Industry Outlook is 'Personal, Digital and Virtual': FMI

Taking a deeper look at the grocery industry and its outlook for the future, the Food Marketing Institute (FMI) has unveiled a new analytic report with suggestions for retail growth strategies.

 

"Food Retailing 2013: Tomorrow’s Trends Delivered Today" examines the future of the supermarket experience through the lenses of grocery demand, consumer trends, merchandising and marketing innovation, and technology, according to FMI. It includes the input of four firms that specialize in analytics and consumer insights -- Booz and Company, Catalina, Crossmark and Nielsen. These companies convened a “think tank-approach” to their findings, which debuted at FMI’s Future Connect professional development conference in Orlando.

 

FMI president and CEO Leslie G. Sarasin presented an overview of the analysis, which will be further explored by the research team in a panel discussion on May 1.

 

Sarasin shared a sobering reality, yet one poised for market possibilities, offering data analytics from interviews among CPG executives and retailers. While consumer demand has remained flat, which is modestly disproportionate to population growth over the past 15-20 years, the industry has witnessed an explosion in its capacity. Sarasin suggested retailers will be evaluating alternative ways to address consumer need for value, convenience and safe foods by focusing their growth strategies on the overall shopper experience.

 

“[Through this analysis], the leaders in our industry kept coming back to three key words to describe the future food retail experience: personal, digital and virtual,” Sarasin noted.

 

The themes of the analysis will be further explored in a series of webinars slated for late spring through summer 2013. Those themes and corresponding webinars include the following:

 

 

There are a broad range of key drivers that will determine the success of in-store marketing and merchandising programs over the next decade. Today, price and convenience continue to trump other consumer trends in garnering shopper attention in store. Outside of HBC and pharmacy, health and wellness-based themes are the third most common platform for displays behind price-only and snack/meal solutions.

 

“Food retailers have an opportunity to better leverage health and wellness to appeal to the growing demand among shoppers," observed Alex Siskos, VP, business insights at Crossmark. "Enhancing fresh food offerings in a unique and compelling way, as well as providing more overall convenient, immediate solutions for shoppers will be key growth enablers. These priorities, in conjunction with improved shopper engagement, digital/mobile integration and greater precision targeting will create the next generation shopper experience that goes well beyond the traditional circular and shopping list.”

 

 

 

The news that consumption is flat is most evident in the fact that, despite supermarkets' capacity additions, industry growth was entirely captured by other formats in the last 12 years. In particular, dollar stores tripled in growth from 2000 ($8 to $24 billion in U.S. grocery sales). Still, retailers will look to online growth in the near future, as the report conservatively projects that, over the next 10 years, penetration of groceries ordered online will encroach on overall in-store sales by 11 percent. With an industry average profit margin of 1 percent, the market share erosion is significant for the food retail industry.

 

“Developing consumer attitudes will reshape the future of food retailing to include shopper aspirations,” said Nielsen SVP, consumer and shopper insights, Todd Hale. “Retailers will need to align formats, assortment, merchandising efforts and communications as shoppers evolve.”

 

 

 

The analysis identified technology as the most critical catalyst of change in grocery retailing today and indicated retailers will need to shift focus as shoppers' traditional "path to purchase" evolves. Ninety-two percent of c-level executives across retail and CPG manufacturing believe mobile technologies are already deeply transforming the shopping experience. “As smartphone use and sophistication grows, we'll see more people depend on their smartphones for every shopping interaction - in-store navigation, mobile wallet payments, loyalty programs, and price comparisons, among others,” said Nick Hodson, partner at Booz & Company.

 

Evolving smartphone technology will also bring an explosion of “big data” that can be used to reshape shopper engagement strategies; however, the analysis revealed most retailers are unsure about how to scale these analytics and apply them meaningfully in the long term. They are also struggling with how to deliver an overall “seamless” experience across multiple retail channels, which is core to shopping simplicity.

 

“Creating a seamless shopping experience across bricks and mortar, bricks and clicks, and online will require most retailers to retool almost every aspect of their business,” said Thom Blischok, chief retail strategist at Booz & Company. “Success will require significant partner collaboration, especially in the supply chain; multichannel marketing, localization, and assortment; and true integrated management of customer relationships.”

 

 

 

According to the analysis, instead of focusing on short-term volume, the most important marketing trend for both manufacturers and retailers in the foreseeable future is building loyalty and long-term ROI. To accomplish this, constituents will need to use shopper data wisely, concentrating on offer personalization. “In the coming years, retailers and brands will work in concert to provide exceptional services for consumers, including personalized shopping lists, brand savings alerts, mobile checkout, recipe services, and product ratings and reviews,” said John Caron, VP of marketing for Catalina. "It will be about delivering the right message at the right time through the right medium...and delighting the consumer."