Supply Chain and Labor Woes

While the grocery industry is cautious about the economy, survey shows bigger issues on their minds

Supply Chain and Labor Woes Dominate Retailer Concerns

More than 130 grocery retailers (including brick-and-mortar, online and omnichannel) shared their thoughts and plans for 2022 in Supermarket News’ second annual Retailer Expectations Survey, covering such topics as the economy, sales projections, store count and hiring, and, of course, the continuing impact of COVID-19. Of those retailers surveyed, 41% operate 1-10 stores, while 38% represent chains of more than 100 stores. Another 18% range in the middle with 11-100 stores.

Inflation is a big factor, as nearly half (44%) of retailers said they were “not very confident” or “not confident at all” in the strength of the economy going into 2022. On the flip side, however, that leaves 56% of retailers saying they are “extremely” or “fairly” confident in the economy. While more than half of respondents this year are positive, it reflects a drop from last year’s result when 65% of retailers were confident coming into the new year.Still, retailers are bullish on sales expectations for 2022. Nearly two-thirds (61%) expect to see sales increase from 1%-9% in the first six months of 2022, with another 16% looking forward to sales increases of more than 10%, as well as the 11% who expect sales to stay the same. Those numbers compare favorably to the 12% who anticipate sales decreases this year, indicating that most retailers hope or expect to fully lap the record grocery sales of 2020 next year.Just over half of retailers (53%) plan to grow their store count in 2022, with the majority of those (73%) looking to grow by 1%-5%. Hiring will continue to be a growth area for grocery retailers, with 75% of respondents saying they plan to hire more workers — up significantly from 56% in last year’s survey. While 38% of this year’s survey respondents plan to grow hiring by a moderate 1%-5%, a larger number (43%) are hoping to increase hiring by 6%-10% — with a promising total of nearly 20% looking to grow their employee count by more than 10%.Building Sales in 2022While last year’s focus for building sales was on growing online grocery and curbside pickup, in 2022 retailers plan to step up their in-store activities such as expanding fresh offerings (56%), improving supply chain efficiencies (54%) and increasing in-store promotions (46%). Online grocery is still a priority for many retailers (46%), as well as curbside pickup (36%), but less so than last year when 60% of retailers planned to introduce or expand online grocery. That shift is no doubt due to the large number of grocers who have implemented online already in the past year.

Other steps retailers plan to take to increase sales in 2022 are increasing private label offerings (44%), expanding health & wellness categories (21%) and increasing center store selection (16%). Among individual retailer responses to the question “What steps will you take in 2022 to grow sales?”:

“Drive optimal item distribution, including via digital retail sales through curbside pickup and delivery.”

“Expand commissary-produced items to satellite stores. Expand home delivery ZIP codes.”

“Facing tremendous inflation which will increase sales but not revenue. Working on GP analysis to improve bottom line at similar rates to inflation.”

“Improve prepared foods programs.”

“Increase marketing spend to gain awareness of brands and their purposes by educating the consumer on trends.”

“New product offerings, in-store promotions, convenience shopping (curbside pickup, delivery), more focus on health and wellness products, expand supply chain.”

“Offer more ready-to-eat items along with surprise in-store sales on high-volume items.”

As one retailer noted, “Private label sales will create more profit margin. The supply chain has to get better. I am taking steps to help mine. I have increased efficiencies in getting unloaded for the next store’s delivery. We are ordering smarter to be in stock on those hard-to-get items. We are building inventory reserves with a limit in each not to exceed. We have added more variety to our fresh offerings to make in-store shopping a thing of the present. We have found that in store promotions add flair and a bit of excitement to the shopping experience.”

Foodservice is backDeli/prepared foods made a comeback in 2021 after a challenging 2020 in the face of COVID. Looking forward, many retailers are renewing their focus on the category, with 48% of respondents planning to increase their prepared foods offering in 2022 and 45% planning to alter or change their prepared foods offering (i.e., more grab-and-go, prepackaged, etc.). Only 7% say they plan to cut back on prepared foods next year.“People have changed up how they shop deli, and convenience and packaging are changing the landscape of fresh in deli,” noted one retailer. “We’re going to offer innovative and exciting new products to enhance offerings and customer trends. Packaged is growing.”Other retailers also shared their thoughts:

“Bring in state-of-the-art equipment for prepared foods that will convert from self-serve to full service.”

“More menu rotation, more targeted menus (like older shoppers, health and wellness-oriented shoppers, kid menus, more ethnic food varieties (like Tuesday Taco, Thai Wednesday, American Thursday, Middle-Eastern Mondays, etc.).”

“Our prepared foods have increased somewhat. Try asking customers what they would like us to offer.”

“The demand for prepared foods has been steadily increasing and we intend to capitalize on it,” summarized one grocer.