PODCAST: The Ever-evolving Grocery Industry: A Discussion with Bergmann’s Commercial Practice

Stacy Lake Hi everyone. Welcome to another episode of Insights by Bergmann. I'm your host Stacy Lake, and today's episode touches on an area that impacts all of us - the grocery and fresh foods industry.

The supermarket has long been a staple of American life, giving us access to a broad range of fresh and packaged foods and products and providing an interface between a fairly complex supply chain and distribution network and us as the end consumer. When you think about it, the evolution of grocery stores is pretty incredible. We have seen everything from S&H Green Stamps, to the growth of global cuisine aisles, to trends in prepared grab and go foods, and now most recently the adoption of online shopping and the formation of dark stores. We cannot under emphasize the speed at which this industry is changing and the impact that especially the COVID-19 pandemic has had on how these stores operate.

I am joined today by three of my Bergmann colleagues who work closely with our clients in the grocery sector, and are here to provide their insight into these changes and how we at Bergmann are built to support this rapidly evolving industry. Andy Hart is our Commercial Practice Leader in our Northeast region. Tom Reder is a Principal with our Midwest design team. And Dana Reeves is our Commercial Practice Leader with our Atlantic region. Andy, Tom, Dana, welcome. Thanks for joining us.

Dana Reeves Thanks, Stacy.

Tom Reder Happy to be here.

Andy Hart Thanks, Stacy.

Stacy Lake In my intro, I mentioned a few examples of the way this industry is changing. What stands out to each of you as some of the most significant changes that you're seeing and the impact with our clients and what they're coming to us for?

Tom Reder I think it's speed revolving around the transaction and acquisition of some items. Variations on self-serve checkout lanes are taking up more and more real estate compared to standard lanes in the big box stores. They're moving quick purchase items to the front to fulfill a grab and go need, which is counterintuitive to what they've done in the past where they like to bring you into the store and keep you there for a while. Now they're letting you grab your stuff and get out quick.

Dana Reeves We've recently worked on store renovations that introduce bars and eat-in dining to enhance the grocery experience and keep people inside. And to Tom's point, now we're taking these features out to accommodate the demand for lockers and refrigeration for pickup orders to get customers out of the store as efficiently as possible. So the in-store shopping/fulfillment hybrid model has all kinds of variations. And again, to piggyback on what Tom mentioned, regarding transaction, checkout has become far more complex to accommodate customer choice. Stores are offering all options: you have self checkout stations, an app that allows consumers to scan and pay as they shop, so the click and collect method, as well as traditional cashiers. This is just taking up a lot of space.

Andy Hart And really on the site side too during the height of the pandemic, we worked really closely with Sam's Club to create customer pickup spaces, over 600 other locations nationwide. And these customer pickup spaces will become the norm just because of the convenience factor associated with being able to order your product online, have somebody come out delivered to you and off on your way.

Stacy Lake It feels like this trend of the consumer experience wanting to buy in different ways that omni channel experience, right? Whether they're buying on their mobile phone, their computer, coming into the store, and then wanting to really get their stuff and go, you know, certainly the COVID-19 pandemic has probably expedited that even if this was already kind of happening in some capacity. Mobile shopping, it's a game changer. I think that's what we're all in agreement on. So it doesn't seem like it's going away. And to your point, Andy, there's a lot of different research and articles out there that point to the fact that consumers are used to this. I think there was one in supermarket news recently that had a study where nearly 60% of US consumers are buying groceries online and they're gonna do that continuing forward, if not more, so people are getting used to this. It's a big business ship for stores from the outside of how people travel to then going into the stores or how they pick up their groceries. So how are we helping our clients prepare for this massive shift?

Tom Reder Various clients are implementing their take on facilitating an online trend with variations on in-store pickup, curbside pickup, home delivery, each of which usually requires some degree of modification to the store, mainly to help with the efficiency of the entire exercise.

Dana Reeves Exactly. We've been helping our clients to accommodate in store pickup from department reorganization, elimination of special features, to adding drive-thrus and modifying parking and traffic patterns. But to bigger business shifts that are really moving fast are digital customer service and hassle-free shopping. So what I'm talking about is cashier-less shopping. No more lines. Our clients are integrating store technology through mobile apps. COVID has accelerated the transition to touchless technologies, and removing customer service employee interactions. Right in your hand, you have instant detailed product information by scanning items with your phone, using location data apps, or even helping customers find specific items within a store, and providing alerts for special offers as shoppers walk down the aisle. But what's really changing the industry are apps with integrated mobile payment systems, so no more waiting in checkout lines. But look at Amazon, look at what they're doing. They have completely disrupted the grocery industry with its new cashier-less way of shopping. You just walk out of an Amazon Go store and your receipt is sent to you through the app - it's pretty revolutionary.

