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What average Americans spend on groceries every month in 22 major cities

It’s easy to get carried away at the grocery store. She who isn’t tempted fill up a basket or cart with extra chips, produce, ice cream, or frozen meals “just in case” is a hero among us.

Buying in bulk, keeping an eye out for deals, or heading to the grocery store with a detailed meal plan can help reduce that grocery bill.

To find out what the average grocery budget looks like in various cities, we consulted the Bureau of Labor Statistics’ Consumer Expenditure Surveys. The data covers the most recent period of 2016 to 2017 and reveals average annual expenditures for consumer units 22 major metros in the Northeast, South, West, and Midwest.

A consumer unit, as defined by BLS, is a household ranging in size from one individual to three or more people.

The data show what Americans spend on “food at home,” which includes dairy products, fruits and vegetables, meats, poultry, fish, eggs, cereals and bakery products, annually. We divided the total by 12 to get the monthly cost. The total spent on groceries for the average household ranges from $286 a month in Dallas to nearly $500 a month in Seattle.

Below, find out how much people spend, on average, on groceries in major US cities.

22. Dallas-Fort Worth

22. Dallas-Fort Worthkan_khampanya/Shutterstock

Average grocery spend: $286/month

Average total food spend: $547/month

21. Tampa

21. TampaShutterstock / Bonnie Fink

Average grocery spend: $301/month

Average total food spend: $524/month

20. Atlanta

20. AtlantaGetty Images/Justin Sullivan

Average grocery spend: $308/month

Average total food spend: $556/month

19. Phoenix

19. PhoenixGregory E. Clifford/Shutterstock

Average grocery spend: $328/month

Average total food spend: $571/month

18. St. Louis

18. St. LouisShutterstock

Average grocery spend: $336/month

Average total food spend: $608/month

17. Detroit

17. DetroitScott Olson/Getty Images

Average grocery spend: $342/month

Average total food spend: $616/month

16. Miami

16. MiamiJeffrey Greenberg/Getty Images

Average grocery spend: $343/month

Average total food spend: $586/month

15. New York

15. New YorkGetty

Average grocery spend: $357/month

Average total food spend: $640/month

14. Baltimore

14. BaltimoreReuters

Average grocery spend: $370/month

Average total food spend: $747/month

13. Los Angeles

13. Los AngelesGetty Images

Average grocery spend: $372/month

Average total food spend: $727/month

12 (TIE). Houston

12 (TIE). HoustonTrong Nguyen / Shutterstock.com

Average grocery spend: $374/month

Average total food spend: $762/month

11 (TIE). San Francisco

11 (TIE). San FranciscoAP Photo/Matt Rourke

Average grocery spend: $374/month

Average total food spend: $743/month

10. Chicago

10. ChicagoCavan Images/Getty

Average grocery spend: $376/month

Average total food spend: $680/month

9. Washington, DC

9. Washington, DCAnton_Ivanov/Shutterstock

Average grocery spend: $392/month

Average total food spend: $765/month

8. Minneapolis-St. Paul

8. Minneapolis-St. PaulTim Roberts Photography/Shutterstock

Average grocery spend: $393/month

Average total food spend: $714/month

7. Philadelphia

7. PhiladelphiaHero Images/Getty

Average grocery spend: $405/month

Average total food spend: $683/month

6. Denver

6. DenverAndreas Rentz/Getty

Average grocery spend: $421/month

Average total food spend: $737/month

5. Boston

5. Bostonf11photo/Shutterstock

Average grocery spend: $426/month

Average total food spend: $688/month

4. Anchorage

4. AnchorageJoe Giblin/AP Photos

Average grocery spend: $440/month

Average total food spend: $692/month

3. Honolulu

3. HonoluluKelly Headrick/Shutterstock

Average grocery spend: $430/month

Average total food spend: $836/month

2. San Diego

2. San DiegoSean Pavone/Shutterstock

Average grocery spend: $447/month

Average total food spend: $832/month

1. Seattle

1. SeattleShutterstock

Average grocery spend: $498/month

Average total food spend: $913/month

Source: Business Insider

Kroger, Walgreens test cameras in aisles

  • Retailers are testing out smart shelves and coolers with penny-sized cameras that collect information on shoppers and their purchases, according to the Associated Press. The technology is aimed at personalizing the shopping experience, but also raises questions about customer privacy.
  • Kroger has placed cameras in two stores near Cincinnati and Seattle, which are embedded in price signs above shelves to play ads and show discounts. The cameras don’t store data, though they can guess age and sex, Kroger told the AP.
  • Walgreens has installed cooler doors that act as video screens with cameras and sensors at six stores in Chicago, New York, San Francisco and Bellevue, Washington. The doors display ads and the contents inside the cooler, and a camera can guess ages and track shoppers’ eyes to see where they’re looking, though Walgreens said that feature is currently disabled.

As technology gets more advanced, companies like Kroger and Walgreens are using these tools to compete with online retailers like Amazon that can record each click and voice order a shopper makes, how long they hover over certain items and which products are placed in their cart regardless of whether they complete the purchase.

In addition to delivering more personalized recommendations, some of the cameras’ touted advantages include conserving energy because customers won’t have to search products with cooler doors open and helping employees keep tabs on what needs to be restocked.

It’s unsurprising that Kroger is one of the first retailers to navigate these uncharted waters. The grocer has made major investments in technological innovation in recent months, including a partnership with Microsoft to implement Kroger’s EDGE shelving system, which replaces traditional paper labeling with digital displays. Kroger is also piloting guided shopping through its Scan, Bag, Go app.

While these cameras creep out some shoppers, others could find the technology useful, according to a report from consumer research company Field Agent. The company conducted a mystery shop with 21 secret shoppers investigating the technology at select Walgreens locations. A handful of shoppers termed the cooler doors “innovative,” “cool” and “informative,” with 67% saying they had an excellent experience with them.

Privacy experts aren’t on board with the idea of cameras in-store, according to the AP report. Although they have the potential to help consumers discover new products and discounts, cameras can also prey on consumers who display certain emotions such as confusion or temptation and can cause discriminatory practices including price adjustments for older shoppers.

Sam’s Club CEO John Furner reported wariness of the technology, saying the most important thing is to make sure people aren’t surprised by how stores are using their technology or data.

Source: Grocery Dive

The man who’s going to save your neighborhood grocery store

In 2014, Rich Niemann, president and CEO of the Midwestern grocery company Niemann Foods, made the most important phone call of his career. He dialed the Los Angeles office of Shook Kelley, an architectural design firm, and admitted he saw no future in the traditional grocery business. He was ready to put aside a century of family knowledge, throw away all his assumptions, completely rethink his brand and strategy — whatever it would take to carry Niemann Foods deep into the 21st century.
This story is published in partnership with Longreadswith reporting supported by the 11th Hour Food and Farming Fellowship at the University of California, Berkeley.

“I need a last great hope strategy,” he told Kevin Kelley, the firm’s cofounder and principal. “I need a white knight.”

Part square-jawed cattle rancher, part folksy CEO, Niemann is the last person you’d expect to ask for a fresh start. He’s spent his whole life in the business, transforming the grocery chain his grandfather founded in 1917 into a regional powerhouse with more than 100 supermarkets and convenience stores across four states. In 2014, he was elected chair of the National Grocery Association. It’s probably fair to say no one alive knows how to run a grocery store better than Rich Niemann. Yet Niemann was no longer sure the future had a place for stores like his.

You no longer need grocery stores to buy groceries.

He was right to be worried. The traditional American supermarket is dying. It’s not just Amazon’s purchase of Whole Foods, an acquisition that trade publication Supermarket News says marked “a new era” for the grocery business — or the fact that Amazon hopes to launch a second new grocery chain in 2019, according to a recent report from The Wall Street Journal, with a potential plan to scale quickly by buying up floundering supermarkets. Even in plush times, grocery is a classic “red ocean” industry, highly undifferentiated and intensely competitive. (The term summons the image of a sea stained with the gore of countless skirmishes.) Now, the industry’s stodgy old playbook — “buy one, get one” sales, coupons in the weekly circular — is hurtling toward obsolescence. Today, with new ways to sell food ascendant, legacy grocers like Rich Niemann are failing to bring back the customers they once took for granted. You no longer need grocery stores to buy groceries.

Niemann hired Kelley in the context of this imminent doom. The assignment: to conceive, design, and build the grocery store of the future. Niemann was ready to entertain any idea and invest heavily. And for Kelley, a man who’s worked for decades honing his vision for what the grocery store should do and be, it was the opportunity of a lifetime — carte blanche to build the working model he’s long envisioned, one he believes can save the neighborhood supermarket from obscurity.

The store that resulted is called Harvest Market, which opened in 2016. It’s south of downtown Champaign, Illinois, out by the car dealerships and strip malls; 58,000 square feet of floor space mostly housed inside a huge, high-ceilinged glass barn. Its bulk calls to mind both the arch of a hayloft and the heavenward jut of a church. But you could also say it’s shaped like an ark, because it’s meant to survive an apocalypse.

Harvest Market in Champaign, Illinois is a vision for the supermarket's future Joe Fassler

Harvest Market in Champaign, Illinois is a vision for the supermarket’s future

Harvest Market is the anti-Amazon. It’s designed to excel at what e-commerce can’t do: convene people over the mouth-watering appeal of prize ingredients and freshly prepared food. The proportion of groceries sold online is expected to swell over the next five or six years, but Harvest is a bet that behavioral psychology, spatial design, and narrative panache can get people excited about supermarkets again. Kelley isn’t asking grocers to be more like Jeff Bezos or Sam Walton. He’s not asking them to be ruthless, race-to-the-bottom merchants. In fact, he thinks that grocery stores can be something far greater than we ever imagined — a place where farmers and their urban customers can meet, a crucial link between the city and the country.

But first, if they’re going to survive, Kelley says, grocers need to start thinking like Alfred Hitchcock.

Kevin Kelley is an athletic-looking man in his mid-50s , with a piercing hazel gaze that radiates thoughtful intensity. In the morning, he often bikes two miles to Shook Kelley’s office in Hollywood — a rehabbed former film production studio on an unremarkable stretch of Melrose Avenue, nestled between Bogie’s Liquors and a driving school. Four nights a week, he visits a boxing gym to practice Muay Thai, a form of martial arts sometimes called “the art of eight limbs” for the way it combines fist, elbow, knee, and shin attacks. “Martial arts,” Kelley tells me, “are a framework for handling the unexpected.” That’s not so different from his main mission in life: He helps grocery stores develop frameworks for the unexpected, too.

Shook Kelley's Kevin Kelley, left, and Rich Niemann of Niemann Foods (April 2019)Vinnie Neuberg

Kevin Kelley (left) is a supermarket ghostwriter—a man who helps grocers like Rich Niemann (right) prepare for a 21st century marketplace

You’ve never heard of him, but then it’s his job to be invisible. Kelley calls himself a supermarket ghostwriter: His contributions are felt more than seen, and the brands that hire him get all the credit. Countless Americans have interacted with his work in intimate ways, but will never know his name. Such is the thankless lot of the supermarket architect.

A film buff equally fascinated by advertising and the psychology of religion, Kelley has radical theories about how grocery stores should be built, theories that involve terms like “emotional opportunity,” “brain activity,” “climax,” and “mise-en-scène.” But before he can talk to grocers about those concepts, he has to convince them of something far more elemental: that their businesses face near-certain annihilation and must change fundamentally to avoid going extinct.

