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The Future Of The Grocery Industry – Jobs, Stores And Creative Destruction

I glimpsed the future of grocery shopping in America last week. It showed up at my front door in the form of smiling, energetic Rena, a personal shopper for an on-line grocery buying and delivery service called SHIPT.

With Rena, I was in good hands. She and SHIPT took great care of my family and our weekly food shopping. The experience left me with positive feelings from both a personal and economic perspective.

Amazon’s recently announced acquisition of Whole Foods sent a shockwave through the grocery industry with talking heads predicting the end of brick and mortar supermarkets as we know them. But, in fact, the deal simply accelerates a trend that was already underway. Long before Amazon made its move, Nielsen made predictions that by 2025, nearly a quarter of all grocery shopping will be done on-demand.

Like any massive change, this trend will have all sorts of ramifications – some good, some potentially bad. But on the whole, I believe the on-demand shopping trend will be a huge net positive. It’s positioned to make life easier for families while creating new wealth and new jobs. We’re talking lots of new jobs.

And, if they play smart, traditional grocers will not only survive but thrive in this brave new world.

Much of my enthusiasm for on-demand shopping comes from my first experience with SHIPT.

My family went all-in, ordering a full week of groceries for the Moss household. Think kale, hamburger meat, dinosaur-shaped chicken nuggets, beef jerky, La Croix peach-pear water, salad, Frosted Mini-Wheats, vanilla extract, cheese, peaches, Pink Lady organic apples. Our list went on and on. All total, we ordered $290 worth of groceries using the SHIPT app.

Rena, our SHIPTshopper, told me the job is perfect for her because she loves grocery shopping. She does as many as six to eight full-scale shops per day, earning both wages and significant tips.

It makes sense; this is a fairly “high value” job. Personal grocery shoppers are selecting and handling something precious and expensive. Americans are particular about their food. This is especially true of their groceries. Mini-Wheats and Ritz crackers are no big deal, but when it comes to fruit, and produce, and steak, I need the selection be perfect. These types of items are expensive and I’m particular about them.

Talking to Rena, I couldn’t help but think that we have similar jobs – she handles food shopping for people while I take responsibility for their money. Both are crucial, emotional aspects of a family’s life. Doing both jobs requires skill, passion, training, and top-notch people skills.

Currently, SHIPT and rival on-demand grocery services employ roughly 5,000 shoppers. Five thousand. That’s a real number of jobs. With the rise of personal grocery shoppers, we’re truly watching the birth of a new industry and a new employment category. Widely available, high-value personal food/nutrition shopping seems like a welcomed new convenience that folks will invite into their homes and ask to stay for awhile.

And if over time, busy families switch to this new grocery model, it could create millions of new personal shopper jobs. Millions.

Kroger and Publix would be wise to hop on board quick. Big name grocers like these should stop with the unrealistic Leave It To Beaver era ads. Instead, they need to embrace the new American family – the family that’s busy, running on tight schedules, and hungry for convenience.

If you ask me, traditional grocery stores would be wise to refocus on partnering with or buying food delivery companies like SHIPT and Instacart. The Krogers and Publixes of America need to step up and show that they can compete with the likes of Whole-Amazon. Soon.

Job Creation And Destruction

So, what does all this mean for grocery workers? In my book, this would be a classic case of “creative destruction” – where cutting edge innovation would take away existing jobs and replace them with more technology-geared counterparts. The end result? New jobs consisting of new opportunities.

Automatic Teller Machines provide a perfect example of the phenomenon of creative destruction. ATMs hit the banking scene way back in the 1970s. But between 1995-2010, the number of ATMs quadrupled from 100,000 to 400,000. What happened to traditional bank teller jobs? We all know they weren’t rendered extinct.  But instead of evaporating, as we may expect, ATM innovation had the opposite effect on bank teller jobs.

The number increased from 500,000 to 550,000. Why? Because ATM’s reduced the cost to operate a branch by reducing the number of tellers required. So, banks opened more branches, tellers became “relationship managers,” and these employees saw a shift in their jobs, as they had more time to spend with customers. All of these changes occurred when ATMs were implemented to handle routine transactions.

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Looking back at how we buy our groceries, according to the Bureau of Labor Statistics, today there are about 2.7 million jobs in the grocery industry. Let’s assume that Nielsen is in the ballpark, and let’s assume that a conservative 20% of all grocery shopping will be done online by 2025. Under our scenario, let’s further assume that the drop in traditional food shopping results and resulting store contraction results in a loss of 15% of the current grocery workforce. Here, we’re talking about positions ranging from executives to managers, from deli counter worker to stockers to cashiers. All total, this translates into roughly 400,000 fewer jobs.

Take it a step further and assume cashiers jobs across the board see a reduction of 40%. Right now, the number of cashiers comes in at about 750,000. Subtract 40%, and we’re left with 450,000. So, a loss of 300,000 additional jobs. Tally it with the number above, and we could be staring down the barrel of a nationwide industry contraction that cuts 700,000 jobs.

But, remember the rise of ATMs. The moral of that story was that when it comes to creative destruction, there’s always 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 so you don’t have to.

Let’s run some numbers on the impact of the Whole-Amazon deal to the grocery industry.

Today, there are approximately 120 million households in America. If 20% use on-demand grocery shoppers in place of going to the store, that’s 24 million households. If one full-time shopper can average eight major house deliveries per day, then they’re serving 40 households per week. Calculate out 24 million households by 40 home deliveries each week, and we’re looking at about 600,000 full-time delivery jobs needed to fulfill this demand for one year.

Job creation doesn’t stop there. This new innovation will need the infrastructure to deliver, likely in the form of new warehouses and grocery hubs. It seems safe to assume that new, more efficient warehouse hubs will replace some of the lost traditional grocery stores. They will have a few key differences from the previous tenants, like no in-house marketing (because the most popular items will be purchased online), fewer cashiers, and less stocking.

In theory, these hubs could be staffed by approximately half of the workforce of traditional grocery stores. Under this conservative estimate, to balance the 700,000 jobs that fade away, we could see the emergence of 350,000 new, revamped 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. This brings the grand total of the post-Whole-Amazon deal grocery industry to almost 1 million jobs. To be exact, 950,000.  Not too shabby.

I think here, a reminder of one key economic truth is in order. While the face of grocery shopping may be changing, food consumption won’t decline. Americans will continue to eat the same amount of food. And, in fact, will grow along with our country’s population expansion.

So will the post Whole-Amazon grocery world bring these numbers to life? Will Americans see this level of massive job creation? Maybe. And then again, maybe not. As with any area that undergoes creative destruction, old jobs will fall and new will rise. But as you walk the aisles of your local grocer or click and add items to your virtual cart, keep the AMT revolution in mind. The lesson there makes clear that we shouldn’t be terrified of change.

 



 

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