Grocer, Who’s Watching the Store When You Should Be Watching the Customer?

 

The Grocery Industry Has Become Exceptionally Good at Watching Shelves, Categories and Inventory—and Surprisingly Bad at Watching Where the Customer Is Going

You have all heard the old grocery adage: “Stack ’em high and let ’em fly.”

For generations, that was grocery retailing in a nutshell. Keep the shelves full, keep the displays attractive, keep the price tags accurate, manage the categories and let the customer do the rest.

But what happens when the customer stops coming?

That is the question grocery retailers should be asking today.

Because the grocery industry has become extraordinarily sophisticated at watching the store. Technology can monitor shelves, inventory, pricing, planograms, promotions, shrink, replenishment and even whether a particular SKU is sitting exactly where the category manager says it should be.

But who is watching the customer?

And more importantly: Who is watching where the customer is going when they leave the grocery store?

That may be the most important question facing traditional grocery retail today.

The Grocery Store Can Now Watch Almost Everything—Except the Most Important Thing

Consider how far grocery technology has come.

Autonomous shelf-scanning robots such as Tally, powered by computer vision, can move through stores multiple times a day identifying out-of-stocks, misplaced products, pricing problems and shelf conditions. Simbe says its technology now analyzes billions of shelf images and can provide retailers with real-time shelf intelligence.

That is impressive.

And it should be.

Out-of-stocks cost retailers sales. Incorrect prices frustrate shoppers. Poor planogram execution wastes valuable selling space. Phantom inventory—where the system says the product exists but the customer cannot find it—is a very real retail problem.

Technology can help solve these problems.

But here is where I believe the grocery industry needs to take the next step:

A perfectly stocked shelf does not guarantee a sale.

A perfectly executed planogram does not guarantee a customer.

A perfectly managed category does not guarantee relevance.

And a perfectly accurate inventory count does not tell you why the consumer decided to buy dinner somewhere else.

That is the distinction between watching the store and watching the customer.

The Legacy Grocery Model Was Built Around Departments

Traditional grocery organizations are still heavily structured around departments and categories:

Produce.

Meat.

Seafood.

Dairy.

Frozen.

Grocery.

Bakery.

Deli.

Center store.

Beverages.

Snacks.

Each category traditionally has somebody watching it.

There are category managers.

Buyers.

Merchandisers.

Planners.

Replenishment teams.

Supply-chain analysts.

Pricing analysts.

Promotional planners.

Inventory specialists.

And now there are artificial-intelligence systems, computer vision, electronic shelf labels, robotics, predictive analytics and increasingly sophisticated loyalty databases.

The industry has invested billions of dollars in learning what is happening inside the four walls.

But the consumer doesn't live inside those four walls.

The consumer lives in a world of occasions.

“I need breakfast.”

“I need lunch.”

“I need something for dinner.”

“I need something quick.”

“I don't feel like cooking.”

“I need something inexpensive.”

“I need something now.”

“I want something healthier.”

“I want something indulgent.”

“I want something I can eat in the car.”

Those are not departments.

Those are consumer occasions.

And increasingly, consumers are solving those occasions outside the traditional grocery store.

The Customer Has Not Abandoned Food. The Customer Has Changed Where Food Is Purchased.

This is where the grocery industry needs to look beyond its own aisles.

Circana reports that the average U.S. household shops at 39 unique retailers annually, illustrating just how fragmented and omnichannel today's consumer has become. Its research also finds lower-income households increasing trips to value retailers and dollar stores.

That means the question isn't simply:

“How did we do versus last year?”

The better question is:

“Where did the consumer spend the occasion that we used to own?”

That is a radically different question.

A consumer may buy milk at a supermarket, coffee at a convenience store, lunch at a QSR, snacks at a dollar store and dinner from a restaurant—all on the same day.

The grocery store doesn't necessarily lose the entire consumer.

It loses the occasion.

And losing enough occasions eventually means losing the customer relationship.

Restaurants Are Watching the Occasion

Restaurants have spent years learning that they are not merely selling food.