Stacy Lake It's pretty incredible. This feels like such a big feat. When we're thinking of clients and this demand, is this something that is being integrated into the programming of many of their stores? Or are we finding that they're kind of dabbling with it, and picking and choosing maybe prototype type locations to try this out at first? Are we witnessing anything like that?

Dana Reeves I think they're testing this out. We're not rolling this out everywhere. We're making small modifications across all the different programs that we work on. So everyone's experimenting with their own idea of what of this transformation.

Andy Hart And even the customer experience, the customer point of view, it's gotta be kind of weird picking stuff off the shelf and walking out.

Stacy Lake That's a huge shift in behavior for everybody. We're talking about customers in-store in some capacity getting their goods, but there's this look towards dark stores and looking at the distribution network overall, right? There's this big shift happening, kind of I'll call it behind-the-scenes where the end consumer might not see so much now, but might be seeing more in the future. Can you talk to us about what we're seeing with dark stores and these micro fulfillment models and what stores are going through to bring these to life?

Tom Reder It comes down to logistics, online presence and trust, really. It's all about the online shopping and home delivery. As clients develop a need, some will some and won't be successful at it. It comes down to how they can best serve the customer. The customer has a preferred shopping experience and then it's how to do that as efficiently as possible.

Dana Reeves The current dark store is less of a store, more of a warehouse. It's longer aisles and minimal displays. The stores used to pack up and pickup online orders. Some of our clients are taking existing stores and turning them into dark stores. So eventually, we will see more of the semi-dark or hybrid approach in which shoppers can submit most of their order online for pickup but still roam the aisles to select items like produce or deli meats, things that you don't want to buy online. And so really this is going to give you the best of both worlds. So fortunately Bergmann has years of experience in warehousing and distribution facilities. Over the last 18 months, last mile distribution centers have really picked up for us, so our warehousing experience has really transferred to help our grocery store clients expand their building needs as they adapt to e commerce shopping demands

Stacy Lake And Andy you really focus on the site/civil side of things, so everything that happens on the outside of the stores. What are your thoughts on the dark store model and, everything that Dana just mentioned and Tom mentioned, and how that is affecting what you look at when you're planning the site?

Andy Hart In terms of the site planning itself, with a dark store, you might have a different amount of parking calculation needed or you might need different graphics circulation based on pickup and takeaway. So it'll be really interesting to see how they go about designing their site.

Stacy Lake Something I know that our team focuses on with a lot of our clients is program management and assisting with some really aggressive programs with rollout, renovation and construction. How has our approach to program management had to change to support this evolution the industry is experiencing? Has it had to change?

Tom Reder I don't think it really has to change. Clients have always been aggressive and they've always been demanding because this is retail, after all. The key to program management is communication, communication, communication. You can't sit on information. You need to keep things moving and have a team around you that understands and feels the same way that you do.

Dana Reeves Right. When I think of program management, I think of things like communication, efficiency and quality. We have really at Bergmann invested in technology that has allowed us to excel at all three. So when we are hit with the volume of work, we have been successful creating field apps tailored to specific programs. These apps can guide anyone through a field survey to capture the correct data and not leave the critical data behind. Our custom apps create a detailed report from the moment we leave the site that either goes to our production team so they can start working right away, or a client so that they can make decisions fast. Another tool is laser scanning, it's now part of our standard practice, it creates efficiency and accuracy during field surveys. It creates immediate Revit models and 360 photographs that we can measure. The data collected is such a time saver throughout the duration of the project.

I honestly don't know how we worked without these tools. I mean, I do because I did it for many years. But we have really streamlined our due diligence process and ability to complete volumes of work accurately and very little time. But ultimately, new technologies save clients time and money, increased quality on their building programs so that they can concentrate on what they want to do, which is selling and delivering fresh groceries to their customers.

Stacy Lake It sounds like going back to Tom, the communication, communication, communication and making that even easier with the technology and the collaboration that goes along with it. That's really interesting. Flexibility is another word that I hear you all talk about quite a bit. It seems to be key for these stores, especially in this industry, Tom, to your point, it's retail, they have to be nimble, they have to flex with things and from my own personal experience as a shopper, I feel like the stores I go into are constantly changing things around, right. The aisles are moving or they have the hot prepared foods now in one spot where they didn't before. They're trying to find different ways to best serve their customers. What are your observations with that? This type of movement has a lot of impact on the mechanicals, the store design, the electrical. How do we make sure we plan for this with our clients?

Tom Reder Retailers that sit stagnant or lose focus on their customers seem to go away, and then they are not our clients anymore. Planning really comes down to the experience, to our experience and a little innovation. You can't and probably shouldn't try to plan for every possible outcome. But you can certainly use your experience to guide the client toward a logical and reportable decision when it comes down to what we refer to as change management. That's what retail is.

