By: Leslie G. Sarasin, President and CEO, Food Marketing Institute
Arguably, nothing registers the changes confronting the industry better than the Worry Index feature in The Food Retailing Industry Speaks (Speaks) research. Back in 2004, we started asking food retail industry executives to score issues according to how they had impacted sales and profits (the higher the score, the greater the impact) and then to project what their impact would be the following year. Comparing and contrasting the worry index lists from various years provides a real sense of what is changing, what is staying the same, what may be shifting in intensity or in some cases what appears to be remaining the same, but in truth, is different because the context has changed.
In 2004, the top five Worry Index issues were:
- Rising health care costs;
- Declining profits/margins;
- Local economic conditions; and
- Difficult relations with suppliers/manufacturers.
This year, the top three concerns are:
- Cost of providing health care benefits;
- Competition from traditional food retailers; and
- Implementation of healthcare, including the Affordable Care Act (ACA).
These may sound a little reminiscent of the list from 2004, but actually have significant contextual variations. Numbers 4 and 5 on this year’s Worry index: (Local, state and national governmental regulations and credit/debit card interchange fees) didn’t make the 2004 top ten and in fact swipe fees weren’t even on the 2004 list at all. Nor would they have been, if we’d had the Worry Index back in 1977. But recalling the headaches caused this year by swipe fees, the shift in payment network’s liability and the consternation generated by EMV compliance and again it registers just how dramatically payments, front end operations and industry issues have grown in complexity.
Over the years, the FMI Worry index has registered the ebb and flow of consistent food retail concerns, such as food and product safety issues and the ups and downs of the economy at local, state or national levels. But it has also been an important indicator capturing the emergence and the weight of new industry issues, such as:
- The threat of new competitive channels -online, dollar stores, specialty stores;
- The ongoing, but changing competition with restaurants and foodservice; and
- The stress of additional regulatory requirements.
It also wraps some numbers around changing consumer trends such as the demand for transparency and the shift in customer demographics (age and ethnicity).
It is sometimes argued that the Worry Index registers the concerns that are most top of mind for food retail leadership and overstates the importance of immediate operational concerns to the detriment of larger global considerations. In other words, the worries captured on the index appear overly focused on the present and immediate present, and miss the gathering storm clouds on the more distant horizons. I would argue that if you look at the areas where the score in the expected impact column is substantially higher than its current impact, you get an indication of future concerns registering on the psyche of food retail leadership and that is where you see them scanning the long range horizons.
The areas in this year’s worry index reflecting the largest spread from current impact to anticipated impact were:
- Job market (staffing, hiring and retention and wages);
- Competition from non-traditional food retailers;
- Food safety issues;
- Technology investments, including omnichannel;
- Product labeling mandates; and
- Competition from online sales.
Packed within these scores are the indicators showing just how much consideration retailers are giving to the challenges of meal kits by mail and the complex considerations of connected commerce. These scores show retailers are more than aware they need to be investing in the technology necessary to offer consumers a seamless shopping experience whether they are trolling the aisles and scrolling a screen, whether they are choosing paper or plastic, drone drop off or personal pick-up. And the rapid rise in job market concerns reveal an industry awareness of the personnel challenges inherent in the changes technology and modernity bring.
The Worry Index is just one part of The Food Retailing Industry Speaks (Speaks) report—a must read for the food retail industry. Download your copy of the report today, free for FMI Members. If you want to dig a little deeper, see how our two signature research reports (both consumer grocery shopper insights and business operations) compare in the updated Grocery Revolution.