Is the Retail Channel Worth Pursuing Anymore?
June 2, 2022

Is the Retail Channel Worth Pursuing Anymore?

Business Models

Even before the COVID-19 pandemic lit e-commerce on fire, many believed brick-and-mortar retail was destined for death, pointing to half-empty malls and bankrupt chains as proof. Grocery stores, however, had been largely insulated from this trend. Despite the convenience of e-commerce, most consumers still preferred buying food in person, wanting to pick out their own produce, meat, dairy, and deli items.
 
But then when COVID-19 turned in-store shopping into a health risk, scores of consumers began buying groceries online. And once they discovered the benefits of this method, many continued to. Even today, despite feeling safe in stores, many people purchase at least some of their groceries online.
 
Just look at the numbers. Pre-pandemic, e-commerce was projected to represent just 5.4% of U.S. grocery sales in 2021, but it ended up accounting for nearly 10%. This year online is predicted to claim 11% of total grocery sales, and by 2026, it should exceed 20% market share.
 
Further stealing sales from brick-and-mortar, the COVID-19 crisis sparked a surge in direct-to-consumer food sales, with shoppers bypassing grocery stores to buy straight from food brands and farms. Experiencing skyrocketing demand, many businesses pivoted to focus more on e-commerce, a strategy that’s still paying off more than two years later.
 
So now, given the massive shifts in how consumers buy food, it might seem like physical grocery stores are going the way of Radio Shack, ShopKo, or Sears. Could they be the next casualties of the so-called “retail apocalypse”? And if so, what would this mean for up-and-coming food brands? Is the good-old grocery store even a worthwhile channel anymore?
 
The quick answers are no, brick-and-mortar grocery is not doomed, and yes, this channel is absolutely worthwhile. While retail may not be the best fit for every food and farm business—which was the case long before the pandemic—it is still a highly viable channel for many.
 
Some skeptics may argue otherwise, believing technology will soon render the grocery store industry obsolete. However, experts in the field, including Edible-Alpha® podcast #111 guest Steve Mehmert, insist that is hardly the case. The reality is that the grocery channel is changing—in some cases, dramatically—but it remains a crucial component of the food-selling landscape and will continue to be for years to come.
 
Steve says that with technological advances and changing consumer patterns, what a grocery store is—what it looks like, what it sells, how it sells—will evolve, but that’s OK. There will continue to be myriad opportunities for food and farm businesses to gain a foothold and grow.
 
Consider this: When the pandemic kneecapped food service, food dollars largely transferred to grocery stores—and those dollars haven’t all migrated back. Even though consumers can now go to restaurants and buy lunch at the office cafeteria, many still opt to make their own meals and snacks, including people who rarely did so pre-pandemic. As a result, total grocery store sales today remain well above pre-COVID levels. So yes, a portion of their sales have shifted from in-store to online, but most stores are still doing greater volume than they used to. 
 
Plus, the pandemic forced many retailers to embrace e-commerce and figure out new ways of doing business. Over the past two-plus years, they’ve tackled many challenges, reached for new solutions, and honed their total suite of services to best serve today’s shoppers. Steve’s company, T4 Solutions, helps grocery stores do exactly that, whether by implementing temperature-controlled food lockers for customer pickup, temp-controlled delivery vehicles, or microfulfillment solutions.
 
Undoubtedly, the world will keep changing, and the grocery retail landscape will continue evolving along with it. But for food and farm entrepreneurs wanting to get their products in front of consumers, this channel can still be a great avenue to pursue.

After 30 years of developing grocery stores, Steve Mehmert launched T4 Solutions to help retailers, food banks, and other distributors implement profitable e-commerce programs. In the rapidly changing grocery landscape, retailers rely on T4’s advice and solutions, from software infrastructure to temperature-controlled lockers to microfulfillment models. Steve shares a wealth of insights on where grocery stores are headed and how independents can stay competitive long-term.  

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