Past the Tipping Point

With Amazon’s purchase of Whole Foods Market poised to change food retailing forever, grocers will need accurate insights on what Nielsen is calling the total consumer to stay relevant and profitable.

“Retailers and brands are feeling pinches – we wanted to take a more holistic view of growth,” explained Jordan Rost, VP of consumer insights at Schaumburg, Ill.-based Nielsen, which on Tuesday rolled out its Total Consumer Report at the market researcher’s CoNEXTions conference in Los Angeles.

With total food and beverage sales down almost $3 billion in the first quarter, supermarket retailers are under extreme pressure to tighten their once exclusive lock on grocery sales, now splintered among new experiences like meal delivery kits, click-and-collect and online grocery shopping.

Nielsen’s new insights aim to illustrate which channels consumers are shifting their dollars to, which categories are already owning total dollar sales across online and in-store, the factors that digitally engaged shoppers look for when shopping online, and how fresh and deli prepared items will be one of the most critical growth strategies for food and beverage manufacturers and retailers.

“We’re finding some pretty astounding shifts in the growth story,” Rost told Progressive Grocer during the conference, “1 to 2 percent topline growth overall, 90 percent of it from digital channels.”

Today, ecommerce owns approximately 6 percent of total sales, Nielsen reports, with nonfood categories leading in share: beauty (28 percent), pet care (27 percent) and health care (14 percent). 

The share of online fresh foods is 3 percent or less, a number that Amazon undoubtedly is aiming to boost. But consumers, by and large, still want the experience of selecting their fresh items by hand. According to Nielsen, fresh categories are more likely to be included in click-and-collect purchases when compared with the average ecommerce order, such as fresh meat (223 percent more likely), produce (180 percent) and deli (163 percent).

As such, fresh food, including fresh prepared, presents the biggest growth driver for brick-and-mortar sales, which are growing at a rate of 4 percent across total food, while dollar sales at low-performing retailers in fresh are declining 1 percent across the total store, Nielsen reports.

Meanwhile, shoppers who are already digitally engaged online identify assortment (76 percent), convenience (71 percent) and personalization (61 percent) as top motivators for shopping online – an indicator of long-term digital adoption that should be front and center for retailers.

“We’re past the tipping point [for digital],” Rost says. “The new story is, where do we go from here, and what does the new collaborative model look like?”

Traditional grocers, he says, need to ask themselves, “How do we think differently about the role we play in people’s lives?”

As of 2016, only 50 retailers accounted for nearly 80 percent of all fast-moving consumer goods (FMCG) sales, one-third fewer than a decade ago. This has shifted the balance of power away from brands and retailers and into consumers’ hands, the Nielsen report notes.

As the grocery retail landscape continues to incorporate digital, there are six core factors in delivering on consumers’ preferences and needs, Nielsen contends, whether they're digitally engaged or digital novices:

• Trust, value and experience: Shoppers demand that orders are accurate, delivered on time, and that no products arrive damaged. Value is centered on promotions that also offer relevant benefits — and not just the lower price. And when it comes to experience, online shoppers are looking for enjoyable and easy-to-navigate platforms.
• Assortment, convenience and personalization: As more shoppers become digitally savvy, it’s important that online retailers are focused in these areas, as they are likely to be key differentiators over the long term.

“Technology is a great amplifier, but you need to start with the core essence of who you are as a retailer,” Rost says. “Technology enables transparency, so it will make a shaky foundation more apparent.”

For retailers and manufacturers alike, the key to growth is understanding the total view of consumers: changing demographics, how they shop online, what factors influence their online purchases, how they eat away from the home and how fresh will continue to drive total store success.

“There’s no one right path to success. What works well for Amazon and Whole Foods isn’t going to work for everyone, but the message is, you need to get in now,” Rost asserts. “The pie is expanding rapidly – it’s not a zero-sum game.”