Grocery Wars: How U.S. Supermarkets Can Stay Relevant and Get Ahead

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Grocery Wars: How U.S. Supermarkets Can Stay Relevant and Get Ahead

09/29/2015

By Eric Shea, VP of Technology at Mobispoke

In recent years, the grocery market has undergone dramatic changes to meet the evolving needs of consumers. Traditional supermarkets are scrambling to differentiate themselves and compete -- from the consolidation seen from deals like the recent Stop & Shop-Hannaford buyout to A&P’s latest move to close or auction almost half of its nearly 300 stores -- and they realize they need to change to keep up with the evolving industry landscape.

In fact, a recent report from retail consultancy Willard Bishop, JLL predicts that by 2018, traditional supermarkets' share of grocery dollars will have shrunk 300 basis points to 37.2 percent, as customers increasingly look to spend their dollars at fresh formats like farmers markets, limited assortment stores such as Trader Joe’s and e-commerce sites such as Amazon.

The main motivators driving this shift are convenience and the on-demand economy. Consumers are turning to options that offer easy and fast service without sacrificing quality such as Peapod or Instacart, and even Blue Apron, a leading recipe and fresh ingredient delivery service. Ultimately, in order to get consumers back in stores, food retailers need to rethink the traditional model and look for innovative opportunities in-store to promote convenience and re-engage shoppers.

Think Beyond the Aisle

The traditional grocery store set-up is familiar to most, with aisles and aisles of food separated by category, from produce and meats to canned goods and baking supplies. Historically, supermarkets have relied on flash sales and showy displays to engage shoppers in-store. To capture the attention of the modern shopper, however, grocery stores need to rethink their strategy to meet the needs of today’s connected, on-the-go consumers.  

Food retailers need to innovate in order to bring greater convenience to their shoppers, and for some this might mean moving away from the traditional supermarket model. In the U.K for instance, grocery giant Tesco launched Tesco Express and Metro chains that offer limited selections and greater grab-and-go options, catering to busy customers in town or city centers. For U.S. grocery stores, now is the time to rethink the in-store experience — whether building out the prepared food section to better meet consumers’ desire for accessible, ready-made meals that are fresh and healthy, or creating new shopping models, such as offering in-store restaurant dining options for consumers who want to be able to have a sit-down meal. By providing a mobile app that allows them to easily “shop” while they eat and have their groceries ready when they finish up their lunch or dinner, supermarkets have the opportunity to redefine the future of how people shop for groceries. As the on-demand economy continues to grow, consumers want to see service options that meet their evolving needs and cater to their lifestyle.  

Personalize the Experience

For today’s connected consumer, personalization is key to engagement. For grocery stores, geo-location tools like iBeacons can be game-changing – allowing stores to offer customized recommendations, marketing materials and more through mobile apps, interactive displays and online sites. While geo-location tools have been tested by some chains, both in the U.S. and Europe, they have mainly been used as a channel to push promotions and deals – the full potential of these applications has yet to be realized. For supermarkets, which historically have low price markups, and thus little return on actual products purchased, their business model relies on volume. Because of this, the typical “coupon approach” of iBeacons can actually hurt them by cutting in on the little profit they make from product sales. Instead, supermarkets should look for ways to make these personalization tools enhance the shopper experience, while simultaneously focusing on convenience.  

Whether using mobile applications to help customers find items in the store, or letting customers choose what recipe they want to make and having an application that guides them to each ingredient, there are a number of use cases in which mobile applications can ease the consumer journey in-store. Brands like Trader Joe’s and Whole Foods have already started to explore this holistic approach to the customer’s food journey by sharing recipes and featuring products in their marketing materials and on store websites. Supermarkets can take this a step further by incorporating these recipes into a mobile application, allowing consumers to shop by recipe, providing recommendations and directing them to featured products. Geo-location tools can aid food retailers in taking a more active role in how consumers are cooking, and therefore buying food.

Maximize Efficiency with Connected Associates

Beyond personalization, retail technology can also be used in-store to maximize efficiency among employees. Given that the supermarket model depends on selling a large volume of goods, having up-to-date insight into store inventory is crucial to maintaining strong sales. By arming store associates with interactive tablets that can provide insight into what's in each aisle and on every shelf, they can maintain better stock levels, better identify inventory discrepancies and ensure that consumers find the products they are looking for quickly and easily.

For example, inventory levels can often become chaotic during holidays like Thanksgiving or Christmas. By providing store associates will real-time inventory information, they can make sure there is no shortage of Thanksgiving turkeys or Christmas hams when consumers come racing down the aisles. Having access to this inventory data can also help stores predict future inventory orders, so that when a heat wave rolls in, they know to stock up on popular items such as ice cream and bottled waters.

Convenience and the on-demand economy are driving a major shift among consumers when it comes to their shopping habits. Today’s supermarkets need to reimagine the in-store experience and leverage retail technology to increase options, personalization and efficiency, in order to get ahead of the competition and drive consumers back to the aisles in-store.