This talk examines how technological change in the grocery industry is affecting work and employment, with a focus on ecommerce and new food delivery channels.

1. Are Grocery Store
Workers in Trouble?
eCommerce, New Food Delivery Channels
and the Future of Food Retail in the U.S.
Chris Benner, UC Santa Cruz
With
Sarah Mason, UC Santa Cruz
Chris Tilly, UCLA
Françoise Carre, UMass Boston

2. “The main reason for the
shift, analysts say, is simple:
Americans are increasingly
shopping online..”

4. • ~$750 billion industry
• Employs more than
3.2 million people
• Average wage of
~$15/hour
• Only part of retail
with significant union
presence
Retail is 10% of all
U.S. Employment
Grocery is Largest
Share of Retail
Food and beverage
stores
20%
General merchandise
stores
19%
Motor vehicle and
parts dealers
13%
Clothing and clothing
accessories stores
8%
Building material and
garden supply stores
8%
Health and personal
care stores
7%
Gasoline stations
6%
Miscellaneous store
retailers
5%
Nonstore retailers
4%
Sporting goods,
hobby, book, and
music stores
4%
Furniture and home
furnishings stores
3%
Electronics and
appliance stores
3%
Employment, Retail Sub-sectors, 2019

5. • A few large firms
dominate the
industry…
• But many strong
regional players and
specialty markets
• Generally
technological
laggard except for
leading firms
Wal-Mart
26%
Kroger
10%
Albertsons
5%
Ahold-Delhaize
4%
Publix
3%
HEB
2%
Meijer
2%
Whole Foods
2%
Target
2%
Trader Joe's
1%
Others
43%
Market Share of Leading Food Retailers in the U.S. in 2017

6. With growth of eCommerce  Key questions
• How much of the traditional in-store grocery retail industry is
likely to be taken over by other delivery channels/firms?
– What are implications for grocery workers and their livelihoods?
• How can traditional brick & mortar grocery stores…
– …take advantage of opportunities in new delivery channels?
– …leverage strengths of their store infrastructure to retain/gain
customers?

7. Background & Context of Study
• Part of multi-sector study looking at technology
and future of work
• Designed to identify broad trends, be forward
looking
• Based on secondary data and ~60 interviews
with:
– Industry analysts
– Technology developers
– Retail executives—operations and technology officers
• Work in progress…

8. Grocery eCommerce is actually 3 key processes…
Online Order Fulfillment
Food to
customers’
home
…that are now adding paid jobs, instead of consumer self-service

11. ● Long, slow development
until Amazon purchased
Whole Foods in 2017
● Instacart was major
beneficiary, for awhile…
● Major players are now all
investing significantly in
on-line ordering
1996
1989
2012

12. Growing diversity of platforms and
processes

15. Technological Barriers Coming Down with Evolving Architectures
● Integrated web-site versus microservices
● Potential separate APIs for search,
recommendations, catalog, promotions,
cart & checkout, inventory, loyalty
programs, pricing, OMS and CSR, etc.
● Software/Retail as a Service

17. E-Commerce still small part of food store sales
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Percent E-Commerce, All Retail Trade and Sub-categories
All
Misc.
Clothing
Motor vehicle & parts
Sporting goods & hobbies
Electronics and appliance
Furniture/Home Furnishings
Building mats. & supplies
Food and Beverage
General merch.
Not Shown: Non-Store Retailers

18. 1.4%
2.8%
8.5%
14.1%
16.9%
18.3%
22.5%
29.6%
32.7%
16.8%
24.3%
28.0%
31.8%
30.8%
31.8%
54.2%
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%
Other
Ordering kiosks
In-store mobile product scanning
Store-supported home delivery
Third-party vendor home delivery
(e.g. Instacart, MyWebGrocer)
Curbside delivery
Click & Collect
Mobile shopping apps
Source: Progressive Grocer, "85th Annual Report of the Grocery Industry", April, 2018
What Omnichannel Services Do You Offer?
2018
2017
• Most eCommerce
does not bypass
brick & mortar
stores
• Omnichannel—
multiple ways of
interacting with
customers

19. Many barriers to ordering on-line
● User interface challenges
● Consumer selection preferences
● Inventory/substitution hassles
● Internal organizational tensions
(operations, technology)
● Additional costs
A few companies are seeing rapid
growth (off a small base), but industry
wide, roll-out will be slower

20. Option 1: Store-based fulfillment
● Dominant model today
● Walmart claims to now
employ over 35,000 pickers
in their stores
● Expensive, doesn’t scale
● Niche customers or stop-
gap measure until market
demand justifies greater
investment

21. Option 2: Micro-fulfillment Center
● Convert portion of
existing store footprint to
semi-automated
fulfillment
● Multiple partnerships
beginning to roll out
● Relatively low barriers to
entry: ~$3 million
investment and 2 months

22. Option 3: Warehouse fulfillment Center
● UK company with very
advanced technology
● Partnership with
Kroger’s to build 20
FCs
● Much more expensive
and requires higher
volume to be profitable

23. Not fully automated…yet

25. Will any one option dominate the market?

26. Will any one option dominate the market?
● Most likely room for many
models
● Roll-out will depend on:
○ Geography
○ Customer segment (income,
age)

27. Many new technologies being developed

28. Alphabet Wing

31. Pick-up and traditional driver delivery will dominate

33. New Prepared Food Home Delivery Platforms

34. Conclusions
● Impacts on existing grocery store
jobs will be modest
○ Fewer cashiers, more pickers
● Grocery stores are here to stay
● Many of the new jobs (drivers
especially) have poor wages and
working conditions

35. Conclusions
● Substantial opportunities for
existing grocery stores
○ Location and existing real
estate matters
● High-road and low-road
options both expanding

36. cbenner@ucsc.edu
Thank you!