“It is the most daunting feeling when you go to a grocery store chain, and you meet with these starched-white-shirt executives,” Kelley tells me. “When we get a new job, we sit around this table — we do it twenty, thirty times a year. Old men, generally. Don’t love food, progressive food. Just love their old food — like Archie Bunkers, essentially. You meet these people and then you tour their stores. Then I’ve got to go convince Archie Bunker that there’s something called emotions, that there are these ideas about branding and feeling. It is a crazy assignment. I can’t get them to forget that they’re no longer in a situation where they’ve got plenty of customers. That it’s do-or-die time now.”

Forget branding. Forget sales. Kelley’s main challenge is redirecting the attention of older male executives, scared of the future and yet stuck in their ways, to the things that really matter.

“I make my living convincing male skeptics of the power of emotions,” he says.

Human beings, it turns out, aren’t very good at avoiding large-scale disaster. As you read this, the climate is changing, thanks to the destructively planet-altering activities of our species. The past four years have been the hottest on record. If the trend continues — and virtually all experts agree it will — we’re likely to experience mass disruptions on a scale never before seen in human history. Drought will be epidemic. The ocean will acidify. Islands will be swallowed by the sea. People could be displaced by the millions, creating a new generation of climate refugees. And all because we didn’t move quickly enough when we still had time.

You know this already. But I bet you’re not doing much about it — not enough, at least, to help avert catastrophe. I’ll bet your approach looks a lot like mine: worry too much, accomplish too little. The sheer size of the problem is paralyzing. Vast, systemic challenges tend to short-circuit our primate brains. So we go on, as the grim future bears down.

Grocers, in their own workaday way, fall prey to the same inertia. They got used to an environment of relative stability. They don’t know how to prepare for an uncertain future. And they can’t force themselves to behave as if the good times are really going to go away — even if, deep down, they know it’s true.

“I make my living convincing male skeptics of the power of emotions.”

In the 1980s, you could still visit almost any community in the U.S. and find a thriving supermarket. Typically, it would be a dynasty family grocery store, one that had been in business for a few generations. Larger markets usually had two or three players, small chains that sorted themselves out along socioeconomic lines: fancy, middlebrow, thrifty. Competition was slack and demand — this is the beautiful thing about selling food — never waned. For decades, times were good in the grocery business. Roads and schools were named after local supermarket moguls, who often chaired their local chambers of commerce. “When you have that much demand, and not much competition, nothing gets tested. Kind of like a country with a military that really doesn’t know whether their bullets work,” Kelley says. “They’d never really been in a dogfight.”

It’s hard to believe now, but there was not a single Walmart on the West Coast until 1990. That decade saw the birth of the “hypermarket” and the beginning of the end for traditional grocery stores — Walmarts, Costcos, and Kmarts became the first aggressive competition supermarkets ever really faced, luring customers in with the promise of one-stop shopping on everything from Discmen to watermelon.

The other bright red flag: Americans started cooking at home less and eating out more. In 2014, Americans dined out more than in for the first time on record, the culmination of a slow shift away from home cooking that had been going on since at least the 1960s. That trend is likely to continue. According to a 2017 report from the USDA’s Economic Research Service, millennials shop at food stores less than any other age group, spend less time preparing food, and are more likely to eat carry-out, delivery, or fast food even when they do eat at home.

But even within the shrinking market for groceries, competition has stiffened. Retailers not known for selling food increasingly specialize in it, a phenomenon called “channel blurring”; today, pharmacies like CVS sell pantry staples and packaged foods, while 99-cent stores like Dollar General are a primary source of groceries for a growing number of Americans. Then there’s e-commerce. Though only about 3 percent of groceries are currently bought online, that figure could rocket to 20 percent by 2025. From subscription meal-kit services like Blue Apron to online markets like FreshDirect and Amazon Fresh, shopping for food has become an increasingly digital endeavor — one that sidesteps traditional grocery stores entirely.

A cursory glance might suggest grocery stores are in no immediate danger. According to the data analytics company Inmar, traditional supermarkets still have a 44.6 percent market share among brick-and-mortar food retailers. And though a spate of bankruptcies has recently hit the news, there are actually more grocery stores today than there were in 2005. Compared to many industries — internet service, for example — the grocery industry is still a diverse, highly varied ecosystem. Forty-three percent of grocery companies have fewer than four stores, according to a recent USDA report. These independent stores sold 11 percent of the nation’s groceries in 2015, a larger collective market share than successful chains like Albertson’s (4.5 percent), Publix (2.25 percent), and Whole Foods (1.2 percent).

Amazon’s vision for Whole Foods represents a future traditional grocers can’t compete in.

But looking at this snapshot without context is misleading — a little like saying that the earth can’t be warming because it’s snowing outside. Not long ago, grocery stores sold the vast majority of the food that was prepared and eaten at home— about 90 percent in 1988, according to Inmar. Today, their market share has fallen by more than half, even as groceries represent a diminished proportion of overall food sold. Their slice of the pie is steadily shrinking, as is the pie itself.

By 2025, the thinking goes, most Americans will rarely enter a grocery store. That’s according to a report called “Surviving the Brave New World of Food Retailing,” published by the Coca-Cola Retailing Research Council — a think tank sponsored by the soft drink giant to help retailers prepare for major changes. The report describes a retail marketplace in the throes of massive change, where supermarkets as we know them are functionally obsolete. Disposables and nonperishables, from paper towels to laundry detergent and peanut butter, will replenish themselves automatically, thanks to smart-home sensors that reorder when supplies are low. Online recipes from publishers like Epicurious will sync directly to digital shopping carts operated by e-retailers like Amazon. Impulse buys and last-minute errands will be fulfilled via Instacart and whisked over in self-driving Ubers. In other words, food — for the most part — will be controlled by a small handful of powerful tech companies.

The Coca-Cola report, written in consultation with a handful of influential grocery executives, including Rich Niemann, acknowledges that the challenges are dire. To remain relevant, it concludes, supermarkets will need to become more like tech platforms: develop a “robust set of e-commerce capabilities,” take “a mobile-first approach,” and leverage “enhanced digital assets.” They’ll need infrastructure for “click and collect” purchasing, allowing customers to order online and pick up in a jiffy. They’ll want to establish a social media presence, as well as a “chatbot strategy.” In short, they’ll need to become Amazon, and they’ll need to do it all while competing with Walmart — and its e-commerce platform, Jet.com — on convenience and price.

That’s why Amazon’s acquisition of Whole Foods Market was terrifying to so many grocers, sending the stocks of national chains like Kroger tumbling: It represents a future they can’t really compete in. Since August 2017, Amazon has masterfully integrated e-commerce and physical shopping, creating a muscular hybrid that represents an existential threat to traditional grocery stores. The acquisition was partially a real estate play: Whole Foods stores with Prime lockers now act as a convenient pickup depot for Amazon goods. But Amazon’s also doing its best to make it too expensive and inconvenient for its Prime members, who pay $129 a year for free two-day shipping and a host of other perks, to shop anywhere else. Prime members receive additional 10 percent discounts on select goods at Whole Foods, and Amazon is rolling out home grocery delivery in select areas. With the Whole Foods acquisition, then, Amazon cornered two markets: the thrift-driven world of e-commerce and the pleasure-seeking universe of high-end grocery. Order dish soap and paper towels in bulk on Amazon, and pick them up at Whole Foods with your grass-fed steak.

Traditional grocers are now expected to offer the same combination of convenience, flexibility, selection, and value. They’re understandably terrified by this scenario, which would require fundamental, complex, and very expensive changes. And Kelley is terrified of it, too, though for a different reason: He simply thinks it won’t work. In his view, supermarkets will never beat Walmart and Amazon at what they do best. If they try to succeed by that strategy alone, they’ll fail. That prospect keeps Kelley up at night — because it could mean a highly consolidated marketplace overseen by just a handful of players, one at stark contrast to the regional, highly varied food retail landscape America enjoyed throughout the 20th century.

“I’m afraid of what could happen if Walmart and Amazon and Lidl are running our food system, the players trying to get everything down to the lowest price possible,” he tells me. “What gives me hope is the upstarts who will do the opposite. Who aren’t going to sell convenience or efficiency, but fidelity.”

The approach Kelley’s suggesting still means completely overhauling everything, with no guarantee of success. It’s a strategy that’s decidedly low-tech, though it’s no less radical. It’s more about people than new platforms. It means making grocery shopping more like going to the movies.

Nobody grows up daydreaming about designing grocery stores, including Kelley. As a student at the University of North Carolina at Charlotte, he was just like every other architect-in-training: He wanted to be a figure like Frank Gehry, building celebrated skyscrapers and cultural centers. But he came to feel dissatisfied with the culture of his profession. In his view, architects coldly fixate on the aesthetics of buildings and aren’t concerned enough with the people inside.

“It was so unorthodox and so bizarrely new in terms of approach that everyone thought I was crazy.”

“Architecture worships objects, and Capital-A architects are object makers,” Kelley tells me. “They aren’t trying to fix social issues. People and their experience and their perceptions and behaviors don’t matter to them. They don’t even really want people in their photographs—or if they have to, they’ll blur them out.”

What interested Kelley most was how people would use his buildings, not how the structures would fit into the skyline. He wanted to shape spaces in ways that could actually affect our emotions and personalities, bringing out the better angels of our nature. To his surprise, no one had really quantified a set of rules for how environment could influence behavior. Wasn’t it strange that advertising agencies spent so much time thinking about the links between storytelling, emotions, and decision-making — while commercial spaces, the places where we actually go to buy, often had no design principle beyond brute utility?

“My ultimate goal was to create a truly multidisciplinary firm that was comprised of designers, social scientists and marketing types,” he says. “It was so unorthodox and so bizarrely new in terms of approach that everyone thought I was crazy.”

In 1992, when he was 28, Kelley cofounded Shook Kelley with the Charlotte, North Carolina–based architect and urban planner Terry Shook. Their idea was to offer a suite of services that bridged social science, branding, and design, a new field they called “perception management.” They were convinced space could be used to manage emotion, just the way cinema leads us through a guided sequence of feelings, and wanted to turn that abstract idea into actionable principles. While Shook focused on bigger, community-oriented spaces like downtown centers and malls, Kelley focused on the smaller, everyday commercial spaces overlooked by fancy architecture firms: dry cleaners, convenience stores, eateries, bars. One avant-garde restaurant Kelley designed in Charlotte, called Props, was an homage to the sitcom craze of the 1990s. It was built to look like a series of living rooms, based on the apartment scenes in shows like Seinfeld and Friends and featured couches and easy chairs instead of dining tables to encourage guests to mingle during dinner.

The shift to grocery stores didn’t happen until a few years later, almost by accident. In the mid-’90s, Americans still spent about 55 percent of their food dollars on meals eaten at home — but that share was declining quickly enough to concern top corporate brass at Harris Teeter, a Charlotte-area, North Carolina–based grocery chain with stores throughout the Southwestern United States. (Today, Harris Teeter is owned by Kroger, the country’s second-largest seller of groceries behind Walmart.) Harris Teeter execs reached out to Shook Kelley. “We hear you’re good with design, and you’re good with food,” Kelley remembers Harris Teeter reps saying. “Maybe you could help us.”

At first, it was Terry Shook’s account. He rebuilt each section of the store into a distinct “scene” that reinforced the themes and aesthetics of the type of food it sold. The deli counter became a mocked-up urban delicatessen, complete with awning and neon sign. The produce section resembled a roadside farmstand. The dairy cases were corrugated steel silos, emblazoned with the logo of a local milk supplier. And he introduced full-service cafés, a novelty for grocery stores at the time, with chrome siding like a vintage diner. It was pioneering work, winning that year’s Outstanding Achievement Award from the International Interior Design Association — according to Kelley, it was the first time the prestigious award had ever been given to a grocery store.

