Jim Prevor had a sitdown with Jorg Snoeck before the Amsterdam Produce Summit. He asked Jorg to expand his focus on retail and the fast-moving consumer goods category and give us a point of reference against which the role and utility of the fresh produce supply chain can be assessed.
Q: Your book, The Future of Shopping, is brilliant in its analysis and scope and reveals countless and invaluable insights for the produce industry. To start, could you provide some background of your company and give our readers some context: What was the impetus for your book?
A: RetailDetail is a leading communication platform for professionals in the retail and fast-moving consumer goods (FMCG) industry. Our newsletters, live-experience center in Antwerp and congresses attract thousands of visitors who are looking for knowledge and inspiration on the tremendous changes the industry is going through.
We are in the middle of a 4th Industrial Revolution, and while the changes and innovations are widely documented, we notice people in the industry get lost in the chaos.
Not everything that is written is true, and it’s all just too much to process. This book aims to provide a complete, yet accessible, summary, being a thorough guidebook that actually helps all players in the industry, from retailers to producers and their suppliers.
In order to survive this revolution, knowledge needs to be shared, and everyone in the supply chain needs to connect. We feel we can help the industry survive only by elevating the shared knowledge in the industry.
Q: Could you walk us through the chapters of the book, highlighting the most important points and issues in each?
—In doing this, could you focus in on the points that are most relevant to the produce industry, and how these issues impact the produce industry?
—Do some of these issues with the transformation to omnichannel create unique challenges for the fresh produce industry versus other shelf-stable consumer goods products, etc.?
A: Every chapter drills down on a different factor in the retail revolution: we face new consumers, new technology and new types of stores or retail touchpoints. This leads to new business models, and all of the changes culminate in the supermarket industry that is being thoroughly disrupted at the moment.
So, our last chapter zooms in on the future of the supermarket, which is, of course, an important one for the produce industry.
Q: To that point, you say in your book, “retail, as we have known it for centuries, is dead. Economic, demographic and technological developments have made it unnecessary.” Does this apply in the same way to fresh produce? For instance, studies show that consumers prefer the sensory experience of shopping for produce in-store.
A: Retail as the unbundling and re-bundling of goods — to physically bring them closer to the consumer — has, for the most part, become obsolete. Also, in the produce industry, we increasingly see shorter supply-chain initiatives, where consumers are connecting directly to the producers and farmers. In addition, when it comes to fresh produce, where there is some sharing, swapping or selling produce from their vegetable gardens, etc., consumers are becoming competitors for retailers.
However, there is still an important part in selection when it comes to producing: as there is no such uniformity like there is with other goods, a careful selection remains very important, guaranteeing a lasting role for an intermediary person/player. This can be the retailer or the consumer hand-selecting products in-store or other intermediaries.
People also find convenience very important when it comes to food. As such, they want to be able to find produce close by and in a convenient setting. Therefore, short supply-chain initiatives will probably never fully replace the part of the store or merchant, bringing food closer — and in practical ways, in terms of packaging, selection, availability, etc. — to the consumer.
Q: You say digitalization has turned the world into a single large marketplace, where you can hunt for the best bargains/lowest prices and compare things online. But there is some evidence when consumers shop for fresh produce online, they tend to shop the website of the store they feel most comfortable with, and they purchase items they are familiar with. Bargain-hunting and price seem less of an issue when shopping for produce online than in-store.
There is also a discussion about the advantages of integrating online and offline and that these synergies can build overall purchases. For instance, consumers gain knowledge online, and when consumers visit that retailer to shop, the sensory experience creates additional purchases… Could you address these points?
A: All of the changes in the 4th Industrial Revolution heavily affect the produce industry as well. For example, the new consumer attaches more importance to fresh and healthy food than ever.
In the book, we especially describe how the new Millennials generation is very conscious about health, self-care and the environment. This results in an increasing demand for fresh organic food, plant-based, and non-processed foods and locally produced. People increasingly want to know about the origins of their food and are interested in buying straight from the farmer as well.
Q: You point to Millennials as a target consumer for fresh produce. At the same time, you make an interesting point about the future of the consumer, talking about demographic shifts, or earthquakes, and the new normal — categorizations:
“Patterns of consumption are no longer determined by traditional demographic segments, like age, gender, location, income, family status, etc. There’s a new wind abroad, which disregards the pigeon-holed thinking of the past.”
You also say, “patterns of consumption and lifestyles not only vary within the same household but also within the same individual.”
Could you elaborate on who is the shopper of the future, and how does the produce industry strategize around this? For instance, could seniors be greater purchasers of fresh produce, but prefer shopping in-store versus buying fresh produce online?
A: When it comes to the shopper of the future in Western markets, we see several important trends: urbanization, aging, the generational shift to digital native Millennials and Gen Z, as well as the emergence of more ethnically diversified consumers. Each requires its own approach in the future of marketing and retail.
