Published On Dec 20, 2022
The grocery industry may not be the first thing that comes to mind when you think of change and rapid evolution, but it happens to be an industry that has transformed day-to-day operations and consumer behavior across generations. Today, we see technology changing the way people buy groceries while plant-based options are becoming the new status quo. But we didn’t get here overnight. To fully grasp these waves of change, let’s take a walk through the history - and the evolution of the grocery store.
Before 1900, “grocery shopping” consisted of a day spent visiting stores specializing in different food sectors, such as the baker, the butcher, the greengrocer, or all three! Nonperishable items were found at smaller, often unsanitary, and understocked stores where the clerk would fill customers’ orders instead of allowing them to walk around and handle the merchandise. The stores regularly sold on credit and even offered home delivery, a foreshadowing of what we see today.
This all changed in 1912 when The Great Atlantic and Pacific Tea Company (“A&P”) launched the economy grocery store. Their new model was developed around standardization, scale, and effective marketing. A&P also began the cash-and-carry system instead of the previously used credit sales and delivery options. Around the time of this development also came the invention of the cardboard box and the commercial use of tin, creating a more effective and sanitary way to keep food fresh. These innovations also allowed A&P to begin developing and marketing its own private-label products. A&P became the inspiration for Clarence Saunders to open the first Piggly Wiggly store in Memphis, Tennessee, in 1916. This was the first concept of a self-service grocery store, something that A&P later implemented in their stores shortly after. These innovative concepts set the groundwork for chains we still know now, like Kroger, American Stores, and Safeway.
The next significant evolution we saw in the grocery industry was in 1930 in Queens, New York when the first ‘supermarket,’ King Kullen, opened. According to KingKullen.com, this new hub for grocery shopping “fulfilled all five criteria that define the modern supermarket: separate departments, self-service, discount pricing, chain marketing, and volume dealing.” This idea was infamously founded by Michael Cullen, a former employee of A&P and Kroger, who did not respond to this idea. That is when Cullen left to open the very first King Kullen, finding his success coinciding with the normalization of residential refrigeration, the creation of cellophane to keep food fresh, and the popularity of the automobile. These innovations allowed people to drive several miles to their nearest supermarket and purchase perishable foods that they could take home and store in their own refrigerator and freezer.
In the 1950s and 1960s, we saw the first grocery-anchored shopping centers come into the suburbs. These centers provided a wide variety of shopping options in close proximity for customers, with the chance of a grocery store sitting next to a hair salon, a laundromat or other store or service provider. These one-stop shopping centers are what we at Phillips Edison & Company value and invest in today, so it is amazing to look back at the innovation through the decades that brought these to be.
Now you must be thinking, what could possibly have been next? That is where the first club or warehouse store, Sol Price, came to fruition in 1976. Price Club charged its shoppers a $25 annual membership fee in exchange for the ability to purchase bulk products at discounted prices. After nearly 20 years of dominating this niche grocery shopping category, Price Club merged with Costco, further creating a unique warehouse shopping experience for customers that still seems to be popular today.
Speaking of current-day popularity, we now look at one of the biggest shake-ups to hit the grocery industry, Walmart. In 1988, the first Walmart Supercenter opening in Washington, Missouri, was the first time we saw general merchandise combined with a full-scale supermarket. This one-stop and find it all model created convenience for shoppers that had never been seen before. That paired with its mission to offer its customers low prices, we still see Walmart as one of the most successful businesses in the grocery and shopping industry. As of 2021, there are over 3,500 stores in the US, and their annual sales topped $500 billion.
As the century turned and we entered the 2000s, we saw growth on both sides of affordability when it comes to grocery shopping. For the more luxurious and high-priced products, Whole Foods benefited by attracting customers interested in the more natural and organic offerings. This expansion coincided with clean eating, cleaning, and living becoming more mainstream than ever before, continuously aiding Whole Foods in popularity. On the other side of the income hourglass, Aldi earned a popular presence amongst lower-income households. Their store model is built around limited assortments and off-brand products that allow lower prices for their customers. On top of that, their process for purchasing bags or bringing your own, as well as their efficient checkout systems allows for the most affordable experience on both the business and customer sides.
The early 2000s also saw an expansion in the manufacturing and operations side of grocery shopping. Refrigeration and freezer storage became sleeker and more high-tech, creating a more convenient shopping experience for customers, self-checkout systems became more common, and grocery carts continued getting bigger to encourage shoppers to buy even more! These innovations continue today as the grocery industry moves towards the next big thing.
One of those next big things has been groceries being ordered online. Now, this e-commerce option has been around for 6+ years, as the wave primarily started when Amazon acquired Whole Foods in 2017. This $13.7 billion purchase proved that while Amazon can provide convenience, brick-and-mortar stores are necessary to provide freshness. While this was the real beginning of online grocery shopping, the pandemic was what heightened its popularity. Because of the safety restrictions, people had to consider staying out of the stores, and opting for the contactless pickup or delivery of groceries was the best option for some people. Stores like Kroger even began opening dispatch centers, stores that were only used for online orders, as the demand was so high in certain areas.
Now, with the world finding its way back to normal, the grocery industry is once again having to adapt and change to what the people want. These wants vary by person, which is why we have seen a range of advancements being made in the last few years. One of the more obvious is the continuation and upgrade of online grocery shopping, as stores continue to find new and innovative ways to make it as convenient as possible. Omni-channel strategy is more important than ever and it is being used in a variety of ways to elevate the customer experience. Artificial intelligence, robotics, and automation all contribute to the shopper’s experience – both online and in-store.
Brick-and-mortar stores have also gotten creative in enhancing the in-store shopping experience for their customers and turning it into a true “experience.” You will now see some of these larger supercenters offering wine tastings, cooking classes, in-store dietitians, or even full-blown restaurants. This not only enhances the overall energy of the store but also provides new experiences for shoppers that give them a reason to stop in more often. It also keeps shoppers in the store longer to potentially make more purchases.
This list of small changes and evolution could go on forever. What is essential is the ability to embrace and encourage change. Our grocery stores wouldn’t look like they do today without this pressure to always improve and innovate. And these days, they cater to everyone. They have everything from e-commerce to unique brick-and-mortar experiences to an array of assortments to tame your taste buds.
Next time you walk into a grocery store or place your online order, think back to when they didn’t have one of your favorite products or features. That is when you can remind yourself that change is a good thing, especially in our grocery stores.