Archival photo of a Harris Teeter store as redesigned by Shook KelleyShook Kelley

In this photo from the mid-1990s, a Harris Teeter supermarket shows off its Shook Kelley redesign—complete with marquee lighting and a giant coffee cup

Shook backed off of grocery stores after launching the new Harris Teeter, but the experience sparked Kelley’s lifelong fascination with grocery stores, which he realized were ideal proving grounds for his ideas about design and behavior. Supermarkets contain thousands of products, and consumers make dozens of decisions inside them — decisions about health, safety, family, and tradition that get to the core of who they are. He largely took over the Harris Teeter account and redesigned nearly 100 of the chain’s stores, work that would go on to influence the way the industry saw itself and ultimately change the way stores are built and navigated.

Since then, Kelley has worked to show grocery stores that they don’t have to worship at the altar of supply-side economics. He urges grocers to appeal instead to our humanity. Kelley asks them to think more imaginatively about their stores, using physical space to evoke nostalgia, delight our senses, and appeal to the parts of us motivated by something bigger and more generous than plain old thrift. Shopping, for him, is all about navigating our personal hopes and fears, and grocery stores will only succeed when they play to those emotions.

Archival photos of Harris Teeter supermarkets redesigned by Shook Kelley in the 1990s (April 2019)Shook Kelley

Archival photos of Harris Teeter supermarkets redesigned by Shook Kelley in the 1990s

When it works, the results are dramatic. Between 2003 and 2007, Whole Foods hired Shook Kelley for brand strategy and store design, working with the firm throughout a crucial period of the chain’s development. The fear was that as Whole Foods grew, its image would become too diffuse, harder to differentiate from other health food stores; at the same time, the company wanted to attract more mainstream shoppers. Kelley’s team was tasked with finding new ways to telegraph the brand’s singular value. Their solution was a hierarchical system of signage that would streamline the store’s crowded field of competing health and wellness claims.

Kelley’s view is that most grocery stores are “addicted” to signage, cramming their spaces with so many pricing details, promotions, navigational signs, ads, and brand assets that it “functionally shuts down [the customer’s] ability to digest the information in front of them.”

Kelley’s team stipulated that Whole Foods could only have seven layers of information, which ranged from evocative signage 60 feet away to descriptive displays six feet from customers to promotional info just six inches from their hands. Everything else was “noise,” and jettisoned from the stores entirely. If you’ve ever shopped at Whole Foods, you probably recognize the way that the store’s particular brand of feel-good, hippie sanctimony seems to permeate your consciousness at every turn. Kelley helped invent that. The system he created for pilot stores in Princeton, New Jersey, and Louisville, Kentucky, were scaled throughout the chain and are still in use today, he says. (Whole Foods did not respond to requests for comment for this story.)

With a carefully delineated set of core values guiding its purchasing and brand, Whole Foods was ripe for the kind of visual overhaul Kelley specializes in. But most regional grocery chains have a different set of problems: They don’t really have values to telegraph in the first place. Shook Kelley’s approach is about getting buttoned-down grocers to reflect on their beliefs, tapping into deeper, more primal reasons for wanting to sell food.

Today, Kelley and his team have developed a playbook for clients, a finely tuned process to get shoppers to think in terms that go beyond bargain-hunting. It embraces what he calls “the theater of retail” and draws inspiration from an unlikely place: the emotionally laden visual language of cinema. His goal is to convince grocers to stop thinking like Willy Loman — like depressed, dejected salesmen forever peddling broken-down goods, fixated on the past and losing touch with the present. In order to survive, Kelley says, grocers can’t be satisfied with providing a place to complete a chore. They’ll need to direct an experience.

Today’s successful retail brands establish what Kelley calls a “brand realm,” or what screenwriters would call a story’s “setting.” We don’t usually think consciously about them, but realms subtly shape our attitude toward shopping the same way the foggy, noirishly lit streets in a Batman movie tell us something about Gotham City. Cracker Barrel is set in a nostalgic rural house. Urban Outfitters is set on a graffitied urban street. Tommy Bahama takes place on a resort island. It’s a well-known industry secret that Costco stores are hugely expensive to construct — they’re designed to resemble fantasy versions of real-life warehouses, and the appearance of thrift doesn’t come cheap. Some realms are even more specific and fanciful: Anthropologie is an enchanted attic, complete with enticing cupboards and drawers. Trader Joe’s is a crew of carefree, hippie traders shipping bulk goods across the sea. A strong sense of place helps immerse us in a store, getting us emotionally invested and (perhaps) ready to suspend the critical faculties that prevent a shopping spree.

Kelley takes this a few steps further. The Shook Kelly team, which includes a cultural anthropologist with a Ph.D., begins by conducting interviews with executives, staff, and locals, looking for the storytelling hooks they call “emotional opportunities.” These can stem from core brand values, but often revolve around the most intense, place-specific feelings locals have about food. Then Kelley finds ways to place emotional opportunities inside a larger realm with an overarching narrative, helping retailers tell those stories — not with shelves of product, but through a series of affecting “scenes.”

In Alberta, Canada, Shook Kelley redesigned a small, regional grocery chain now called Freson Bros. Fresh Market. In interviews, the team discovered that meat-smoking is a beloved pastime there, so Shook Kelley built huge, in-store smokers at each new location — a scene called “Banj’s Smokehouse” — that crank out pound after pound of the province’s signature beef, as well as elk, deer, and other kinds of meat (customers can even BYO meat to be smoked in-house). Kelley also designed stylized root cellars in each produce section, a cooler, darker corner of each store that nods to the technique Albertans use to keep vegetables fresh. These elements aren’t just novel ways to taste, touch, and buy. They reference cultural set points, triggering memories and personal associations. Kelley uses these open, aisle-less spaces, which he calls “perceptual rooms,” to draw customers through an implied sequence of actions, tempting them towards a specific purchase.

A scene inside Freson Bros. Fresh Market, an Alberta, Canada supermarket redesigned by Shook Kelley

Something magical happens when you engage customers this way. Behavior changes in visible, quantifiable ways. People move differently. They browse differently. And they buy differently. Rather than progressing in a linear fashion, the way a harried customer might shoot down an aisle — Kelley hates aisles, which he says encourage rushed, menial shopping — customers zig-zag, meander, revisit. These behaviors are a sign a customer is “experimenting,” engaging with curiosity and pleasure rather than just trying to complete a task.

A scene inside Freson Bros. Fresh Market, an Alberta, Canada supermarket redesigned by Shook Kelley

“If I was doing a case study presentation to you, I would show you exact conditions where we don’t change the product, the price, the service. We just change the environment and we’ll change the behavior,” Kelley tells me. “That always shocks retailers. They’re like ‘Holy cow.’ They don’t realize how much environment really affects behavior.”

In the mid-2000s, Nabisco approached Kelley’s firm, complaining that sales were down 16 percent in the cookie-and-cracker aisle. In response, Shook Kelley designed “Mom’s Kitchen,” which was piloted at Buehler’s, a 15-store chain in northern Ohio. Kelley took Nabisco’s products out of the center aisles entirely and installed them in a self-contained zone: a perceptual room built out to look like a nostalgic vision of suburban childhood, all wooden countertops, tile, and hanging copper pans. Shelves of Nabisco products from Ritz Crackers to Oreos lined the walls. Miniature packs of Animal Crackers waited out in a large bowl, drawers opened to reveal boxes of Saltines. The finishing touch had nothing to do with Nabisco and everything to do with childhood associations: Kelley had the retailers install fridge cases filled with milk, backlit and glowing. Who wants to eat Oreos without a refreshing glass of milk to wash them down?

The store operators weren’t sold. They found it confusing and inconvenient to stock milk in two places at once. But from a sales perspective, the experiment was a smash. Sales of Nabisco products increased by as much as 32 percent, and the entire cookie-and-cracker segment experienced a halo effect, seeing double-digit jumps. Then, the unthinkable: The stores started selling out of milk. They simply couldn’t keep it on the shelves.

Archival photo of a "Mom's Kitchen" grocery design installation at a Buehler's Fresh Foods in Tifton, Ohio Shook Kelley

Archival photo of a “Mom’s Kitchen” installation at a Buehler’s Fresh Foods in Ashland, Ohio

You’d think that the grocery stores would be thrilled, that it would have them scrambling to knock over their aisles of goods, building suites of perceptual rooms. Instead, they retreated. Nabisco’s parent company at the time, Kraft, was excited by the results and kicked the idea over to a higher-up corporate division where it stalled. And Buehler’s, for its part, never did anything to capitalize on its success. When the Nabisco took “Mom’s Kitchen” displays down, Kelley says, the stores didn’t replace them.

“We were always asking a different question: What is the problem you’re trying to solve through food?” Kelley says. “It’s not just a refueling exercise — instead, what is the social, emotional issue that food is solving for us? We started trying to work that into grocery. But we probably did it a little too early, because they weren’t afraid enough.”

Since then, Kelley has continued to build his case to unreceptive audiences of male executives with mixed success. He tells them that when customers experiment — when the process of sampling, engaging, interacting, and evaluating an array of options becomes a source of pleasure — they tend to take more time shopping. And that the more time customers spend in-store, the more they buy. In the industry, this all-important metric is called “dwell time.” Most retail experts agree that increasing dwell without increasing frustration (say, with long checkout times) will be key to the survival of brick-and-mortar retail. Estimates vary on how much dwell time increases sales; according to Davinder Jheeta, creative brand director of the British supermarket Simply Fresh, customers spent 1.3 percent more for every 1 percent increase in dwell time in 2015.

Grocers can’t be satisfied with providing a place to complete a chore. They’ll need to direct an experience.

Another way to increase dwell time? Offer prepared foods. Delis, cafes, and in-store restaurants increase dwell time and facilitate pleasure while operating with much higher profit margins and recapturing some of the dining-out dollar that grocers are now losing. “I tell my clients, ‘In five years, you’re going to be in the restaurant business,” Kelley says, “‘or you’re going to be out of business.’”

Kelley’s job, then, is to use design in ways that get customers to linger, touch, taste, scrutinize, explore. The stakes are high, but the ambitions are startlingly low. Kelley often asks clients what he calls a provocative question: Rather than trying to bring in new customers, would it solve their problems if 20 percent of customers increased their basket size by just two dollars? The answer, he says, is typically an enthusiastic yes.

Just two more dollars per trip for every fifth customer — that’s what victory looks like. And failure? That looks like a food marketplace dominated by Walmart and Amazon, a world where the neighborhood supermarket is a thing of the past.

When Shook Kelley started working on Niemann’s account, things began the way they always did: looking for emotional opportunities. But the team was stumped. Niemann’s stores were clean and expertly run. There was nothing wrong with them. Niemann’s problem was that he had no obvious problem. There was no there there.

Many of the regionals Kelley works with have no obvious emotional hook; all they know is that they’ve sold groceries for a long time and would like to keep on selling them. When he asks clients what they believe in, they show him grainy black-and-white photos of the stores their parents and grandparents ran, but they can articulate little beyond the universal goal of self-perpetuation. So part of Shook Kelley’s specialty is locating the distinguishing spark in brands that do nothing especially well, which isn’t always easy. At Buehler’s Fresh Foods, the chain where “Mom’s Kitchen” was piloted, the store’s Shook Kelley–supplied emotional theme is “Harnessing the Power of Nice.”