They are selling:

Convenience.

Speed.

Craveability.

Portability.

Value.

Indulgence.

No cleanup.

No preparation.

Immediate gratification.

That is why the grocery industry's competition is no longer simply Kroger versus Albertsons versus Walmart versus Costco.

The competitive set increasingly includes McDonald's, Taco Bell, Starbucks, 7-Eleven, Dollar General, local restaurants, delivery platforms and virtually any retailer capable of solving a food occasion.

Circana reported U.S. foodservice operator spending of $357.3 billion for the 12 months ending June 2025, up 3.7% year over year.

Meanwhile, convenience stores have been quietly transforming themselves into foodservice competitors.

According to NACS, U.S. convenience-store foodservice represented 28.5% of in-store sales and 38.9% of in-store gross profit dollars in 2025. Prepared food accounted for 73.9% of convenience-store foodservice sales.

Think about that.

The convenience store used to be thought of primarily as a place to buy gasoline, cigarettes, beverages and packaged snacks.

Today, prepared food—including pizza, chicken, burgers, sandwiches, wraps and salads—is one of its most important economic engines.

The c-store didn't simply add food.

It began competing for food occasions.

Then There Is the Dollar Store

Dollar stores represent another lesson grocery retailers should be studying.

Their proposition is brutally simple:

Value + Convenience + Small Basket + Immediate Need.

Circana specifically identifies dollar stores as value-oriented formats serving frequent, small-basket trips and notes that lower-income households are increasing their trips to value retailers and dollar stores.

And Dollar General's fiscal 2025 numbers demonstrate the scale of consumables within that business: consumables generated approximately $35.1 billion in annual sales, representing the company's largest merchandise category.

So while traditional grocery retailers are asking:

“How do we optimize this category?”

Dollar stores are also asking:

“How do we make this trip easier, cheaper and faster?”

Those are very different questions.

The Grocery Industry's Technology Trap

This is where technology can become both a solution and a distraction.

Technology is terrific at answering questions such as:

·       Is the SKU on the shelf?

·       Is it in the correct location?

·       Is the price tag correct?

·       Is the shelf full?

·       Is inventory available?

·       Is the promotion executed?

·       Is the planogram compliant?

·       Is there phantom inventory?

·       How much shrink occurred?

But those questions are largely inside-the-store questions.

The next generation of grocery technology must answer questions such as:

·       Why did the customer come in?

·       What occasion were they trying to solve?

·       What did they buy?

·       What didn't they buy?

·       What did they substitute?

·       What did they buy elsewhere?

·       How frequently are they visiting restaurants?

·       Which meals are migrating to convenience stores?

·       Which occasions are migrating to dollar stores?

·       Which grocery trips are becoming smaller?

·       Why are shoppers making more frequent quick trips?

·       What does the customer consider “value” today?

·       What causes the customer to abandon a planned purchase?

·       What would have made the customer buy dinner at the grocery store instead of a restaurant?

That is customer intelligence.

And it is fundamentally different from inventory intelligence.

The Consumer Is Already Sending Grocery Retailers the Signal

Circana has reported that grocery quick trips increased 8.9%, while shoppers purchased 11% fewer items per trip. It also found consumers purchasing more perimeter items—including deli-prepared and heat-and-eat foods—on those quick trips.

That should set off alarms.

The consumer is effectively saying:

“I don't necessarily want to shop your entire store. I want to solve today's problem.”

That is an enormous distinction.

The traditional grocery model was built around basket building.

The emerging consumer is increasingly interested in occasion solving.

And the retailers that understand that difference can build entirely different businesses.

Grocery's Opportunity May Actually Be Sitting in Its Own Deli

There is an important irony here.

Grocery retailers may not need to become restaurants.

They may need to become better at being grocery retailers that understand foodservice.

FMI reported that consumers increasingly view deli-prepared foods as an alternative to restaurant meals, with the share substituting deli-prepared foods for restaurant meals more than doubling from 12% in 2017 to 28% in 2025. FMI also reported retail foodservice dollar sales of $52.1 billion over the latest 12-month period covered by that research.

