While market shifts have been relatively drastic for the supermarket industry in recent years, the reality is that transformations occurring over decades are far more significant. On this assertion, dunnhumby, the customer data science solutions and analytics platform, released a special report examining what trends will have the biggest potential impact on grocery retailers over the next three decades, which retailers are best positioned, and which supermarkets need to evolve to meet the future trends.
According to Matt O’Grady, President of the Americas for dunnhumby, the report “Grocery 2053: A Data-Driven Gaze into The Future” assumes that the fate of retailers will not change solely over a five-year period. Instead, supermarkets will rise (or fall) based on their ability to align themselves to the dominant demographic, cultural, economic, and technological trends that will slowly reshape the market context over decades to come.
The report found that Amazon, H-E-B, Costco, Sam’s Club, and Walmart are best positioned for 2053, when the U.S. grocery retail industry will be worth $1.9 trillion, more than double its size today.
In this special report, dunnhumby included the largest 35 U.S. supermarkets across conventional, mass, club, specialty, discounter, drug, and dollar channels.
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Dunnhumby identified 15 sub-trends affecting the grocery industry and then grouped these into mega or macro trends that will have the most significant impact. The dunnhumby Retailer Preference Index database — which contains over 70,000 consumer survey responses from 2017 – 2022 — was analyzed to understand which trends matter the most to consumers.
Supermarkets were then evaluated for 2053 based on their future expected customer base, relevant trends, and the value proposition alignment required.
“The aim of our report is to help retailers understand what shopper values that will shape the decades to come and offer a framework of how to transform their organizations over time,” said O’Grady.
Key findings from the study:
- Generation Y (born 1981-1996) and Generation Z (born 1997-2012), who came of age during the Great Recession of 2008-2010, began their work lives, started their families, and may have become caregivers before and during the Pandemic, will be central to how the market evolves over the next three decades.
More than any other age groups, Generation Y and Z have been scarred by both the Great Recession and the Pandemic and how those two periods framed their views on their personal finances.
- Fiscal Conservatism (concern about the economy as well as personal day-to-day and long-term finances) is the biggest source of stress for consumers and the most important over-arching trend that will continue to affect consumers over the next 30 years.
Only when income exceeds $150,000 per year do finances even out, with health and the environment as sources of stress for consumers. And the younger the consumers, the more they tend to be stressed with finances, both long-term and day-to-day.
- The ten supermarkets best positioned to benefit from Fiscal Conservatism over the next 30 years are Lidl (1), Food 4 Less (2), Aldi (3), Costco (4), Fry’s (5), Amazon (6), BJ’s Wholesale (7), H-E-B (8), Shoprite (9), and WinCo (10).
Conversely, Harris Teeter, Wegman’s, Publix, and Sprouts Farmers Market share is vulnerable to the fiscal conservatism trend over the next 30 years. - Health and Wellness (2), Data 3.0 (3), Values-Based Consumption (4), and Channel Proliferation (5) follow Fiscal Conservatism as the second through fifth most important trends of the future.
CVS topped all retailers for Health and Wellness, followed by Amazon, H-E-B, Rite Aid, Walgreens, Costco, Walmart, Fry’s, Kroger, and Meijer. Amazon was the top store for Data 3.0, Values-Based Consumption, and Channel Proliferation. - Health and Wellness, and finances are opposing forces for many consumers. The struggle between buying healthy and affordability is real. While 80% of consumers aspire to choose healthier foods when shopping, price is a barrier for 60% of them.
Consumers with higher incomes are more likely to choose healthy foods when shopping regularly. Younger customers care more about their mental health, whereas older customers care about their physical health.
- Data 3.0 (defined in the report as the adoption of new technology) is still nominal, but it greatly appeals to younger generations. That means that winning the hearts and wallets of future post-millennial generations will happen not only via offering self-checkout lanes (used by four out of every five customers) but integrating new and holistic virtual tech into purchases and communications.
- Values-Based Consumption, based on values such as sustainability or on the welfare of store employees, remains aspirational and ranks last when customers are asked to trade off with other needs like finances and personal health.
That’s because, like Health and Wellness, consumer needs that are less personal and less immediate to the consumer take a back seat until the priorities are fulfilled (like one’s finances).