Seniors prefer in-store shopping, indeed, as they want to feel more connected and also like the social element of shopping.
Whereas, younger, Millennial consumers are very interested in fresh produce as well, but as they have little time, they highly value convenience and speed. Because of the urbanization, this convenience is increasingly found online and in neighborhood stores, much less in large (suburban) supermarkets.
Although Millennials also like to ‘destress’ and take it slow once in a while, a moment in which going out to buy and home-cook healthy, fresh food is increasingly popular as well. There is an important part of produce in both the ‘fast’ and ‘slow’ consumption moments.
Ethnic consumers pay a lot of importance to fresh produce as well, but still, they too often do not find the products they’re looking for in mainstream supermarkets.
This shortening of the supply chain is an interesting alternative for producers too since it is a way to escape the increasing pricing pressure from retailers. For retailers themselves, offering produce straight from the producers is, in turn, a good way to increase margin and to give consumers what they want.
In Belgium, for instance, retailer Colruyt is building collaborations with potato farmers, buying the lands for the farmers, but letting farmers exploit the land for Colruyt. They also make sure knowledge and expertise are shared among the farmers. As such, they have been able to optimize the use of land and have extended the potato season in Belgium.
Q: You provide several interesting examples in the book of short chains; VLAM recruiting more than 1,450 sales points in Flanders and Brussels, neatly distributed over different regions and localities. One Flemish person in five now orders produce direct from a farmer.
Example 2: Increased attention for local production breathing new life into farmer’s markets thanks to the internet… Buurder profiles itself as a virtual agricultural market; and Example 3: American startup Farmersmarket, which organizes an online food market where consumers can order their fresh produce from the affiliated growers in their region.
You also talk about technological advancement. Could you highlight key factors in the retail transformation to Retail 4.0?
A: When it comes to technology, automation is key. Dominated by large tech players, such as Amazon and Chinese Alibaba, the most important technological evolutions in the retailing industry boil down to moving retail radically omnichannel, blending online and offline into one.
We are steadily moving into a world where grocery shopping is fully automated. Thanks to consumer data analysis and connected home appliances through the Internet of Things, groceries can be delivered into your fridge and into your pantry. Weekly supplies and meal ingredients get to be delivered at home, including also fresh produce.
The challenge producers face, however, is that the consumer will no longer make a conscious choice as to which products he or she buys, not even which fruits and vegetables. The pressing matter here is the same as for all FMCG suppliers: how to make sure that your produce is chosen and is delivered to the consumer?
Nonetheless, as said, people do feel the urge to consume more consciously and mindfully, especially when it comes to their food intake. So next to this automated, fast supply chain, there is also ample space for a slow alternative as well: people still want to go pick some fresh produce and other products they attach importance to themselves, be it in-store, at the farmers market or even online.
Q: Will some of the Internet-of-Things technologies have limitations when it comes to fresh produce?
A: The limitations for technological automation in the industry of fresh produce is mostly practical; it is a matter of logistics and transportation in suitable conditions. These are things lots of startups, as well as huge players such as Amazon and Walmart, are working on intensely. As for these giants, it is crucial to get this right: the delivery of fresh produce is the only thing that still stops Amazon from becoming the Everything Retailer it aims to be.
It is therefore also the sole purpose of the acquisition of Whole Foods by Amazon: understanding the fresh produce industry and retail.
Q: In your book, you say, “Physical stores need to concentrate on one of two things: either ultra-efficiency or meaningful experience. Retailers and brands, therefore, face a straight choice. There is no middle ground.” In this competitive, omni-channel environment, isn’t there an argument (or necessity) for doing both?
A: There is, and some retailers manage to do both, such as the example of Starbucks with both seated service and mobile to-go ordering, but it is very important to create two very clearly distinct customer journeys, which should not interfere.
So, convenience online and experience offline is possible, for example, but make sure the experience-seeking customer is not misguided by your online offering, thinking it is too matter of fact and ‘sec’, while it should also be clear to a shopper on the run that he’d better not go to the store.
An example of a food retailer that IS succeeding in offering both is Alibaba’s Hema grocery chain in China: it is possible to quickly find and take home the right products if you are in a hurry, with completely till-free and cashier-free checkouts, but for those who want experience, you can eat there and have your shopping bags delivered at home.
Even quicker for the convenience-seeker: online orders through the mobile app are picked in-store and delivered at home within 30 minutes if you live inside a 3-kilometer radius.
Also, Amazon aims to do both with Whole Foods (experience) on the one hand and Amazon Fresh (convenience) on the other.
Q: This ties into The Future of Shopping. You point to the classic supermarket model being challenged by new models of production and distribution of food. And you provide great examples, challenging the existing price-versus-service dichotomy… the growth of Colruyt, which combined a lowest-price guarantee with full assortment, and a qualitative offer of fresh produce and well trained, helpful staff.
