Reviving grocery retail: Six imperatives
In the United States and Western Europe, many traditional grocery retailers are seeing their sales and margins fall—and things could get even worse. Here’s how to reverse the trend.
To put it bluntly, much of the $5.7 trillion global grocery industry is in trouble. Although it has grown at about 4.5 percent annually over the past decade, that growth has been highly uneven—and has masked deeper problems. For grocers in developed markets, both growth and profitability have been on a downward trajectory due to higher costs, falling productivity, and race-to-the-bottom pricing. One result: a massive decline in publicly listed grocers’ economic value.
And it could get much worse. Monumental forces are disrupting the industry. If grocers don’t act, they’ll be letting $200 billion to $700 billion in revenues shift to discount, online, and nongrocery channels and putting at risk more than $1 trillion in earnings before interest and taxes (EBIT). When the dust clears, half of traditional grocery retailers may not be around.
What has driven the grocery industry to this point? The disruption can be attributed to three major forces: consumers’ changing habits and preferences, intensifying competition, and new technologies. Each of these forces is, to some extent, always at work, but the speed and magnitude of change have caught most grocers off guard. McKinsey – Read more…