel retailer to be waiting for their arrival. A consumer can safely order an 88-size Washington Extra-Fancy Red Delicious apple and will get an almost identical product from any vendor. But a consumer can’t order tuna salad from the deli and be certain it’s the kind their family will enjoy. Certainly, the mere announcement of specials — we are cooking shrimp scampi today – is far less effective than seeing the chef, smelling the aroma, tasting samples — when it comes to boosting sales.
For deli/foodservice, omni-channel retailing is a “tale of two cities.” It is the best of times –when deli/foodservice will be the center of brick-and-mortar retailing — and it is the worst of times — when online sales will challenge the distinctiveness of the department, suppress sales of variable items and deny the department its big marketing edge of cooking, sampling and impulse buying.
The future will go to the retailers able to square this circle. db