Still, Niemann Foods was an especially challenging case. “We were like, ‘Is there any core asset here?’” Kelley told me. “And we were like, ‘No. You really don’t have anything.’”

What Kelley noticed most was how depressed Niemann seemed, how gloomy about the fate of grocery stores in general. Nothing excited him — with one exception. Niemann runs a cattle ranch, a family operation in northeast Missouri. “Whenever he talked about cattle and feed and antibiotics and meat qualities, his physical body would change. We’re like, ‘My god. This guy loves ranching.’ He only had three hundred cattle or something, but he had a thousand pounds of interest in it.”

Niemann’s farm now has about 600 cattle, though it’s still more hobby farm than full-time gig — but it ended up being a revelation. During an early phase of the process, someone brought up “So God Made a Farmer” — a speech radio host Paul Harvey gave at the 1978 Future Farmers of America Convention that had been used in an ad for Ram trucks in the previous year’s Super Bowl. It’s a short poem that imagines the eighth day of the biblical creation, where God looks down from paradise and realizes his new world needs a caretaker. What kind of credentials is God looking for? Someone “willing to get up before dawn, milk cows, work all day in the fields, milk cows again, eat supper and then go to town and stay past midnight at a meeting of the school board.” God needs “somebody willing to sit up all night with a newborn colt. And watch it die. Then dry his eyes and say, ‘Maybe next year.’” God needs “somebody strong enough to clear trees and heave bails, yet gentle enough to yean lambs and wean pigs and tend the pink-combed pullets, who will stop his mower for an hour to splint the broken leg of a meadow lark.” In other words, God needs a farmer.

Part denim psalm, part Whitmanesque catalogue, it’s a quintessential piece of Americana — hokey and humbling like a Norman Rockwell painting, and a bit behind the times (of course, the archetypal farmer is male). And when Kelley’s team played the crackling audio over the speakers in a conference room in Quincy, Illinois, something completely unexpected happened. Something that convinced Kelley that his client’s stores had an emotional core after all, one strong enough to provide the thematic backbone for a new approach to the grocery store.

Rich Niemann, the jaded supermarket elder statesman, broke down and wept.

🛒 🛒 🛒

I have never been a fan of shopping. Spending money stresses me out. I worry too much to enjoy it. So I wanted to see if a Kelley store could really be what he said it was, a meaningful experience, or if it would just feel fake and hokey. You know, like the movies. When I asked if there was one store I could visit to see his full design principles in action, he told me to go to Harvest, “the most interesting store in America.”

Champaign is two hours south of O’Hare by car. Crossing its vast landscape of unrelenting farmland, you appreciate the sheer scale of Illinois, how far the state’s lower half is from Chicago. It’s a college town, which comes with the usual trappings — progressive politics, cafes and bars, young people lugging backpacks with their earbuds in — but you forget that fast outside the city limits. In 2016, some townships in Champaign county voted for Donald Trump over Hillary Clinton by 50 points.

I was greeted in the parking lot by Gerry Kettler, Niemann Foods’ director of consumer affairs. Vintage John Deere tractors formed a caravan outside the store. The shopping cart vestibules were adorned with images of huge combines roving across fields of commodity crops. Outside the wide-mouthed entryway, local produce waited in picket-fence crates — in-season tomatoes from Johnstonville, sweet onions from Warrensburg.

And then we stepped inside.

Lawrence Anderson (lower right) and Joe Fassler

Everywhere, sunlight poured in through the tall, glass facade, illuminating a sequence of discrete, airy, and largely aisle-less zones. Kettler bounded around the store, pointing out displays with surprised joy on his face, as if he couldn’t believe his luck. The flowers by the door come from local growers like Delight Flower Farm and Illinois Willows. “Can’t keep this shit in stock,” he said. He makes me hold an enormous jackfruit to admire its heft. The produce was beautiful, he was right, with more local options than I’ve ever seen in a grocery store. The Warrensville sweet corn is eye-poppingly cheap: two bucks a dozen. There were purple broccolini and clamshells filled with squash blossoms, a delicacy so temperamental that they’re rarely sold outside of farmers’ markets. Early on, they had to explain to some teenage cashiers what they were — they’d never seen squash blossoms before.

I started to sense the “realm” Harvest inhabits: a distinctly red-state brand of America, local food for fans of faith and the free market. It’s hunting gear. It’s Chevys. It’s people for whom commercial-scale pig barns bring back memories of home. Everywhere, Shook Kelley signage — a hierarchy of cues like what Kelley dreamed up for Whole Foods — drives the message home. A large, evocative sign on the far wall reads Pure Farm Flavor, buttressed by the silhouettes of livestock, so large it almost feels subliminal. Folksy slogans hang on the walls, sayings like FULL OF THE MILK OF HUMAN KINDNESS and THE CREAM ALWAYS RISES TO THE TOP.

Then there are the informational placards that point out suppliers and methods.

There are at least a half dozen varieties of small-batch honey; you can find pastured eggs for $3.69. The liquor section includes local selections, like whiskey distilled in DeKalb and a display with cutting boards made from local wood by Niemann Foods’ HR Manager. “Turns out we had some talent in our backyard,” Kettler said. Niemann’s willingness to look right under his nose, sidestepping middlemen distributors to offer reasonably priced, local goods, is a hallmark of Harvest Market.

That shortened chain of custody is only possible because of Niemann and the lifetime of supply-side know-how he brings to table. But finding ways to offer better, more affordable food has been a long-term goal of Kelley — who strained his relationship with Whole Foods CEO John Mackey over the issue. As obsessed as Kelley is with appearances, he insists to me that his work must be grounded in something “real”: that grocery stores only succeed when they really try to make the world a better place through food. In his view, Whole Foods wasn’t doing enough to address its notoriously high prices — opening itself up to be undercut by cheaper competition, and missing a kind of ethical opportunity to make better food available to more people.

“When,” Kelley remembers asking, “did you start to mistake opulence for success?”

In Kelley’s telling, demand slackened so much during the Great Recession that it nearly lead to Whole Foods’ downfall, a financial setback that the company never fully recovered from — and, one could argue, ultimately led to its acquisition. Harvest Market, for its part, has none of Whole Foods’ clean-label sanctimony. It takes an “all-of-the-above” approach: There’s local produce, but there’re also Oreos and Doritos and Coca-Cola; at Thanksgiving, you can buy a pastured turkey from Triple S Farms or a 20-pound Butterball. But that strong emphasis on making local food more accessible and affordable makes it an interesting counterpart to Kelley’s former client.

The most Willy Wonka–esque touch is the hulking piece of dairy processing equipment in a glass room by the cheese case. It’s a commercial-scale butter churner — the first one ever, Kettler told me, to grace the inside of a grocery store.

“So this was a Shook Kelley idea,” he said, “We said yes, without knowing how much it would cost. And the costs just kept accelerating. But we’re thrilled. People love it.”Harvest Market isn’t just a grocery store — it’s also a federally inspected dairy plant. The store buys sweet cream from a local dairy, which it churns into house-made butter, available for purchase by the brick and used throughout Harvest’s bakery and restaurant. The butter sells out as fast as they can make it. Unlike the grocers who objected to “Mom’s Kitchen,” the staff don’t seem to mind.

Harvest Market's in-store butter churner—the first of its kindJoe Fassler

Harvest Market’s in-store butter churner—the first of its kind

As I walked through the store, I couldn’t help wondering how impressed I really was. I found Harvest to be a beautiful example of a grocery store, no doubt, and a very unusual one. What was it that made me want to encounter something more outrageous, more radical, more theatrical and bizarre? I wanted animatronic puppets. I wanted fog machines.

I should have known better — Kelley had warned me that you can’t take the theater of retail too far without breaking the dream. He’d told me that he admires stores where “you’re just not even aware of the wonder of the scene, you’re just totally engrossed in it” — stores a universe away from the overwrought, hokey feel of Disneyland. But I had Amazon’s new stores in the back up my mind as a counterpoint, with all their cashierless bells and whistles, their ability to click and collect, their ability to test-drive Alexa and play a song or switch on a fan. I guess, deep down, I was wondering if something this subtle really could work.

“Here, this is Rich Niemann,” Kettler said, and I found myself face-to-face with Niemann himself. We shook hands and he asked if I’d ever been to Illinois before. Many times, I told him. My wife is from Chicago, so we’ve visited the city often.

He grinned at me.

“That’s not Illinois,” he said.

We walked to Harvest’s restaurant, a 40-person seating area plus an adjacent bar with a row of stools, that offers standards like burgers, salads, and flatbreads. There’s an additional 80-person seating area on the second-floor mezzanine, a simulated living room complete with couches and board games. Beyond that, they pointed out the brand-new wine bar — open, like the rest of the space, until midnight. There’s a cooking classroom by the corporate offices. Through the window, I saw a classroom full of children doing something to vegetables. Adult Cooking classes run two or three nights every week, plus special events for schools and other groups.

For a summer weekday at noon in a grocery store I’m amazed how many people are eating and working on laptops. One guy has his machine hooked up to a full-sized monitor he lugged up the stairs — he’s made a customized wooden piece that hooks into Harvest’s wrought-iron support beams to create a platform for his plus-size screen. He comes every day, like it’s his office. He’s a dwell-time dream.

We sit down, and Kettler insists I eat the corn first, slathering it with the house-made butter and eating it while it’s hot. He reminds me that it’s grown by the Maddoxes, a family in Warrensburg, about 50 miles west of Champaign.

The corn was good, but I wanted to ask Niemann if the grocery industry was really that bad, and he told me it is. I assume he’ll want to talk about Amazon and its acquisition of Whole Foods and the way e-commerce has changed the game. He acknowledges that, but to my surprise he said the biggest factor is something else entirely — a massive shift happening in the world of consumer packaged goods, or CPGs.

For years, grocery stores never had to advertise, because the largest companies in the world — Proctor and Gamble, Coca-Cola, Nestle — did their advertising for them, just the way Nabisco helped finance “Mom’s Kitchen” to benefit the stores. People came to supermarkets to buy the foods they saw on TV. But Americans are falling out of love with legacy brands. They’re looking for something different, locality, a sense of novelty and adventure. Kellogg’s and General Mills don’t have the pull they once had.

When their sales flag, grocery sales do too — and the once-bulletproof alliance between food brands and supermarkets is splitting. For the past two years, the Grocery Manufacturers’ Association, an influential trade group representing the biggest food companies in the world, started to lose members. It began with Campbell’s Soup. Dean Foods, Mars, Tyson Foods, Unilever, Hershey Company, the Kraft Heinz Company, and others followed. That profound betrayal was a rude awakening: CPG companies don’t need grocery stores. They have Amazon. They can sell directly through their websites. They can launch their own pop-ups.

It’s only then that I realized how dire the predicament of grocery stores really is, and why Niemann was so frustrated when he first called Kevin Kelley. It’s one thing when you can’t sell as cheaply and conveniently as your competitors. But it’s another thing when no one wants what you’re selling.

Harvest doesn’t feel obviously futuristic in the way an Amazon store might. If I went there as a regular shopper and not as a journalist sniffing around for a story, I’m sure I’d find it to be a lovely and transporting way to buy food. But what’s going on behind the scenes is, frankly, unheard of.

