The grocery store of the future is already here. From embracing emerging technologies, prioritising investment in sustainability and forging third-party tie-ups, here’s how UK grocers are future-proofing their stores.
The impact of AI
Artificial intelligence (AI) has landed on shopfloors. Grocers are harnessing the tech in multiple areas, from supporting productivity and speeding up fulfilment to hyper-personalising loyalty schemes and increasing stocking efficiency.
In May, Sainsbury’s unveiled a five-year partnership with Microsoft that will see its frontline staff using AI to identify shelves in need of replenishment. The tech will “pull together multiple data inputs, such as shelf-edge cameras” to save employees time and ensure sales opportunities aren’t missed.
Tesco, meanwhile, is developing a new range optimisation tool that will “automate bespoke product selection based on store location and demographic”. Labelled “sophisticated AI” by the retailer, the tech will help Tesco reset its Express stores, putting the “right products” in individual shops to suit local communities.
The Co-Op is focusing its efforts on curbing retail crime after incidents of shoplifting, abuse, violence and antisocial behaviour in stores soared by 44% in 2023. In February, the c-store specialist introduced AI technology to monitor self-checkouts.
Marks & Spencer staff have used hand-held devices since September 2023 to create “a connected-store environment, giving store colleagues prioritised tasks to quickly bring shelves into full planogram compliance”.
The devices employ AI to compare the products currently on shelves to planograms (store-specific diagrams that show where every item should be). Team members scan shelves to find out which products need to be moved or replenished, helping them optimise inventory placement to boost sales.
Reimagining store formats
In the grocery sector, bricks-and-mortar continue to reign supreme. More than 85% of all total UK grocery sales were made in stores in 2023, according to Mintel research.
Unsurprisingly, some grocers are therefore looking to expand their bricks-and-mortar footprints.
Lidl is seeking more locations in leading cities as it pursues its ambition to open “hundreds of new stores”. In the long term, the discounter aims to operate 1,500 stores across the UK. As of early 2024, there were 960, so the retailer is well on track to hit its target of 1,100 by 2025.
Iceland, meanwhile, is working to more than double its number of The Food Warehouse stores. It currently operates the retail park-focused store format in 170 locations, with a long-term goal to run 400 outlets across the UK.
However, the majority of grocers appear to be focusing investment on ambitious store upgrades to improve the shopping experience. At the heart of these transformations are third-party brand partnerships, more self-service tech in stores, and a spotlight on general merchandise and fashion.
Asda is rolling out store upgrades designed to “improve the shopping experience” in larger supermarkets and superstores. The programme comes at the cost of £50m at a time when Asda has completed the refinancing of £3.2bn of its debt, pushing the “majority of its maturities into the next decade”.
The initiative will see 170 Asda stores upgraded by the end of November 2024, with “major” improvements including new George fashion departments, new foyers, seasonal aisles, food-to-go services, counters, and new flooring and lighting.
Meanwhile, Aldi is poised to upgrade more than 100 UK stores this year, with the goal of providing more space to shop and more sustainable features. This will involve redesigning store layouts and updating signage. The discounter operates around 1,000 shops across the British Isles, with 13,380 in total across 20 countries.
Sainsbury’s has taken action to update its UK flagship. In June 2024, the grocer launched a revamped Cobham store in Surrey, with a new format designed to amp up “creativity and excitement while shopping”. Despite its food first strategy, the new store put Habitat and Tu fashion and homewares products front and centre.
Eco investments
Nearly two-thirds (61%) of UK consumers say sustainability is more important to them now than it was two years ago, according to research conducted by NielsenIQ. Grocers are responding with innovations to keep up with changing consumer demands.
Tesco has implemented a wide range of in-store sustainability innovations after committing to hitting several green targets. As well as aiming to reach net zero carbon emissions by 2035, Tesco has already achieved its goal of using 100% renewable energy across the group by 2030. As part of this move, in late 2019 it announced it would add solar panels to 187 UK stores.
The brand has also committed to increasing sales of healthy products to 65% of total sales by 2025. Part of this commitment involves growing its Wicked Kitchen plant-based meal range by 300% by 2025. Not only will these initiatives make Tesco products healthier, but they should halve the environmental impact of the UK shopping basket.
In April, the supermarket teamed up with global grocery giants on a five-year, £98.9m venture capital fund that aims to “accelerate innovation” and “address the sector’s sustainability challenges”.
A collaborative partnership between Tesco, Ahold Delhaize, Woolworths Group, Sobeys and ShopRite in Africa, the W23 Global fund will see Tesco contribute $25m over the next five years.
Elsewhere, Sainsbury’s and Lidl have both linked their electric vehicle (EV) charging services to their loyalty programmes.
Lidl has integrated EV charging payments through its Lidl Plus rewards app in a bid to “further enhance our customers’ shopping experience”, while Sainsbury’s announced in June that customers using its Smart Charge EV points around the UK would be rewarded with Nectar points in the UK first.
Refrigeration has been another sustainability focus for grocers who want to reduce their Scope 2 emissions (indirect greenhouse-gas emissions associated with the purchase of electricity, steam, heat, or cooling).
Expanding third-party partnerships
Several grocers have taken steps this year to expand their existing in-store third-party partnerships after seeing positive results from joint ventures, while others are launching new partnerships to further engage consumers.
In May, Waitrose launched an in-store Gail’s Bakery takeaway at its Canary Wharf branch in London as part of a “wider strategy to invest in stores through upgrades, refurbishments and new openings”. The grocer already has Gail’s sections in 64 of its stores.
Elsewhere, the Co-Op has expanded its in-store parcel locker tie-up with provider InPost in June this year, as it looks to triple the number of lockers across its estate to 150 stores across the UK.
The move, which the Co-Op says aims to “make things easier and more convenient for our member-owners and customers”, comes after InPost revealed that more than half of UK shoppers have used one of its lockers in the past year.
Tesco has expanded a key partnership with Ikea to increase footfall in stores, with 100 new click-and-collect points set to open at the supermarket. The next-day click-and-collect service was rolled out nationwide by Ikea in 2023, and the new rollout will put 90% of its customers within a five-mile radius of a collection point.
Elsewhere, Marks & Spencer’s hugely successful transformation owes a lot to third-party fashion partnerships, so it’s no surprise the retailer is looking to expand in this area.
M&S announced it would open pop-ups for Nobody’s Child – the fashion retailer it owns a 27% stake in – in 48 stores this year. This would be a significant increase from its 12 existing pop-ups and follows a “successful” 2023 trial, which saw dress sales increase by 16.5% in 30 participating stores.
Iceland has taken a different tack. Instead of bringing other brands into The Food Warehouse stores, the frozen food retailer has embarked on a partnership with Wilko, whose website and brand are now owned by CDS Superstores. The tie-up has added Iceland’s own-brand and exclusive products to Wilko’s shelves.
The partnership between Wilko and Iceland follows the supermarket’s tie-up with The Range, also owned by CDS Superstores. The Range has had Iceland concessions since 2019, now covering 117 stores.
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