Micro-grocers, food delivery and the rise of 18-hour cities

March 30, 2015

Where Millennials and Gen Z decide to live and work will color the future of food retail and foodservice.

Originally published in the Facts, Figures & the Future weekly e-newsletter. Click here for a free subscription.

By tracking human elements in urban markets – such as location choices, the labor force and demographics - PricewaterhouseCoopers (PwC) and the Urban Land Institute (ULI) project U.S. real estate trends.

To Facts, Figures & The Future (F3), the prospects they cite bear major implications for retail food, foodservice and food delivery. We believe these trends impact more than the issues of site selections and clusters to build food distribution and marketing efficiencies. In our view, if supermarkets were to apply these insights to their own decisions on store formats, operating hours, product mix and pricing as well, they could more effectively sync food offers to the life rhythms and demands of populations within specific trading areas.  

To arrive at their forecasts, PwC and ULI also examine financial factors such as consumer savings and capital flow from around the world; and physical traits such as water (looming examples are California’s current severe drought and the 14-year drought in the Colorado River Basin), power and communications grids, and transportation infrastructure (which desperately require renewal in many parts of the United States). Indeed, they connect the grade of D+ that the American Society of Civil Engineers gives U.S. infrastructure to Millennials’ intolerance for congestion and delay. 

“If the pursuit of Millennials is central to…your firm’s business strategy, that’s alarming. Businesses are playing close attention to commutation patterns of employees, realizing that the people you want most are also the most ‘footloose’ as employees,” cautions this 36th consecutive annual study, Emerging Trends in Real Estate 2015. For food operators that will need Millennials and Gen Z as both workers and primary customers, this is a key concern, says F3.

“The back-to-the-city movement is not all that’s happening,” states the report, which notes the appeals of “edge-city” and suburban locations with “good bones” and “18-hour city” energy that “support live/work/play interactions” and combine transit and walkability.

Declaring “the 18-hour city comes of age,” PwC and ULI observe, “no longer is it accepted that only the great coastal cities can be alive around the clock and on weekends. Downtown transformations have combined the key ingredients of housing, retail, dining, and walk-to-work offices to regenerate urban cores…deep into the evening, the mix of shops, restaurants, and entertainment truly generates excitement.”  It cites Nashville, Greenville, Raleigh-Durham, Charlotte, Denver, Brooklyn, Portland and Atlanta as promising markets.

F3 identifies early signs of supermarkets and foodservice operators meeting the evolving food-consumption needs in areas that boast “18-hour energy” or even more robust “24-hour energy.” These efforts (bulleted below) relate largely to convenience. Yet coupled with insights on the food inventiveness that younger consumers value, can create compelling round-the-clock formats in the right places attracting younger consumers to live and work. A few examples:

  • Small-format grocers are filling in dense markets. These stores will increasingly offer personalized experiences enabled by technologies, and speedier checkouts enabled by mobile payments.
  • Peapod has a mobile app that allows people to order groceries at commuter rail stations and schedule home delivery. This is one of many competing methods to appeal to shoppers with delivery or curbside pickup services.  
  • Starbucks will soon test “Green Apron” coffee delivery by baristas in NYC and Seattle. F3 thinks one reason is to capture large-volume corporate orders in office buildings.