Grocery stores have two ironclad rules. First, that grocers set the prices, and farmers do what they can within those mandates. And second, that everyone works with distributors who oversee the aggregation and transport of all goods. Harvest has traditional relationships with companies like Coca-Cola, but it breaks those rules with local farmers and foodmakers. Suppliers — from the locally milled wheat to the local produce to the Kilgus Farms sweet cream that goes into the churner — truck their products right to the back. By avoiding middlemen and their surcharges, Harvest is able to pay suppliers more directly and charge customers less. And it keeps costs low. You can still find $4.29 pints of Halo Top ice cream in the freezer, but the produce section features stunning bargains. When the Maddox family pulls up with its latest shipment of corn, people sometimes start buying it off the back of the truck in the parking lot. That’s massive change, and it’s virtually unheard of in supermarkets. At the same time, suppliers get to set their own prices. Niemann’s suppliers tell him what they need to charge; Niemann adds a standard margin and lets customers decide if they’re willing to pay.

If there’s a reason Harvest matters, it’s only partly because of the aesthetics. It’s mainly because the model of what a grocery store is has been tossed out and rebuilt. And why not? The world as Rich Niemann knows it is ending.

In 2017, just months after Harvest Market’s opening, Niemann won the Thomas K. Zaucha Entrepreneurial Excellence Award — the National Grocers Association’s top honor, given for “persistence, vision, and creative entrepreneurship.” That spring, Harvest was spotlighted in a “Store of the Month” cover feature in the influential trade magazine Progressive Grocer. Characteristically, the contributions of Kelley and his firm were not mentioned in the piece.

Niemann tells me his company is currently planning to open a second Harvest Market in Springfield, Illinois, about 90 minutes west of Champaign, in 2020. Without sharing specifics about profitability or sales numbers, he says the store was everything he’d hoped it would be as far as the metrics that most matter — year-over-year sales growth and customer engagement. His only complaint about the store, has to do with parking. For years, Niemann has relied on the same golden ratio to determine the size of parking lot needed for his stores — a certain number of spots for every thousand dollars of expected sales. Harvest’s lot uses the same logic, and it’s nowhere near enough space.

“In any grocery store, the customer’s first objective is pantry fill — to take care of my needs as best I can on my budget,” Niemann says. “But we created a different atmosphere. These customers want to talk. They want to know. They want to experience. They want to taste. They’re there because it’s an adventure.”

They stay so much longer than expected that the parking lot sometimes struggles to fit all their cars at once. Unlike the Amazon stores that may soon be cropping up in a neighborhood near you — reportedly, the company is considering plans to open 3,000 of them in by 2021 — it’s not about getting in and out quickly without interacting with another human being. At Harvest, you stay awhile. And that’s the point.

Americans are falling out of love with legacy brands. They’re looking for something different, locality, a sense of novelty and adventure.

So far, Harvest’s success hasn’t made it any easier for Kelley, who still struggles to persuade clients to make fundamental changes. They’re still as scared as they’ve always been, clinging to the same old ideas. He tells them that, above all else, they need to develop a food philosophy — a reason why they do this in the first place, something that goes beyond mere nostalgia or the need to make money. They need to build something that means something, a store people return to not just to complete a task but because it somehow sustains them. For some, that’s too tall an order. “They go, ‘I’m not going to do that.’ I’m like, ‘Then what are you going to do?’ And they literally tell me: ‘I’m going to retire.’” It’s easier to cash out. Pass the buck, and consign the fate of the world to younger people with bolder dreams.

Does it even matter? The world existed before supermarkets, and it won’t end if they vanish. And in the ongoing story of American food, the 20th-century grocery store is no great hero. A&P — the once titanic chain, now itself defunct — was a great mechanizer, undercutting the countless smaller, local businesses that used to populate the landscape. More generally, the supermarket made it easier for Americans to distance ourselves from what we eat, shrouding food production behind a veil and letting us convince ourselves that price and convenience matter above all else. We let ourselves be satisfied with the appearance of abundance — even if great stacks of unblemished fruit contribute to waste and spoilage, even if the array of brightly colored packages are all owned by the same handful of multinational corporations.

But whatever springs up to replace grocery stores will have consequences, too, and the truth is that brick-and-mortar is not going away any time soon — far from it. Instead, the most powerful retailers in the world have realized that physical spaces have advantages they want to capitalize on. It’s not just that stores in residential neighborhoods work well as distribution depots, ones that help facilitate the home delivery of packages. And it’s not just that we can’t always be home to pick up the shipments we ordered when they arrive, so stores remain useful. The world’s biggest brands are now beginning to realize what Kelley has long argued: Physical stores are a way to capture attention, to subject customers to an experience, to influence the way they feel and think. What could be more useful? And what are Amazon’s proposed cashierless stores, but an illustration of Kelley’s argument? They take a brand thesis, a set of core values — that shopping should be quick and easy and highly mechanized — and seduce us with it, letting us feel the sweep and power of that vision as we pass with our goods through the doors without paying, flushed with the thrill a thief feels.

This is where new troubles start. Only a few companies in the world will be able to compete at Amazon’s scale — the scale where building 3,000 futuristic convenience stores in three years may be a realistic proposition. Unlike in the golden age of grocery, where different family-owned chains catered to different demographics, we’ll have only a handful of players. We’ll have companies that own the whole value chain, low to high. Amazon owns the e-commerce site where you can find almost anything in the world for the cheapest price. And for when you want to feel the heft of an heirloom tomato in your hand or sample some manchego before buying, there is Whole Foods. Online retail for thrift, in-person shopping for pleasure. Except one massive company now owns them both.

Whatever new models spring up to replace grocery stores will have their unintended consequences, too.

If this new landscape comes to dominate, we may find there are things we miss about the past. For all its problems, the grocery industry is at least decentralized, owned by no one dominant company and carved up into more players than you could ever count. It’s run by people who often live alongside the communities they serve and share their concerns. We might miss that competition, that community. They are small. They are nimble. They are independently, sometimes even cooperatively, owned. They employ people. And if they are scrappy, and ingenious, and willing to change, there’s no telling what they might do. It is not impossible that they could use their assets — financial resources, industry connections, prime real estate — to find new ways to supply what we all want most: to be happier, to be healthier, to feel more connected. To be better people. To do the right thing.

I want to believe that, anyway. That stores — at least in theory — could be about something bigger, and better than mere commerce. The way Harvest seems to want to be, with some success. But I wonder if that’s just a fantasy, too: the dream that we can buy and sell our way to a better world, that it will take no more than that.

Which one is right?

I guess it depends on how you feel about the movies.

Maybe a film is just a diversion, a way to feel briefly better about our lives, the limitations and disappointments that define us, the things we cannot change. Most of us leave the theater, after all, and just go on being ourselves.

Still, maybe something else is possible. Maybe in the moment when the music swells, and our hearts beat faster, and we feel overcome by the beauty of an image — in the instant that we feel newly brave and noble, and ready to be different, braver versions of ourselves — that we are who we really are.

Source: New Food Economy

How Albertsons tackled digital transformation to boost customer experience

When it comes to utilizing digital tools to improve the customer experience, even the biggest and most progressive retail organizations have challenges.

That much was evident at the recent Adobe Summit in Las Vegas, as several leading retailers described challenges they’ve faced as well as the progress they’ve made.

Albertsons Companies, one of the nation’s largest food retailers, was doing e-commerce and grocery delivery in the 1990s, but the company did not modernize and keep up with the times as much as they should have as technological evolved, said Paul Johnson, the company’s senior director of platform product management, during a panel talk.

In 2018, Albertsons focused on unifying the digital experience and expanding e-commerce and loyalty, and having foundational tools such as search, chat and recommendation, Johnson recalled.

In 2019, it plans to make seamless shopping a reality, expanding and enhancing marketing and focusing on the customer promise and will consider new business models.

Albertsons confronted a host of technology issues related to digital transformation to improve the customer experience, shared Johnson, as there were 21 different web experiences, search crashed once a month, there was no common CMS platform, APIs were limited and the tech stack was complex.

Data quality issues

On the data side, the company lacked a way to target and experiment, he said, as data was not trustworthy for pre and post analysis, and there was no instrumentation for technical data.

“If we couldn’t get the data, or couldn’t trust the data, we certainly couldn’t do things like experimentation and target,” Johnson said.

“Digital for us means digital across all the different ways a shopper wants to shop,” he said. This includes loyalty, coupons and offers, delivery, drive up and go, and order ahead, encompassing 21 different web experiences and 42 mobile apps for all the different Albertsons’ supermarket brands.

Rebuilding teams

Over the past year and a half, the grocer has been rebuilding teams that focus on customer experience. There used to be monolithic engineering teams and project teams focused on disparate parts of the customer experience. It went and built 15 product teams to focus on specific customer problems.

It unified the design language to unify the design across all the brands, he said, and also integrated loyalty with e-commerce.

“If we tried to tackle all of this at once, we certainly wouldn’t be on the stage right now talking to you,” he said. “Bite size releases were key to unifying the experience over time.”

Source: Retail Customer Experience

Millennials Tried to Kill the American Mall, But Gen Z Might Save It

Gen Z keeps confounding Corporate America.

They’ve shunned beer, they want companies to take political stands and they trust Kardashians to make their makeup choices. But perhaps the biggest surprise about this new cohort of teenagers is the most unexpected of all: They love the shopping mall.

Around 95 percent of them visited a physical shopping center in a three-month period in 2018, as opposed to just 75 percent of millennials and 58 percent of Gen X, according to an International Council of Shopping Centers study. And they genuinely like it; three-quarters of them said going to a brick-and-mortar store was a better experience than online, ICSC found.

“There’s always been this assumption that as you go through the age spectrum, the younger consumer that has grown up with online and digital and is very savvy would shun physical experiences,” said Neil Saunders, an analyst at GlobalData Retail. “But actually that’s not turned out to be the case.”

Gen Z—or the group of kids, teens and young adults roughly between the ages of 7 and 22—still appreciate brick and mortar. But they aren’t just millennials living in a different time. Today’s teens interact differently with stores than their older siblings and Gen X parents before them, and several retailers who didn’t understand the fundamental differences in how they shop landed themselves in bankruptcy court: Think Charlotte Russe, Wet Seal and Claire’s, once staples of the teen mall circuit.

Failure to adapt to changing trends and stay relevant can crush a business, with regional mall vacancy rates at 9.3 percent in the U.S. But get it right, and savvy apparel companies could capture some of the generation’s expected spending power of about $143 billion in the U.S. alone. Here’s a look at some of the ways retailers are keeping up:

1. They Don’t Fight the iPhone

Gen Z spends a lot of time on their smartphones—and they know it: Nearly six out of 10 self-diagnose overuse, according to a recent survey by Bloomberg and Morning Consult. For companies that embrace that, instead of fight it, the payoff can be huge.

Forever 21, consistently ranked among American teenagers’ top brands, rewards phone-in-hand shopping by offering customers 21 percent off if they snap a picture of themselves in a Forever 21 outfit and post it with designated hashtags—then show the cashier at the register. And they do it: On Instagram, the #F21PROMO has been used about 20,000 times, mostly by teenage girls striking a range of poses from sitting on a bench with a Starbucks drink in hand to throwing up peace signs. One poster on Twitter, who hid her face with her baseball cap, wrote “my mom is making me do this for 21% off.”

Tech companies are responding as well. RetailMeNot, a digital coupon provider, is able to send push notifications to shoppers when they’re in a mall to alert them to potential discounts. A recent survey from the startup found that an overwhelming 91 percent of Gen Z shoppers are searching for deals on their mobile phones while inside retail locations.

