Increased Sales Through Technology Helps Boost Grocery Store Openings

Grocery operators’ agile adaptation to changing consumer preferences, largely through in-store technology investment, helped boost overall sales by 5.3% year-over-year in 2023. This in turn has led to more demand for retail space.

Grocers most often locate in neighborhood, community & strip centers, whose overall availability rate has dropped by more than 2 percentage points since Q4 2019 to just under 6.5%. The 30 largest grocers in the U.S. have opened more than 500 new stores since 2020, totaling almost 26.3 million sq. ft. Early estimates for 2024 are for at least 80 new store openings totaling 4.3 million sq. ft., based on data from retail analytics firm RetailStat.

The growth in store footprints is occurring at a time of markedly increased funding for grocery-focused tech companies relative to pre-pandemic levels.

E-commerce accounts for just 6.6% of total U.S. grocery sales, most of which (84%) is fulfilled in-store, according to Mercatus, a provider of grocery e-commerce software. However, most people’s preference to shop for groceries in-store doesn’t mean that they are averse to using technology to do so. A consumer survey by research firm Forrester found that many of them are already familiar with or would like to become familiar with in-store technology. For example, over half of those surveyed said that they either already use or are interested in using mobile devices for in-store checkouts.

More than 100 grocery operators surveyed by Supermarket News and Mercatus said that technology is an important part of their business strategy. However, over 60% of them cited cost as the primary obstacle to adding tech solutions.

Implementing in-store technology sometimes has unintended consequences. One example is the link between self-checkout stations and retail theft, which the National Retail Federation estimates totaled $112.1 billion in 2022. A survey of 2,000 U.S. consumers by on-line lending service LendingTree found that 15% of self-checkout users admit to stealing and another 21% admit to “accidentally taking an item.” Of those who have admitted to stealing, 44% said they would likely do so again.

As of 2022, self-service accounted for 38% of check-out stations at major grocery chains and grew by 10% annually in the previous five years, according to consumer intelligence company Catalina. However, some grocers are restricting their use or eliminating them altogether. Costco is adding staff in self-checkout areas, while Target has started a pilot program at some stores where self-checkout is limited to shoppers with 10 or fewer items.

Technology investors are showing increased interest in the grocery sector, as operators make technological enhancements to help boost sales and improve customer service. Grocers that continue to embrace new technology will find themselves in a strong position for growth, which in turn will fuel more demand for grocery-anchored retail centers.