Grocery stores evolve or die

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Patience might be a virtue, but your ability to hold on to that tenet can be challenging when you’re in a checkout line at a grocery store. According to an adviser to the retail sector, the installation of cameras that help stores to monitor the length of checkout lines might be in the offing.

Joseph McKeska, who is a partner of Elkhorn Real Estate Partners, says the competition that grocery stores face from online retailers is prompting them to improve the shopping experience that consumers have at their physical stores.

“A good example would be Kroger’s testing cameras at the front checkout that they use to notify clerks to exactly when they need to open additional check stands, so nobody waits in line for more than, I want to say, three minutes,” McKeska tells Consumers Digest.

Longer term, bigger changes could be in store, says Mark Hamrick, who is the senior economic analyst at Bankrate.com. As we went to press, it was announced in June 2017 that Amazon made an offer to buy Whole Foods Market.

The deal is expected to close in the second half of 2017, and not much change is expected until 2018. However, Hamrick envisions a future that might include self-check kiosks where Amazon’s smart technology registers items that are removed from a store shelf and placed into a cart, with a real-time tally that appears on an app.

“The idea is that, ultimately, they want to eliminate the bottleneck at the front of the store,” he says. “It’s not optimal for the consumer or the [store], because it’s inefficient.”

McKeska says grocers large and small must adjust the way that they do business, particularly in light of Amazon’s entry into the market, so they minimize the effect on their operations in an environment that will lead to a loss of as much as $100 billion in sales by 2025 to new e-grocery participants, according to a recent study. McKeska wouldn’t be surprised if at least 900 grocery stores close by then as a result.

The largest players in the grocery realm—Ahold Delhaize (which operates Food Lion and Giant stores, among others), Albertsons (which operates its namesake chain as well as Safeway and others), Kroger and Walmart—are adjusting their business model to include digital and online services and home delivery, McKeska says.

Amazon’s purchase of Whole Foods “will just accelerate their efforts and other grocers’ efforts,” he says. “They know Amazon will be playing in the brick-and-mortar realm.”

Grocery retailers that are in the next couple of tiers might explore home delivery, which Meijer is reported to be doing via a partnership with an on-demand grocery-delivery service, according to industry publication Chain Store Age.

The biggest challenge with companies other than Ahold Delhaize, Albertsons, Kroeger and Walmart is that a fairly substantial cost is associated with home delivery that typically is passed on to the customer either through delivery fees or price markups on products, McKeska says.

“Those companies that are able to implement changes to compete in this new world of grocery retailing will thrive in the future, and those that are not will struggle to survive,” he adds.