Nimble retailers are making their stores more Instagram-worthy in a bid to appeal to this connected crowd. About a third of Gen Z consumers say shopping should also be entertaining, according to data from Cassandra, a cultural insights and strategy agency. With these Gen Z shoppers in mind, old-guard department store Macy’s Inc. earlier this month rolled out in 36 of its locations “Story,” a colorful themed shop-in-shop. In its behemoth Herald Square store, the 7,500-square-foot space is brightly painted with primary colors, a pillar completely made of Crayola crayons, a pingpong table and a rainbow tunnel.

Story is filled with knickknacks like hot dog-shaped pet toys, purses that charge phones and self-help books on how to cure hangovers, which Macy’s Chief Executive Officer Jeff Gennette describes as items “nobody needs’’ but are “going to want’’ once they walk through the spot. Every two months, the space undergoes a complete overhaul and introduces a new theme. That means repainting walls, installing new carpets and designing new opportunities to post on Instagram. It’s a neck-breaking pace for retail.

“You just don’t have the same predictability that you have in some of the department store square footage,’’ Gennette said in an interview at the flagship store. “You can always show up and find something different.’’

2. They Let Them Customize It

Gennette’s onto something: Different is the name-of-the-game for these young adults. Nearly half of Gen Z shoppers want products tailor-made to their tastes and interests, according to a 2018 report from IBM and the National Retail Federation. To be sure, previous generations personalized their apparel and accessories in ways they wanted, like adding patches and buttons. The difference for this generation is that retailers have more technology already in place to acquiesce to their requests right from the start.

“In the past, it has been a little more cookie-cutter,” says Marcie Merriman, an EY consultant who specializes in the Gen Z consumer. Now for today’s teens, “their mind just goes to a very different place because of their expectation that anything is possible.’’

In some American Eagle Outfitters Inc. stores, shoppers can take their jeans to a counter and get them embossed, attach back patches and add paint. Champion, the activewear company owned by Hanesbrands Inc., trained store associates to heat-press and embroider its iconic “C’’ logo and brand name anywhere consumers want on their sweatshirts and hoodies upon request. Levi Strauss & Co. put tailor shops in most of its mainline stores to entice consumers to add monogram stitching to the brand’s trucker jackets and iconic jeans—which CEO Chip Bergh admits weren’t popular with millennials, including his own sons, but are having a comeback.

Tiffany & Co.—a go-to jeweler for rite-of-passage gifts like Sweet 16 celebrations, proms and graduations—is not just engraving initials into pieces of silver bracelets and necklaces anymore. Last year, it heavily invested in its “Make It My Tiffany” program in a bid to reel in this generation of shoppers. “You can have your bracelet, ring or piece of jewelry personalized,’’ CEO Alessandro Bogliolo said. His 14-year-old daughter, for example, has a piece of jewelry with her pet on it.

3. They Don’t Think Secondhand Clothing Is Second-Rate

Gen Z, just coming into its spending power, is looking for a good deal. Bonus points if the product is also sustainable. That group is turning to reused clothing at the quickest pace, according to Thredup’s 2019 Resale Report, with one in three Gen Z shoppers expected to buy secondhand this year.

That has some unlikely players getting into the mix. High-end department store Neiman Marcus just made an unexpected move: buying a minority stake in Fashionphile, an e-commerce company focused on pre-owned luxury handbags and accessories. While the used luxury products will still be sold on Fashionphile’s website, in the next year Neiman will open about five to seven in-store showrooms for customers to receive a quote on the used items they want to sell. Down the line, Neiman hopes its involvement in the reused market could convert young shoppers interested in used items to loyal new-product customers, CEO Geoffroy Van Raemdonck said in an interview.

“The customer who participates in buying secondhand products are younger,’’ he said. “That’s usually their first time of entering the luxury market, and we aim to introduce them to Neiman Marcus—and ultimately to transition them to buying products of the season at Neiman Marcus. It’s clearly a recruitment effort.’’

Saunders, the analyst at GlobalData Retail, said more companies need to start thinking outside the box to attract this important demographic.

“The more traditional retailers haven’t really thought about this particular generation as an attractive target. They haven’t really thought about what this group wants out of a shopping experience,” he said. “I think that’s starting to change now.” —With Tiffany Kary, Lily Katz, and Kim Bhasin

Source: Bloomberg Businessweek

Regional grocery chains are in fight-or-flight mode

The Publix Super Market in southeast Orlando is, at first glance, a standard American grocery store. It’s a well-lit space with a pharmacy, a fresh produce section and more than a dozen aisles lined with neatly stocked shelves of cereals, beverages and canned goods, among other grocery cart items.

But along the periphery of the store you see something a little different: An employee is standing behind a sandwich station, preparing a made-to-order hot sub for a customer. Another is adjusting the price sign at a nearby prepared foods section featuring hot wings, potato wedges and gouda mac and cheese.

“You can taste anything you want to taste. You can have a slice of anything,” said Publix media and community relations manager, Dwaine Stevens, while taking me on a tour of this location one weekday morning.

He pointed to the bakery section, where workers wheeled carts of dough and icing, preparing to decorate cakes. At another Publix location a short drive away, store employees were packaging hand-rolled sushi. We could watch the food being made or, if we wanted to, place an order online.

Across the country, regional grocers, like Publix, are introducing tailored options to distinguish themselves. It’s part of their survival strategy, as price-driven national and international players vie for a larger piece of grocery industry market share. Walmart is now the country’s biggest grocer. Amazon, which owns Whole Foods, is reportedly planning to open dozens of new, separate grocery stores. European discount supermarkets, like Aldi and Lidl, are also expanding in U.S. cities.

Many regional grocers are struggling. The parent company of Winn Dixie, which operates about 500 stores across the south, filed for bankruptcy last year and closed dozens of locations. The company announced in March that it will be closing seven more Winn Dixie stores this year. Still, customers like Jim Milam in Orlando continue to shop at Winn Dixie. Milam, who is in his 80s, lives on a fixed income and gets enough money from his monthly social security check to spend about $80 on groceries every month. Milam is always on the prowl for a deal, and also frequents Walmart and Family Dollar.

But he finds himself buying food from his neighborhood Winn Dixie a couple of times a month, as he’s done for the past 50 years.

“I only live, you know, six blocks away,” he said. “If you get into Walmart, it takes you almost an hour to get out. People go in there and they have two carts. It’s a good place for price, but not for shopping.”

Convenience and innovation were the key reasons regional supermarkets once dominated the American grocery market. These stores brought together, in one place, the products and services that consumers used to have to go different places to buy. Piggly Wiggly, one of the first modern supermarkets, which opened in Memphis in 1916, pioneered a self-service shopping model.

Before then, the shopping experience was different.

“You had to go to the counter and talk to a clerk and they would pull your products for you. You couldn’t really like go and touch and feel what you were gonna buy,” said historian Benjamin Davison.

By the 1950s, grocery chains were hitting their stride. They offered amenities, like parking, and their purchasing power meant lower prices. Today, convenience isn’t enough, so regional grocers have to specialize.

Publix, which owns more than 1,200 stores in the South, seems to be successfully navigating choppy waters. It posted higher sales in 2018 and just paid a dividend to its shareholders. The store offers online grocery delivery through Instacart. Store associates help customers carry groceries to their cars, too.

Dwaine Stevens, who has been with the company for 40 years, said adapting store offerings to community needs has been another part of the Publix approach.

“We have different versions of our stores with different sizes. It’s not a cookie cutter approach that we take,” he said.

Wegmans, another regional grocer, offers in-store cooking classes and recipe cards, inside the store and online. Hy-Vee, in the Midwest, has hosted fondue nights and brought in dietitians to speak to customers.

“The winners are really building deeper customer relationships creating physical in-store experiences that can’t be digitized,” said Randy Burt, partner at the consulting firm AT Kearney. “You see a really strong focus on the customer, you see a focus on the shopping experience a lot of which is interaction with store associates and you see a focus on really innovating the food offering.”

Big regional chains are also trying to find new niches. Publix is piloting a store in Tallahassee and other locations called Greenwise, which sells organic foods. Winn Dixie has started retooling some of its locations as Fresco Y Mas stores to better serve Latino shoppers.

Source: MarketPlace.org

America’s Biggest Supermarket Company Struggles With Online Grocery Upheaval

Nobody can say Rodney McMullen doesn’t know the grocery business. He started as a bagger at Kroger Co. when he was in college, rising through the ranks to become chief financial officer, then chief executive officer, of America’s biggest supermarket chain.

But can he lead the 2,764-store Cincinnati-based company through the changes upending the supermarket industry?

“You are in Cincinnati. You are a conservative bunch of people,” said Bill Smead, chief executive of Smead Capital Management and a Kroger investor. “Does anyone’s blood pulse through their veins with an entrepreneurial bent?”

Not since Walmart Inc. first pushed into groceries in the late 1980s have traditional chains faced so many challenges. E-commerce is transforming the business, forcing cash-strapped companies to overhaul their operations and invest heavily in technology and talent to keep customers from straying to Amazon.com Inc. At the same time, they have to keep food prices as low as consumers have come to expect.

Kroger CEO Rodney McMullen says he believes the company has devised a plan to help it grow again. PHOTO: SANGSUK SYLVIA KANG/THE WALL STREET JOURNAL

The transition has proven rough for Kroger, which stayed focused on store sales long after mass-merchant competitors were investing in online-ordering technology and delivery services. Executives have debated which investments to make and how drastically to change the company’s business model. Some would-be technology partners have been turned off by what they see as the grocer’s conservative culture—including members of one group who stormed out of a meeting in protest.

Mr. McMullen knows it is a pivotal moment for the company and that investors are concerned. “We’ve got to get our butts in gear,” he said in an interview. “There was no doubt we were behind.” He said he believes Kroger executives have devised a plan to help it grow again.

Few American retailers have managed the online transition smoothly.Target Corp. and Walmart struggled before improving stores and e-commerce operations. Sears Holdings Corp. filed for bankruptcy protection in October. Toys “R” Us was liquidated in March 2018.

Online ordering and delivery has been around in the U.S. grocery business for decades, but it hasn’t caught on as rapidly as it has in other sectors. Many U.S. shoppers live close to supermarkets and prefer to select food from the aisles. That is changing as more young people form families and older people get more comfortable ordering online. One option proving especially popular is for consumers to order groceries online for pickup in a store’s parking lot.

Online purchases account for just 5% of the roughly $1 trillion U.S. food and consumer-product market, according to Nielsen. Yet online sales are growing 40% annually, while in-store sales have been flat for years.

“It’s like driving on the autobahn,” Mr. McMullen told investors last fall. “It’s incredibly exciting. But there’s a lot going on, and it’s going on fast.”

Years ago Walmart became the largest food seller in the U.S., while Kroger remains the biggest supermarket chain by stores and sales. Walmart boosted its delivery business with its 2016 purchase of Jet.com, bringing on Jet executives to accelerate online grocery sales. Target bought Shipt Inc., another grocery delivery service, in 2017. And Amazon broadened its reach into the grocery business by buying Whole Foods in 2017, although it, too, has struggled with online delivery of groceries.

Online Era

To catch up, Kroger has budgeted $4 billion for investments, including warehouses managed by robots, a meal-kit company and digitally enabled shelves that market products to customers through LED displays. Last year, it formed a partnership with an autonomous-vehicle startup, Nuro Inc., and started selling its line of natural and organic products on Alibaba Group Holding Ltd.’s Tmall site in China.

Those investments are denting its profits at a time of intense competition to sell groceries cheaply. Its shares are down 17% since June 2017, when Amazon said it would buy Whole Foods, and have dropped after five of Kroger’s eight latest quarterly earnings reports.

Sapphire Star Capital, an investment fund, sold a $350,000 stake in Kroger in September. “We just had to cut them loose,” said Michael Borgen, the fund’s chief executive. “They just got too volatile.”

