From inflation to labor shortages, food retailers have experienced a number of obstacles for the past several years and there are fears that those obstacles will continue, if not get worse, moving into 2023.
FMI is a trade group that represents food retailers and their supply chain partners. Most recently, they surveyed both food retailers and their suppliers to better understand the challenges they are facing caused by inflation, supply chain issues, and labor shortages. The survey also revealed how retailers and suppliers are improving the customer experience and helping them navigate challenges.
The industry survey, “The Food Retailing Industry Speaks,” surveyed food retailers and wholesale companies representing over 38,000 stores. “From shifting expectations on the COVID-19 pandemic phase to unpredictable inflationary pressures to ongoing supply chain bottlenecks and labor shortages, [as well as] continued global unrest, retailers continue to face a variety of hurdles to running their business everyday,” said Leslie Sarasin, FMI President and CEO.
FMI’s research identified labor and supply chain issues as key obstacles as 87% of retailers and 86% of suppliers reported having labor shortages. To attract and retain employees, suppliers and retailers offered better wages and salaries, improved benefits, training bonuses, and education benefits. Supply chain issues also proved to be an obstacle as 70% of retailers indicated that they expect supply chain disruptions to negatively impact their businesses. This is a significant increase as only 42% of retailers reported the same concern last year.
While navigating these obstacles, the food retail industry is also meeting customers’ needs by investing in technologies that improve efficiency and experience. FMI’s grocery shopping trends found that, despite rising food and gas prices, consumers still feel in control of their finances. Lower-income households, on the other hand, are more concerned about affording groceries as inflation persists. FMI’s survey showed that consumers were spending an average of $136 a week on groceries in August, which is down from $148 a week in February. To combat rising inflation, 62% of food retailers are using high-low pricing and everyday low-price offers to satisfy consumers.
Consumer behavior shifted at the height of the pandemic and retailers adapted to those changes. 91% of all retailers now offer online shopping, and nearly half of those retailers saw online sales increase in 2021. Online share of total sales continues to grow for food retailers, representing 6.5% of total sales in 2021. To meet this growing demand, food retailers have adjusted their services. Almost 90% of retailers offer online ordering and curbside pickup and 56% offer home delivery. However, many retailers are still working to improve their e-commerce as only 10% believed their e-commerce platforms were very sophisticated.
Despite these obstacles, there’s still plenty of opportunities, especially in fresh produce. “A major trend that has emerged from the pandemic is that shoppers who are looking for fresher, healthier, more convenient options are spending more time in their grocery stores,” explained Sarasin. Retailers are picking up on this trend as 81% of respondents reported enhancing their store’s organic assortment, 82% plan to increase fresh grab-and-go products, and 70% are planning on expanding their fresh produce products.