Thriving in the New World of Grocery: 5 Keys for Retailers
Eighteen major grocers have gone bankrupt since 2014, and that’s not because people have stopped eating. Retailers, operating in a marketplace that has never been more competitive (thank you, internet), are caught up in a foundational shift led by Millennial consumers that has many struggling to successfully activate an increasingly diverse and demanding shopper base.
With nontraditional grocery continuing to steal market share – gaining a healthy 6 percent since 2006, with sales for dollar formats up 6.6 percent in 2017 – traditional retailers will have to rethink their marketing and operational strategies to maintain their competitiveness and protect their market position.
As shoppers engage in an omnichannel pursuit of quality and value, convenience and experience have never been more important. Add to that shoppers’ expectations for localization and personalization – seeking the ultimate "me" experience – and retailers have their work cut out.
So what should food retailers do to compete successfully in the new reality of grocery?
Eliminate price image as a vulnerability
There are those behemoths in the space that have carved out price as their primary differentiator, and we all know who they are. But while they’ve hung their hats on a lower price image, that’s not a viable option for most.
Therefore, retailers must eliminate price image as a vulnerability by excelling in other areas where they can compete. This could be service, produce and perishables, meal preparation, or even connection with the community. By focusing on delivering real value and a quality shopper experience, it’s possible to avoid a price-only comparison and the challenges that come with being perceived as a higher-priced provider.
Develop scalable omnichannel capabilities
Simply enabling shoppers to purchase groceries online isn’t enough for retailers to be competitive. To engage and keep shoppers, retailers need to provide them with a superior experience that’s both seamless and transparent – providing maximum visibility into the products they want to buy.
Omnichannel engagement must help shoppers find products, understand products, get products, pay for products – and return products. It must be an interrelated, interconnected experience that absolutely has to include a shopper-friendly returns process.
Reimagine the role of physical stores
With consumers enjoying near-immediate fulfillment through other channels, keeping them coming back to the store requires that retailers offer shoppers a transparent, experiential environment in which they can quickly learn about and acquire the products they want and need. Shoppers, while in store, must have a personalized experience that concurrently meets their demand for convenience.
To satisfy and retain shoppers, retailers will need to reallocate and repurpose available space to ensure that their fulfillment capabilities align with shopper expectations. Achieving the needed efficiency will, in turn, create loyalty-building differentiation.
Increase the presence of private label products
According to the “2018 Total Consumer Report” from Nielsen, private label sales grew three times faster than those of national brands from 2016 to 2017. Private label not only drives additional margin, but this increasingly popular “alternative” also represents a cost-effective strategy for growth in the meal-kit market.
At the same time, shoppers are becoming more and more brand-agnostic and turning away from big brands toward those they believe can best help them meet their demand for more fresh, organic and natural foods. As private labels already overindex in fresh food categories, retailers need to optimize their store-brand assortment and ensure that these products are given appropriate shelf space.
Evolve with changing dietary trends
Time is the new currency for consumers, and they’re actively looking for assistance with faster, easier meal preparation. Retailers that want to win must make it easier for shoppers to feed themselves and their families with a robust complement of prepared offerings, while also providing guidance and assistance on food selection and at-home preparation.
Speed isn’t shoppers’ only consideration, though. According to Inmar’s “2017 Syndicated Data Study,” 52 percent of shoppers said that they always read food product labels, while 20 percent reported following a special diet such as gluten-free, Paleo or vegetarian. Retailers looking to capture greater “share of stomach,” and maintain general market share, must maximize product transparency and maintain an assortment that recognizes shoppers’ focus on better diet and nutrition.
It’s clear from what’s happening in the marketplace that the days of grocery retailers winning on gross margin or simply spending their way to prosperity are over. With estimates pointing toward almost 20 percent of groceries being purchased via ecommerce by 2022, retailers must take significant steps – sooner rather than later – if they’re to effectively address a host of challenges that are only going to grow.
Responding to these challenges won’t be easy, but if retailers can connect supply chain from production to consumption, if they can deliver value alongside convenience and if they can differentiate themselves from the competition by providing a truly superior shopping experience, they’ll not only survive, but also thrive, in the new world of grocery.