Kroger has invested in Ocado Group to build a network of automated warehouses for online retail akin to this Ocado facility in the U.K. PHOTO: PETER NICHOLLS/REUTERS

John San Marco, a research analyst at Neuberger Berman, an investment-management firm that owns Kroger stock, said the company is doing the right thing by investing in online operations, even if it dents profitability in the near term. “Kroger is in the very early innings of a business transformation,” he said. “This isn’t a one and done.”

Mr. McMullen, who became CEO in 2014, has acknowledged that Kroger was slow to invest online. He said many competitors also avoided investing in online operations until recently. On Kroger’s latest earnings call in March, he sought to reassure investors that Kroger’s investments will pay off. “You have to start somewhere, and you have to learn,” he said.

Kroger has a record of dabbling in digital projects without committing to more significant changes to its business, current and former employees say.

In 2000, when Mr. McMullen was CFO, Kroger canceled a pilot delivery program in Columbus, Ohio, because of low demand. Another pilot has been running at Kroger’s King Soopers chain in Denver for two decades without expanding to additional parts of the country.

Another such effort began about seven years ago when executives were told that Amazon had surpassed Kroger as a top seller of Procter & Gamble Co.’s diapers.

At the time, Kroger’s digital-operations staff fit into a small room at its Cincinnati headquarters. They started meeting every Friday at 7 a.m. to discuss ways to improve Kroger’s digital efforts. The operation soon expanded.

Kroger didn’t have the infrastructure to ship goods to customers. Building warehouses and wooing tech talent to build an online-grocery portal would have cost hundreds of millions of dollars, employees say.

Kroger is experimenting with using autonomous vehicles to deliver groceries. PHOTO: KROGER/ASSOCIATED PRESS

Kroger managers remained focused on their stores, where sales determine their compensation and chances for advancement. Some believed boosting online sales would create extra work and distract the company from maximizing store revenues, former executives said.

“Most of us, when we say the digital world, automatically conclude that e-commerce is where everything is going,” then-CEO David Dillon told investors in 2013. “I don’t draw that same conclusion.” Reaching customers digitally also included things like online coupons and social media, he said.

Amazon continued to siphon diaper sales from Kroger and other retailers, notching roughly $500 million in diaper sales last year, according to estimates by market research firm Edge by Ascential.

Grocery Aisle

Kroger turned to acquisitions to boost its digital reach. It bought Vitacost.com, an online retailer of natural foods and supplements, for $280 million in 2014. But Kroger was slow to integrate Vitacost’s technology into its operations. That frustrated Vitacost’s founders and Kroger employees who had brokered the deal, according to people from both companies.

A meeting at Vitacost’s Boca Raton, Fla., headquarters soon after the deal closed underscored the divide. Vitacost employees suggested emailing promotions to customers so that discounts could be tweaked more often than through the paper circulars that Kroger planned months in advance.

Kroger executives balked, with one marketing head saying that Vitacost was a rounding error in the company’s overall balance sheet and it wouldn’t just change its promotional plans, according to people from both companies. Some Vitacost executives walked out in protest.

Kroger was slow to add a link to Vitacost on its website or place signs in its stores promoting Vitacost. Officials from the two operations clashed over whether to let Vitacost accept Apple Pay or PayPal, the people said. Vitacost’s revenue grew less than that company had expected. Engineers and executives left the company. Other Vitacost executives have remained at Kroger and helped on various technology initiatives.

Although Walmart is the largest food seller in the U.S., Kroger remains the biggest supermarket chain by stores and sales. PHOTO: ERIK S. LESSER/EPA/SHUTTERSTOCK

Some at Kroger acknowledge more could have been done to make its Vitacost investment pay off. “Some look at us and argue we haven’t done much with Vitacost,” said Michael Schlotman, who stepped down as chief financial officer this month and will retire at the end of the year. “It’s a fair assessment.”

Kroger now accepts PayPal on Vitacost but not its other e-commerce sites. It uses Vitacost’s technology for a ship-to-home grocery service that made its debut last year. Executives hope the service will win back business from Amazon’s subscription service for staple goods.

“It’s just starting to get legs,” Mr. McMullen said.

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Kroger recently tried to partner with, invest in or acquire three different startups: Shipt, the online grocery delivery service; meal-kit company Plated; and Boxed.com, a bulk online retailer, according to people familiar with those efforts. None panned out.

Target bought Shipt in December 2017. National grocery chain Albertsons Cos. purchased Plated in 2017 for more than Kroger offered, according to people familiar with the negotiations. Boxed executives and investors balked over terms offered by Kroger in negotiations, talks stalled and Kroger never made a formal offer.

“They aren’t willing to pay enough to buy technical talent,” said one person involved in negotiations between Kroger and those startups.

Amazon broadened its reach into the grocery business by buying Whole Foods in 2017. PHOTO: JOHN MINCHILLO/ASSOCIATED PRESS

Yael Cosset, Kroger’s chief digital officer, declined to comment on any negotiations. He said the company tends to be more conservative in rolling out tech pilots that directly affect customers in stores, but has moved faster behind the scenes on other efforts.

Kroger officials say the company is now working with Microsoft Corp. ,Oracle Corp. , IBM Corp. and other tech companies, and is spreading the word about Kroger to potential tech startup partners at the Cincinnati-based Cintrifuse startup investment fund.

“Kroger has been very bold in their vision,” said Luke Jensen, chief executive of Ocado Solutions, a division of U.K.-based automated-grocery company Ocado Group PLC that Kroger has invested in to build a network of automated warehouses for online retail in the U.S. “They are learning from us, but we are learning from them.”

Kroger spent years negotiating with Instacart Inc. before Amazon’s Whole Foods purchase spurred executives to strike a deal. Instacart now makes deliveries from more than 1,600 Kroger stores.

Some suppliers give Kroger executives credit for acknowledging the challenges they face. Last year, one grocery-delivery vendor told a Kroger technology executive that despite the company’s investments in automated online warehouses, it still wasn’t getting digital orders to customers as fast as its competitors.

The executive agreed, according to a person familiar with the conversation. To figure out how to make same-day deliveries, he told the vendor, Kroger might need to make another acquisition.

As the company tries to change, some senior executives are leaving. Mr. Schlotman is retiring after more than three decades at the company. Christopher Hjelm, the chief information officer who urged fellow executives to help him turn Kroger into “a technology company that just happens to sell food,” is also departing. Matt Thompson, the digital official who devised many of Kroger’s online pickup and delivery strategies, left earlier this month. Investment banker Robert Beyer is stepping down as lead independent director in June.

A Kroger supermarket in Cincinnati in 1948. PHOTO: BETZ-MARSH STUDIO/CINCINNATI MUSEUM CENTER/GETTY IMAGES

A Kroger spokeswoman said the retirements were long planned. Mr. McMullen has recruited new officials with technology experience at the executive and board levels, she said.

Executive bonuses have declined in the past two fiscal years, reflecting Kroger’s weaker sales. Financial filings show that executives hit less than 4% of their targets for performance-based bonuses in the last fiscal year, the lowest payout in at least two decades.

Mr. Cosset, the chief digital officer who is set to succeed Mr. Hjelm as chief information officer in May, has set ambitious time lines for opening online-pickup locations and other goals. Yet he has also been careful not to drift too far from Kroger’s focus on its stores.

“The traditional brick-and-mortar customer shouldn’t feel neglected,” he said.

Source: The Wall Street Journal

Albertsons’ new CEO has a tough job on his hands

Albertsons recently announced that current CEO Jim Donald, who has been in the role for less than seven months, is stepping down and will be replaced by Vivek Sankaran, who formerly served as CEO of PepsiCo Foods North America. Sankaran will officially become CEO and president of the Idaho-based grocer on Thursday.

Sankaran worked at PepsiCo in a variety of roles over a 10-year period culminating in being selected as PepsiCo Foods North America CEO. Before joining PepsiCo in 2009, Sankaran was a partner at McKinsey and Co. Sankaran is qualified to be the CEO and president of Albertsons. However, Sankaran is going to discover that he has a tough job on his hands positioning Albertsons for success against major competitors like Walmart, Aldi, Kroger, Ahold Delhaize and Amazon.

Albertsons’ current strategy

Albertsons, ranked number three in overall grocery market share behind Walmart and Kroger, respectively, faces a challenging future even though operational performance has increased. All of Albertsons’ competitors are investing heavily in digital and supply chain initiatives and Albertsons must do the same.

Albertsons has stepped out of its comfort zone through partnerships with Microsoft to use Azure cloud computingtechnology as the preferred platform to reduce friction in the shopping experience. Albertsons is also in the process of piloting micro-fulfillment technology through Takeoff Technologies.

Albertsons is certainly trying. However, 2018 was a tough year for the company as it failed to merge with Rite Aid — a deal that I believe it was one-sided in favor of Albertsons. I also believe merging Albertsons and Rite Aid would have generated little if any value to either company.

With the combined companies valued at $24 billion, Albertsons was convinced a merger with Rite Aid was the best strategy for the company. I believe failing to merge with Rite Aid is the best thing that could have happened to Albertsons.

Albertsons is also struggling to integrate its acquisition of the meal kit company Plated into its retail ecosystem. According to a recent report, Albertsons has removed Plated meals from stores across the country. The meals remain available online. I publicly spoke out against the deal shortly after it was announced, and had previously recommended to executives from Albertsons that they acquire either ICON Meals or Factor 75, two leaders in prepared meals. Plated is materially insignificant to Albertsons and divesting the company should be explored.

A continuing challenge for Albertsons is that its substantial debt limits the ability of the company to make acquisitions. According to the company’s January earnings report, its long-term debt stands at $10.6 billion, down from $11.7 billion at the end of February 2018. This debt amount makes it challenging for a company interested in acquiring Albertsons to generate the required ROI. Albertsons is owned and operated by the private equity firm Cerberus Capital Management.

Albertsons is faced with the reality that it must identify the optimal path forward in a hyper-competitive retail environment. Hiring Sankaran as CEO is a start, but is it enough?

What Albertsons must do now

Sankaran will be confronted with a myriad of challenges once he becomes CEO. Among the top challenges Sankaran will face is the need to identify the optimal competitive strategy for Albertsons as well as confront the company’s severe debt position. I urge Sankaran to identify Albertsons differentiating capabilities and implement a capabilities-driven strategy to maximize organic growth and surgical M&A to shape the future of the company. Sankaran will have to ensure that Albertsons continues to remodel stores while remaining committed to implementing a digital strategy. Albertsons’ online grocery sales are growing steadily but still represent a fraction of sales, while grocery industry analysts agree e-commerce market share for retailers could reach 20% by 2025. A robust digital strategy is a must-have for Albertsons. Instead of introducing a questionable strategy like Kroger’s use of Nuro to deliver groceries, Albertsons should partner with Zume or Fleat Network, two companies that I believe have exceptional disruptive potential.

Sankaran should evaluate increasing capital investment in Albertsons’ convenience store concept, Albertsons Express, which offers fresh-cut fruits and vegetables, deli sandwiches, salads and fuel. The grocery industry is migrating towards smaller store formats as these stores can be opened in areas that won’t support a traditional grocery store. Sankaran should experiment with formats, square footage, product assortment and then open the smaller format stores throughout Albertsons grocery ecosystem. This should be a priority for Sankaran.