A: When it comes to online, fresh logistics still need to improve to increase efficiency, but this is a matter of practicalities that will be solved in due time. However, the fast and online system will put even more pressure on producers, because retailers will want to guarantee only the best and most fresh produce goes to their customers since there is no way for them to return or swap products that do not meet their demands.
To build consumers trust, only the very best will do.
Q: Could an omni-channel retailer create a way for consumers to return or swap products that do not meet their demands, reassuring them, and also opening up possibilities when consumers return products in-store that they’ll increase their purchases?
A: You’re right, it’s not that it isn’t possible, but more that it kind of defeats the purpose of convenience. So definitely, this is absolutely possible, but given the speed at which produce moves and is consumed, it would be rather inconvenient to return the product and wait for the delivery of another one.
Or to go to a store to swap: you order online partially to avoid going to the store, right? This is why in food, click-and-collect customers are most often shown the fresh produce that the pickers have selected right upon collection. That way, it is still possible to swap right away at the collection point.
Q: Could omni-channel diminish brands and lead to more private label? What can suppliers do to reverse this?
A: Automatisation, not omni-channel, is leading to more private label. If you order something via Amazon’s Alexa today, Amazon has a preference for its own private labels, pushing these first.
Suppliers can reverse this by either partnering up with the retailers, through knowledge and promotional collaborations that are beneficial to both parties or by finding their own channels through which to reach the consumer.
An example is INS Ecosystem, a recently launched blockchain platform that wants to be an online grocery marketplace where brands can sell their goods directly to consumers, without any other parties, such as the retailer, in between.
Q: How do discounters like Lidl and Aldi fit in with this competitive dynamic?
A: Aldi and Lidl are increasingly parting with their hard discount image. Every retailer invests in low prices but also aims for more service and convenience. Aldi and Lidl are no exception: you find a broad range of organic products, A-label brands, fresh bread and produce, while also improving the in-store experience with more natural light and agreeable color schemes.
They even go omni-channel with webshops, and Lidl is even trialing home delivery. They too move towards no compromise.
Q: What are your key takeaways for the produce industry, from the retailer perspective and from the supplier perspective.
A: As everyone is becoming a retailer, suppliers get to find their own media and channels to reach the consumer. The retailer is no longer the only way to find a market.
As for retailers, this also means that they are facing unseen competition. Instead of the eternal focus on price competition and price wars among supermarket chains, we increasingly see collaborations arise, even between competitors, when it comes to purchasing alliances, knowledge sharing, and partnerships.
Q: Could you provide some examples of collaborations even between competitors?
The main focus should be how to add value for the consumer, beyond the element of price. Retail becomes about servicing customers, helping them lead their lives the way they want to live it. Opportunities then lie with how to help people eat healthily, and to eat fresh food, for example, in the most convenient way.
This can be done though meal kits, organic produce subscription boxes, etc. Example: the Belgian supermarket chain Colruyt launched a premium sister chain, CRU, where consumers find local premium quality foods in a market-style environment, but most remarkable is their strategy of offering everything in 3 shapes: raw, pre-packed of fully prepared.
You can, for instance, find fresh pineapples, pre-cut slices of pineapple and pineapple smoothies. This way, the store wants to cater to everyone’s individual needs in terms of convenience.
Q: How important is consistent branding across platforms?
A: Extremely important. In this omni-channel environment, the consumer does not make any distinctions between channels and platforms, so consistency is key to a brand’s trustworthiness and image.
Q: Are there different issues with product/packaging requirements/merchandising/marketing strategies for online and offline options, particularly with fresh produce and its perishable nature?
A: The lack of clear and standardized product data and labeling is still a big issue for online food retail today.
Q: Could you elaborate on how retailers and produce suppliers can capitalize on the synergistic play between online and offline to maximize sales and profits for fresh produce?
A: Retail is everywhere and everything. From laptop to mobile to super-smart applications inside your home, Alexa…Internet of Things, machine-to-machine retail and FMCG. Interaction between digital and physical. In the near future, smart mirrors in your house will record all your sizes and measurements… and there will be mobile shops and popups in places anywhere and everywhere, etc.
Q: What are the biggest challenges and opportunities for the fresh produce industry to compete and prosper in this new omni-channel environment?
A: It is crucial to capitalize on both the fast and slow moments of consumption, by offering an adapted approach to each. The same consumer can and will be looking for convenience and speed at one moment in time, yet choosing experience the next.
In the first situation, automation, online groceries, and convenience stores or hubs with large opening hours are the way to go. In the latter, a lot is to be done with a personalized experience, educating and informing people and the creation of authentic and entertaining moments.
People want to go buy organic, locally harvested pumpkins at the market, but also want artisanal-made pumpkin soup from a vending machine ‘on the go’ on their way to work, to give just one example. Opportunities lie on both sides.