I recently glimpsed the future of grocery shopping in America. It showed up at my front door in the form of smiling, energetic Rena, a personal shopper for an online grocery buying and delivery service called SHIPT. Rena and SHIPT took great care of my family and our weekly food shopping. The experience left me with a positive outlook for the future of how we consume food in America and what it might mean for our rapidly changing economy.
Amazon’s recently announced acquisition of Whole Foods sent a shockwave through the grocery industry. News reports predicted the end of brick and mortar, and the grocery industry saw a massive cut in value. In fact, Kroger’s stock market value fell by nearly 30 percent. After all, Amazon is known for ushering in sweeping changes whenever it steps into a market. There were seismic moves to the industry when Amazon began competing head-on with traditional retailers.
But this new deal simply accelerates a trend that was already underway. Long before Amazon made its move, Nielsen made predictions that by 2025, nearly 20 percent of all grocery shopping will be done on-demand.
Like any massive change, the trend toward online shopping for groceries will have all sorts of ramifications. On the whole, however, I believe a rise in on-demand shopping could actually be a net positive. It’s positioned to make life easier for families while expanding an entirely new segment of the job economy.
And, if they play smart, traditional grocers will not only survive, but thrive in this brave new world.
Part of my enthusiasm for on-demand shopping comes from my recent experiences with SHIPT, Uber Eats, and Zifty — all companies that specialize in on-demand food delivery. I recently put SHIPT to the test to see if it could tackle a full Moss weeklong family grocery list. We went all in. Think kale, hamburger meat, dinosaur-shaped chicken nuggets, you name it. All together, we ordered $290 worth of groceries through SHIPT.
Rena, our SHIPT shopper, explained her job to me. She does as many as six to eight full-scale shops per day, earning both wages and significant tips. For Rena, it’s a perfect fit because she loves grocery shopping.
With the rise of personal grocery shoppers, we’re truly watching the birth of a new industry and a new high-value employment category. According to SHIPT, they already employ tens of thousands of shoppers across the nation. And if, over time, busy families buy in to this new grocery model, it could be a significant number of new jobs.
So where does this leave traditional grocery store employees? I find our current scenario a classic case of “creative destruction” — where cutting-edge innovation slices away existing jobs and replaces them with more technology-geared roles. The result is the creation of new jobs with new opportunities and responsibilities.
Automated teller machines provide a perfect example of this phenomenon. ATMs hit the banking scene back in the 1970s, and between 1995-2010, the number of ATMs quadrupled from 100,000 to 400,000. What happened to traditional bank teller jobs?
Instead of evaporating, as we may have expected, the number of bank teller jobs actually increased from 500,000 to 550,000. Why? When ATMs were implemented to handle routine transactions, they reduced the cost to operate a branch by reducing the number of tellers required. Banks responded by opening more branches, tellers became “relationship managers,” and there was a shift in this job. This is what creative destruction looks like.
Turning back to how we buy our groceries, let’s run some numbers on the predicted economic impact on the market and jobs. Consider these points:
- According to the Bureau of Labor Statistics, today there are about 2.7 million jobs in the grocery industry.
- Nielsen predicts that 20 percent of all grocery shopping will be done online by 2025.
- Assume traditional food shopping drops, with store contraction resulting in a loss of 15 percent of the current grocery workforce (from executives to managers to stockers), and we have roughly 400,000 fewer jobs.
- Let’s further assume cashier jobs across the board see a reduction of 40 percent. Right now, cashier jobs come in at about 750,000, calculating to a loss of 300,000 additional jobs.
- In total, we’re talking about a nationwide industry contraction that cuts 700,000 jobs.
But remember the rise of ATMs and the moral of the story. When it comes to creative destruction, there’s light at the end of the tunnel. And job reduction doesn’t always spell a permanent void; new jobs rise from the ashes of the old ones. We already know what the new job creation looks like with on-demand grocery shopping. It looks like Rena — personal shoppers to handpick your groceries for you.
Now let’s run some numbers on the potential impact of the online, on-demand grocery industry:
- There are approximately 120 million households in America.
- If 20 percent switch to on-demand grocery shoppers, that’s 24 million households.
- One full-time shopper can average eight major house deliveries per day, thereby serving 40 households per week.
- Calculate it out, and we need about 600,000 full-time delivery jobs to fill the demand.
And consider this: Job creation doesn’t stop there. This new innovation will need infrastructure to deliver, likely in the form of new, smaller warehouses and grocery hubs. In theory, these hubs could be staffed by approximately half of the workforce of traditional grocery stores.
- To balance the 700,000 jobs that fade away, we could see the emergence of 350,000 new warehouse or grocery hub jobs.
- Bring the numbers together, and we’re looking at a potential creation of 600,000 on-demand grocery shopper jobs and 350,000 warehouse grocery hub jobs.
- The grand total of job creation in the post-Whole Foods-Amazon deal? Almost 1 million jobs. To be exact, 950,000. Not too shabby.
But will the post-Whole Foods-Amazon grocery world bring these numbers to life? Maybe. And then again, maybe not. As with any area that undergoes creative destruction, old jobs will fall and new jobs will rise. But as you walk the aisles of your local grocer or click and add items to your virtual cart, keep the ATM revolution in mind. The lesson there makes clear that we shouldn’t be terrified of change.
The original AJC article appears here.
This information is provided to you as a resource for informational purposes only. It is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.