Dana Reeves Honestly, I think our clients are very smart and plan for trends and renovation. So the life cycle of change in a typical retail store happens every five to seven years. And we're always renovating for our clients. To be very technical, and you mentioned mechanical systems and plumbing and such. There are systems that you can use for plumbing, electric and refrigeration such as flexible refrigeration drops, vacuum drainage, which would eliminate and in-floor drainage. These things are not typical, they're costly, but if a client is concerned with executing future renovations quickly in special circumstances or for a very specific market that they want to be in, we have suggested and implemented the systems.

Stacy Lake We're thinking about the inside of the stores and then there's a lot happening again on the exterior, the outside of the stores. And Andy, something that we've talked quite a bit about recently is this opportunity for grocery stores to benefit from increased adoption of EV, electric vehicles. Can you share some more about this? I find this really intriguing.

Andy Hart A new study by University of California Berkeley, found that due to the technology advances, and the reduced cost of batteries, that these things can support all vehicles being electric by 2035. Even the new electric vehicles today have ranges of over 250 miles, which is more than a typical daily commute for anybody. Not to mention the quick charging being offered now on vehicles. To meet also the federal government is looking at trying to improve these conditions as well and they're looking to have a net zero emission from vehicles by 2050. And obviously in order to meet this goal, a large amount of the transportation sector needs the electric vehicles to be part of that transportation and part of Biden's transportation bill even includes funding for and plans for over 500,000 new electric charging stations. So where do these all go? Where could the customers get their charging? More retail outlets will need to be providing more than electric charging stations to improve the customer experience as well as support their own sustainability initiatives as well.

Giant Food before the pandemic had already begun providing Volta EV stations at their Mid-Atlantic stores and they're free as well. So it even helps the customer to get prepared for the electric vehicle. And like I said before, support giant eco-friendly charging and their sustainability. Specifically around cleaner transportation and energy and greenhouse gas reduction. On the transportation side, we've been working with the national distributor that's been providing EV readiness to their development sites. They're investing in placing all the infrastructure in the ground as needed to provide EV charging for their delivery vehicles in the very near future. This is really becoming a new advance that retailers want to be ready for.

Stacy Lake I'd imagine ,too, as grocery stores are seeking different types of sites to be a part of, we see them going into mixed use areas. That alone is a call for, especially on the consumer side, putting in these charging stations, I'm sure.

Andy Hart Absolutely. And I think as the technology advances. Right now, electric vehicles are probably less than 2% of the overall vehicles on the road. It's going to be kind of interesting to see, customers buying electric cars. You might be a little weary, like "Where do I charge my car, oh, my God, I'm getting low." It's like a cell phone - you get down to 25% and you're like, "Where's the nearest plug? I gotta plug in." If these charging stations can be available, like at a Walmart. Walmart's are suburban, mostly, they're all along highways. So even if you're going on a trip with your family during the summertime, you know that, hey, I can always stop, get some lunch at a Walmart and plug in while I'm there. So it's kind of an interesting thing.

Stacy Lake There are some pretty amazing trends happening in this industry. Thinking about the relationships that we have with our grocery clients, what are each of you most excited about as we continue on through this next year?

Tom Reder The past year, we never stopped moving, we never stopped working. We adapted, but mostly, I think everybody just wants to meet in person again.

Stacy Lake That in-person collaboration, connecting with the clients?

Dana Reeves I do like connecting with our clients in person. Face time is always preferred. But grocery stores are not that different from any other retailer. They need to keep up with their customer expectations. Right now, as we come out of COVID, the changes are trending faster than normal, even when we admit how fast retail changes. But trust is important, brand relationships are important, and Bergmann is no different. We need to maintain our relationships with our clients by performance and competence. We can't wait for the next challenge they give us.

Stacy Lake Staying ahead of the curve. Andy, what are your thoughts?

Andy Hart Kind of on Tom's same vein, getting all the team back together to work together, collaboratively in one building, it's great to have that ability again. I'm looking forward to be able to do that, again.

Stacy Lake I'm sure the clients are eager for that, too, and the rest of the team members, because it takes a village. I think that's one of the things that I've learned when chatting more with all of you and the work that goes into our grocery clients. Folks from across all of our disciplines, from every aspect of the architecture, interior design, engineering side of things. So to get everybody back together, I'm sure that will help. This is clearly an exciting industry. A number of expansive topics that we could delve into for hours, but I think this was a really great overarching summary of what you all are seeing. Thanks so much for sharing your perspectives. Is there anything else that you wanted to share before we signed off?

Dana Reeves No, I think we've covered it. There was a lot of grocery knowledge, right?

Stacy Lake Thank you, all three of you. And to our listeners, thanks for joining us for this episode of Insights by Bergmann. As always, this and all of our episodes can be found on our website at bergmannpc.com/podcast or on your favorite streaming apps, including Spotify, Apple, Breaker and a lot more. And you don't have to miss an episode, so visit our website and sign up for emails. Every time we'll release a new podcast you'll get a little love note in your inbox from us. Thanks for spending time with us and have a great day.