Based on conversations with clients, some of the top concerns for grocers this year will be rising costs, employee retention, and optimizing their technology stack. All three of these issues are interrelated, and good vendor partnerships will be key to overcoming challenges.
First, rising costs will affect multiple aspects of the grocery business in 2023. Grocers' biggest challenge will be mitigating the rising cost of food and the lingering effects of the global supply chain crisis, but the costs of rent and labor are also on the rise. Approximately half of all U.S. states will see an increase in minimum wage before the end of the year, with increases having already gone into effect for several states on January 1st.
In 2023, many grocers will work on optimizing their technology stack to ensure they're investing in the right tools and getting the best value from those investments.
To help offset rising costs, grocers will need to find ways to improve their operational efficiency. One of the ways grocers can do this is by implementing a strong employee retention strategy. The cost of replacing an employee is almost always more than the cost of giving them a raise, so it's in grocers' best interests to focus on retaining their current workforce. We also recommend cross-training to help fill coverage gaps and keep service levels steady when labor is uncertain or unstable.
Second, grocers will need to clean up their tech stack this year to help address both challenges (rising costs and the need to retain employees). During the pandemic, we saw many grocery retailers rapidly adopt technologies such as self-checkout, delivery, and e-commerce. The chosen solutions weren't always the most efficient or cost-effective, but those decisions may have been necessary at the time to stay competitive. This year, we anticipate that many grocers will work on optimizing their technology stack to ensure they're investing in the right tools and getting the best value from those investments.
For example, one trend we've seen already is a shift toward omnichannel order entry software, such as CBS NorthStar, that reduces employee training requirements and supports easy cross-training. Similarly, grocers paying for a costly labor management software that doesn't offer gig shifts, shift swaps, team apps, and other employee retention tools are starting to shop around for a better solution. When it comes to managing labor, we typically advise grocers to choose a software that can balance the needs of their employees with the needs of the business.
Finally, grocers will need to take a hard look at whether their technology vendors are acting like valuable partners. In the past year, many of our grocery clients have come to us because their current labor management vendor did not take very good care of them. With costs on the rise, we expect that grocers simply won't be able to afford slow response times and inefficiencies from vendors going forward.
While there will always be challenges associated with running a grocery business, we believe retailers are reinvigorated to enjoy their work, and will position themselves for success this year by doubling down on employee retention, optimizing their tech stack, and partnering with reliable, service-oriented vendors.