Progressive Grocer's 92nd Annual Report: Anchored Amid Waves

Industry stakeholders looking for calm waters may have to wait until the back half of this decade, given the waves of disruption and change that have continued without much of a break since 2020. Progressive Grocer’s 2025 State of the Industry Survey affirms that grocers are navigating a still-choppy environment as best they can by focusing on what they do best: serving consumers in a customized way and in a manner that distinguishes their unique operations. That doesn’t mean, however, that today’s retailers aren’t investing in innovations – they are, but doing so in a thoughtful, practical way.As they contend with shifting winds that whip up challenges, whether related to trade issues, lingering inflation, increased competition across the omnichannel, or some other emerging storm, grocers surveyed by PG’s research team share their perspectives and the ways that they’re moving their businesses forward through a combination of pragmatism and personalization. Some of those insights may confirm the course that you’ve set on your own journey, while other findings may prove surprising.Scanning the HorizonStarting with the current outlook and future forecast that are so important in setting direction amid waves of uncertainty, PG’s survey shows that grocers remain in caution mode, a mindset that should be pretty familiar by now.Such wariness is evident in one key finding – that 60% of retailers feel optimistic, compared with 70% who maintained a positive outlook last year. Also telling is a data point showing that the percentage of respondents who feel “very” or “extremely” optimistic about the future dropped 27% year over year. A variety of macro and micro factors are fueling those tamped-down expectations. Pricing is still top of mind, as 76% of grocers anticipate that overall inflation will increase in 2025 and an equal number (76%) believe that operational costs, such as energy, fuel and supplies, will go up. About half of respondents cite other issues likely to affect their businesses, including marketing costs (51%), capital expenditures (49%), competition (46%), supply chain disruptions (47%) and technology spend (46%). A few years after acute labor shortages and supply chain bottlenecks made headlines, those issues remain near the top of lists of shared concerns: 54% of respondents say that labor is the No. 1 topic that keeps them up at night, while 49% list wages and benefits, and an equal 49% mention supply chain disruptions. The tariff situation, which has been volatile since President Trump announced a series of North American and global tariffs and then delayed some of them, spurred 32% of survey participants to report that trade issues are worrisome to them.Consequently, as they remain cautious and pull back from large-scale investments like new stores and expansive technology systems, 39% of grocers polled by PG say that they expect a downward shift in their net profits this year. That’s a rather substantial increase – 19% – from last year’s survey.Anchored by Store ExperiencesIn this often tempestuous operating environment, grocers are striving to right their businesses by focusing on the perennial strategy of winning in store. According to this year’s Annual Report, grocers are deploying and updating a variety of in-store tools as they work though challenges from different directions.Some of those tools are time-tested approaches. For example, an overwhelming 85% of food retailers say that in-store signage is their main consumer and advertising strategy, underscoring its perceived effectiveness. That contrasts with their take on retail media: Despite the steady drumbeat of retail media in the grocery and CPG sectors, just 53% of respondents say that retail media is a primary marketing tactic right now, a 21% slide from 2024’s survey.That’s not to say that retailers are eschewing tech in their marketing efforts: Two-thirds (63%) say that email and social commerce marketing are important, and 53% believe that mobile app marketing is an important element.As they rely on in-store signage to get marketing messages across to their customers, retailers are doubling down on store experiences in other ways. In-store support services continue to be a leading method for consumer engagement, according to PG’s survey, topping social media and loyalty programs. As far as departmental services go, in-store butcher counters remain a point of difference, with 61% of survey participants saying that such offerings are paramount. Rounding out the top three services are community programming, cited by 54% of retailers, and seafood specialists, mentioned by 32% of grocery pros. Some service areas have fallen a bit out of favor this time around, including the use of on-site wellness experts (down 18 percentage points), informational kiosks (down 22 percentage points), certified chefs (down 16 percentage points), and programs for children and students (down 21 percentage points).Of course, the store experience hinges on the actual store, and, to that end, the “box” itself is essential. Even if retailers are more cautious and not investing in as many new store builds, remodels and investments in existing stores come in first on the list of retailers’ best investments over the past one to three years, ahead of tech investments and upgraded pricing and promotional solutions. Underscoring that emphasis, respondents projected that store refreshes and improvements are likely to be their best investment in the next one to three years, too.Personal DirectionAs they focus on store experiences, grocers keep people who experience their stores top of mind. Shopper personalization across the omnichannel, including the physical store and digital space, is increasingly important to retailers polled by PG.On the digital front, grocers believe that their customers value personalized offers available on mobile apps. Nearly half (47%) of survey respondents report that personalized discounts available on their store’s app are important to shoppers. Interestingly, the number of retailers who report that loyalty card data helps them boost personal engagement with shoppers fell this year by 17 percentage points.Meanwhile, the overarching idea of personalization can be quite real. According to PG’s survey, the importance of online virtual assistants and chatbots dropped 16 percentage points compared with 2024, as shoppers and grocers embrace forms of human interaction. One-to-one engagement can be powerful and a business differentiator in the store as well. A solid 75% of grocers surveyed agree that in-store service is a primary way to engage shoppers, and 71% say that customer relationship marketing is crucial.Captains of Their Own DestinyGetting personal extends beyond the retailer-customer relationship as more grocers tout their own unique identities to stand apart in a competitive marketplace.On the shelves and in displays, signature and private label products are increasingly pivotal to food retailers trying to distinguish their business. In fact, nearly eight out of 10 grocers prioritize signature products, per this year’s survey, and 73% say that private label products are a key part of enhancing their retail brand or banner.As macroeconomic conditions remain turbulent, own brands are likely to remain a focal point. Survey respondents list private label as the top category currently driving sales, followed by dairy, center store, frozen foods, and beer, wine and spirits. Retailers predict that private label items are likely to fuel sales growth for the rest of 2025.For some grocers, signature products are turning into signature departments. That’s apparent in the growing emphasis on full-service meat and seafood counters, from-scratch bakeries, and health, beauty and wellness sections.Still, there are some areas where grocers opt for third parties over their own items and services. For instance, although many retailers express dissatisfaction with their current third-party delivery provider, they’re less inclined to invest in developing their own apps, due to uncertain macroeconomic circumstances.Rising Tides Lift All BoatsGrocers that gravitate to the fundamentals of shopper engagement and store experiences are also adhering to principles of community outreach that have served them well over the decades. The 2025 Annual Report shows that retailers appreciate their longstanding role as community hubs and resources.Indeed, 85% of those polled say that community involvement is important to them as they interact with customers. Even the second most popular engagement tactic – the promotion of seasonal events – has a community focus, in that such events are often tied to communal celebrations. More than half (54%) of those surveyed believe that community programs are important in-store services.The notion of community relations includes traditional efforts like the support of local schools, food banks, nonprofits and youth sports teams, as well as educational classes for customers, and special events. In today’s tech-oriented era, the idea extends to online social communities: A strong majority of 85% of retailers polled by PG say that social media is a top channel for customer engagement. Progressive Grocer’s 2025 Annual Report is based on a nationwide survey of industry professionals at national, regional, independent, specialty and convenience stores. Participants included store owners, store managers, category managers, corporate executives, retail/store operations executives, c-suite leaders, and sales, advertising and marketing executives.

Progressive Grocer's 92nd Annual Report: Anchored Amid Waves

Complete Analysis

Related Topics

Business Topic