That is not a side business.

That is a strategic opportunity.

But it requires a different mindset.

The deli cannot simply be managed like another department.

A hot bar cannot be treated like canned soup.

A prepared sandwich cannot be managed like sliced cheese.

A rotisserie chicken is not merely another SKU.

These are meal solutions.

They compete directly with restaurants.

And the consumer judges them accordingly.

The Real Question: Who Is Watching the Migration?

Here is my challenge to grocery executives:

Imagine having a dashboard that tells you every out-of-stock item in your store within minutes.

Now imagine having another dashboard that tells you:

“Your customers purchased 14,000 fewer dinner occasions from you this month—and here is where those occasions went.”

Which dashboard would you rather have?

I know my answer.

I want both.

Because operational excellence matters.

But operational excellence without consumer relevance can simply make you more efficient at operating yesterday's business model.

The New Grocery Scorecard Should Include the Customer Outside the Store

The grocery industry needs to expand its definition of store intelligence.

I would build a new Customer Migration Scorecard measuring at least five things:

1. Occasion Migration

Track which breakfast, lunch, dinner and snack occasions are moving to restaurants, convenience stores, dollar stores and other channels.

2. Trip Migration

Measure not just transaction count but where trips are moving.

A declining grocery trip may not mean consumers are eating less.

They may simply be shopping elsewhere.

3. Basket Migration

A shopper may still visit your store but purchase fewer items.

That matters.

Circana's data showing more frequent quick trips but fewer items per trip should force retailers to examine exactly what is disappearing from the basket.

4. Meal-Solution Performance

Stop measuring prepared foods only by department sales.

Measure:

How many meals did we solve?

How many meals did we lose?

How much restaurant business could we capture?

5. Competitive Occasion Intelligence

Every grocery retailer should know its top 20 occasions that are being lost to:

Restaurants.

QSRs.

C-stores.

Dollar stores.

Club stores.

Delivery.

Other grocers.

If you don't know where the customer went, you don't really know why your business changed.

“Stack Them High and Let Them Fly” Needs an Upgrade

The old grocery mantra still matters.

A customer cannot buy what isn't available.

Technology that reduces out-of-stocks is valuable.

Robotics and computer vision can make stores more accurate and give associates more time to serve shoppers. Simbe, for example, says its deployments have produced measurable reductions in out-of-stocks and manual shelf-auditing time at participating retailers.

But perhaps the new mantra should be:

“Know the customer. Solve the occasion. Make it available. Make it valuable. Make it easy.”

That is a much bigger assignment.

The Grocerant Guru® Perspective

I have long argued that the Grocerant Niche is about the blurring of food channels.

The grocery store is no longer competing only with the grocery store.

The restaurant is competing with the grocery store.

The convenience store is competing with the grocery store.

The dollar store is competing with the grocery store.

And increasingly, every retailer that can provide a fresh prepared Ready-2-Eat or Heat-N-Eat solution is competing for the same consumer occasion.

So, yes, watch your shelves.

Use technology.

Deploy artificial intelligence.

Use computer vision.

Eliminate phantom inventory.

Fix pricing errors.

Reduce out-of-stocks.

Optimize planograms.

But don't confuse store intelligence with customer intelligence.

The shelf can tell you what happened to the product.

The POS can tell you what sold.

The category manager can tell you what happened to the category.

But only customer intelligence can tell you:

Why didn't the customer buy from you?

And even more importantly:

Where did they go instead?

That is the question grocery retailers should be watching.

Because the future of grocery retailing may not be determined by who has the best-managed store.

It may be determined by who understands the customer well enough to keep the customer from leaving the store in the first place.

Remember: Success does leave clues.

The clue grocery retailers need now may not be sitting on the shelf.

It may be walking out the front door.

Are you ready for some fresh ideations? Do your food marketing tactics look more like yesterday than tomorrow?

Visit Foodservice Solutions® for more information or contact Steve@FoodserviceSolutions.us.

The Grocerant Guru®
Steve Johnson
Foodservice Solutions®