Sankaran will be pressured to identify additional opportunities for cutting costs, which should include divesting banners and making changes to the organizational structure of the company. I strongly advise Sankaran to revisit Albertsons’ supply chain, procurement practices and logistics needs across all banners. Kroger’s partnership with Ocado reinforces the importance of Albertsons automating its supply chain and leveraging micro-fulfillment technology from CommonSense Robotics and Takeoff Technologies, the leading providers of micro-fulfillment technology.

Sankaran and his executive team are faced with the daunting task of identifying and implementing strategies that will ensure growth while protecting market share. No easy task. I believe the best course of action for Albertsons is to consider the following options:

Merge with Ahold Delhaize

A review of the map below shows that Albertsons has a significant presence in the western and central United States. An option worth exploring for Albertsons is to divest its stores in Illinois, Indiana and Ohio, as well as its stores located on the East Coast. However, a bigger strategy would be for Albertsons to explore a merger with Ahold Delhaize, which operates over 2,000 stores in 23 states. Ahold Delhaize also owns and operates the largest online grocery retailer, Peapod. Ahold Delhaize generated $44 billion in revenue from its U.S. operations in 2018. A combined Albertsons/Ahold Delhaize would create the largest standalone grocery retail chain by store count with annual revenues in excess of $100 billion.

Credit: Albertsons

Merge with Giant Eagle

With 410 stores located throughout Pennsylvania, Ohio, Virginia, West Virginia, Maryland and Indiana and revenues of $8.9 billion, the privately-held and exceptionally well-run company could prove to be a strategic asset for Albertsons. I especially like Giant Eagle’s getGo Café + Market concept and I believe the format can be significantly scaled across Albertsons retail ecosystem. Giant Eagle’s Market District format can also be scaled.

Be acquired by Alibaba

An even bigger option for Albertsons to consider is to approach Alibaba about an acquisition. Alibaba has tried to acquire U.S.-based companies in the past. However, due to security concerns, the federal government denied Alibaba permission. Alibaba could acquire Albertsons, and doing so would raise no security concerns because Alibaba would capture and manage the same customer data captured and utilized by Whole Foods, Kroger, Walmart and other retailers. I had discussions with Alibaba executives in 2018 regarding an acquisition of Albertsons. The executives I spoke with stated they would support an acquisition, but they raised concerns that the U.S. would not approve the acquisition. I spoke with representatives from several U.S. government agencies about this topic in 2018 as well and each agency affirmed that they would not oppose the acquisition. In addition, I contacted members of the Trump administration and no one raised any objections about the acquisition.

Alibaba would benefit by having a significant retail presence in the U.S. with the potential to scale. Albertsons would benefit from Alibaba’s technology, logistics prowess and especially Alibaba’s Hema stores, which are among the most advanced stores in the world. A combined Albertsons/Alibaba loyalty program would generate a substantial value proposition as customers would have access to groceries and food as well as general merchandise. It is conceivable that Alibaba/Albertsons could become a competitive threat to Kroger, Amazon and even Walmart.

Albertsons is faced with a challenging future. Aldi will operate 2,500 stores by 2025 resulting in increased pricing pressure. Walmart, Kroger and Amazon continue to invest heavily in technology, opening stores and creating a superior omni-channel experience. Incremental changes aren’t enough for Albertsons. Sankaran must think big.

Source: Grocery Dive

Financial hit from Stop & Shop strike could top $100 million

The 11-day strike at Stop & Shop stores in New England could impact the supermarket chain’s operating profit by more than $100 million.

In updated financial guidance after the strike, which ended Sunday, parent company Ahold Delhaize estimated a one-off impact of $90 million to $110 million on Stop & Shop’s 2019 underlying operating profit. The total includes lower sales, increased shrink of seasonal and perishable inventory, and additional supply-chain costs.

Overall, Zaandam, Netherlands-based Ahold Delhaize now expects underlying operating margin to be slightly lower in 2019 than in 2018 following the strike. The global food retailer also lowered the percentage growth of underlying earnings per share for 2019 from high single digits to low single digits.

Ahold Delhaize said it expects its free cash flow to be unchanged, at about €1.8 billion ($2.02 billion U.S.) for full-year 2019, “due to the continued business strength of our other U.S. and European brands.” The company added that first-quarter 2019 results, to be reported May 8, won’t be affected by the strike and remain in line with expectations.

More than 31,000 workers from 246 Stop & Shop stores in Massachusetts, Connecticut and Rhode Island walked off the job on April 11 after their contract expired Feb. 23 following weeks of negotiations since January. Stop & Shop and United Food & Commercial Workers (UFCW) union locals 1445, 1459, 919, 371 and 328 continued negotiations during the strike and reached a new contract agreement Sunday evening. Employees returned to work Monday morning.

“I am pleased that Stop & Shop’s management and the five local unions have tentatively reached a fair and responsible contract in which all Stop & Shop associates are offered pay increases, eligible associates have continued excellent health coverage and eligible associates have ongoing defined benefit pension benefits,” Ahold Delhaize CEO Frans Muller said in a statement. “I know that both Stop & Shop management and its associates are proud to welcome customers back and look forward to taking care of them every day.”

Terms of the tentative three-year contract weren’t disclosed. The agreement still must be ratified by members of the five UFCW locals.

Boston-based location data specialist Skyhook estimated that Stop & Shop store visits by loyal customers plummeted 75% from April 12 to 14 compared with visits a week earlier. The estimate stems from a foot traffic analysis of anonymized mobile devices that typically visit Stop & Shop once weekly in Massachusetts, Connecticut and Rhode Island.

Skyhook’s analysis also found that many loyal Stop & Shop customers went to other supermarkets between April 12 and 14, with retailers such as Market Basket, Trader Joe’s, Shaw’s, Star Market and Hannaford (an Ahold Delhaize USA chain) seeing big gains in store visits.

The U.S. Federal Mediation & Conciliation Service (FMCS) — called into talks on April 3 following an impasse — credited Stop & Shop management and the union locals with staying focused on reaching mutually acceptable terms, including provisions on health care and retirement benefits, wage increases and Sunday overtime pay. The strike drew local and national media coverage as well as wide attention from public officials, such as former Vice President Joe Biden.

“Bargaining sessions are no easy task for anyone involved, and I’m proud to see the tenacity and efforts by the parties and FMCS’ mediators pay off with a successful outcome,” stated FMCS Director Nominee Richard Giacolone. “Being able to create a path for workers to get back on the job is great for management and labor, and certainly great for the customers eager to visit Stop & Shop for their grocery needs once again.”

Source: Supermarket News

Are you prepared to be replaced by robots? Some at Walmart soon have to be

Walmart recently said it plans to deploy robots to scan shelves, scrub floors and perform other mundane tasks in its stores as the retail giant seeks to lower labour costs.

While the retail giant did not say which jobs, if any, might be lost as a result, the announcement – and the many more surely to follow at other big box retailers – begs the question: How can workers prepare for a future of increasingly automated work?

Millions of today’s jobs are expected to be affected by artificial intelligence and automation as part of the “fourth industrial revolution.” But just which occupations are most at risk has been a guessing game among economists, futurists and scholars trying to predict winners and losers.

As experts on workers’ identities and careers and industry and technological change, we developed a new tool we believe will help workers more accurately determine the fate of their professions – and figure out how best to prepare.

WHO WILL BE HURT

A host of research studies have examined where industrial revolution 4.0 is likely to wield its greatest impact.

Driven by a focus on cost and efficiency, most predictions pit one group of workers against another. For example, blue collar versus white collar, skilled versus unskilled, college-educated versus not college-educated and even predictions by race and gender.

While these broad groupings may grab headlines, they offer little guidance to individual workers at a time when, more than ever, individuals are expected to take responsibility for managing and driving their own careers.

Rather than focus on efficiency or cost, our research offers a more nuanced and sustainable tool for examining the fate of one’s profession: Value.

WORKERS VALUE

Our research is based on the idea that every individual’s work creates value in his or her day-to-day job.

That value may be something a customer pays for, may enable co-workers to do their own jobs or help the company to function internally. In any case, every job provides some degree of worth or usefulness to another party.

The value is constant, but the way it is created and delivered to the end user can be threatened by automation and artificial intelligence (AI).

Only after we’ve evaluated that can we determine how the coming wave of technological change will affect a job’s future prospects. To assess these threats, we need to break value down into two key components.

First, value is created by the skills required to complete a job, such as a programmer’s ability to code or a painter’s knack at prepping a wall and applying paint cleanly. In general, we’ve found that when skills are standardised, they are more likely to be threatened by automation or AI.

The second component of value, though, is separate from skills. It’s the method of delivering a job’s value to someone else, which can also be threatened by new technology. We call this “value form”.

For example, while a college professor’s skills and expertise in a particular domain may not be under immediate threat, the form in which their value is delivered is certainly threatened by online learning platforms and the increased use of AI education tools.

By considering these two threats together, workers can better assess if their jobs are at risk.

JOBS IN DANGER

Our framework has four categories: A job could be displaced, disrupted, deconstructed or durable depending on the level of threat facing its skills and value form.

Displaced signifies the jobs that are most in danger. Our analysis shows pharmacists, radiologists and librarians all belong in the displaced category.

Disrupted means the skills are highly threatened, but people desire the recognised or current method of delivery, which often involves a human interaction. Examples include fast-food servers, accountants and real estate agents.

Deconstructed flips those two around: The skills are hardly standardised but automation poses a serious threat to how the job’s value is delivered. Photographers, college professors and livery drivers are in this category.

Durable jobs are the safest ones because both the skills and the value form are difficult or costly to automate. Lucky workers in this category include electricians, plumbers and physician assistants.

WHAT WE LEARN FROM VALUE

In some ways, the value framework confirms what others have found.

For example, no one would have argued that shelf stockers at big box retailers like Walmart would be a safe job for years to come – as the retailer’s announcement confirms. Putting them in our framework, their primary skills of keeping inventory stocked and shelves clean are severely threatened because they are standardized and routine.

Furthermore, robots can deliver more value through automated transmission of inventory information. Thus, our model shows these workers will most likely be displaced.

However, our focus on value suggests that other predictions based merely on categories of at-risk jobs may be missing the mark.

For example, some people predict many jobs are threatened simply because they are routine, non-college-educated or blue-collar, like plumbers, electricians and hospice workers.

Yet, rewiring an electrical system in a historic home or caring for a hospice patient are non-standard jobs that require a human to create and deliver value, which is why these jobs can be quite durable.

WHAT WORKERS CAN DO

Once workers understand the value they create and the threat automation poses to their skills and value form, what actions can they take?

The common answer they’ve been given thus far involves encouraging them to engage in lifelong learning. But a focus on value the way our model provides much more nuanced guidance.

Workers in deconstructed jobs, for example, don’t need new skills. They just need to learn to adapt existing skills to new forms of delivery. Conversely, workers in disrupted jobs need training to work alongside robots and AI systems during periods of transition.

And even if displaced workers – a fate that is likely to be on the horizon for Walmart’s shelf stockers – need to consider retraining, the traditional higher education system is not well suited for the future of work.

Universities should focus on the longer-term bachelor’s-to-master’s pathway. Rather, individuals need access to quick, modular and adaptable pathways to new jobs.

The 48-year-old parent who just lost his job as an accountant is not able to begin a new four-year degree programme. But a three-month programme to earn a cybersecurity certificate would be doable and all he needs.

The future of work is already here. Days after Walmart’s announcement, workers at Stop & Shop, a large regional grocery chain in the Boston area, are striking over increased automation. But we have time.

Let’s worry less about robots and AI itself and more about the value workers can create in different jobs in a landscape that will continue to change for years to come. Value is the only constant.

Source: Channel News Asia