The changing role of supermarkets in Australia

ESG initiatives will bring the consumer through the door, while technology advancements will elevate the consumer experience in the supermarket.

January 26, 2023

Supermarkets once used to be a place where people went to purchase groceries. However, since the onset of the pandemic and consequent lockdown restrictions, the local supermarket has become more than a place to buy essentials. With the ever-evolving traditional neighbourhood centre model, supermarket retailers have been expanding their offerings to create a one-shop stop for all. Some supermarkets are already offering barista-made coffee and freshly made sushi within their stores. This change may be a trend to be seen going into 2023 as supermarket retailers look at new methods of maintaining and increasing market share.

Also, technological advancements will likely take centre stage in what supermarkets look like in the future – whether it's automation, more self-service practices or even drone delivery. The concept of drone delivery has been around for many years, with Coles trialling the idea in early 2021 in the ACT and then expanding it to Southeast Queensland. While the service provides customers with another delivery option, it also aims at reducing the number of trucks on the road. The initiative will likely be rolled out in stages across the nation within the next few years.

The introduction of ESG practices into business models has historically been a high-cost option, often overlooked and waived by most retailers globally. However, consumers have become increasingly aware of environmental, social, and corporate practices, influencing what they purchase and, more importantly, from where. The change in consumer behaviour has put an increasing burden on retailers to manage consumer expectations and bridge the gap between knowledge and action. There is already regulatory pressure for transparent ESG targets and actions from major retailers, with much of the spotlight on Australian supermarkets.

Being non-discretionary by nature, food retailers are at the forefront of this change. With all three big supermarket chains in Australia striving for market share, they will likely continue to adapt new ESG principles into their store networks. In 2021, we saw a push towards sustainable practices such as banning single-use plastic bags and some stores installing solar panels. Initiatives like those will likely be more commonplace in 2023 and onwards.

ESG initiatives will bring the consumer through the door, while technology advancements will elevate the consumer experience in the store. The performance of supermarkets is critical for foot traffic counts and sales revenue levels for most shopping centres, as these retailers account for a significant portion of most shopping centres in Australia.