Dive Brief:
- A new study by IDC Retail Insights and Precima finds that grocery market share is down 29% since 1991, as consumers increasingly turn to foodservice and other establishments to fulfill mealtime needs. The report looks at several aspects of physical grocery stores and suggests how retailers can improve them to keep customers coming back.
- A key challenge explored is how stores can deliver the basics shoppers expect while also satisfying the divergent needs of different shopper segments — for example, boomers versus millennials. The research finds that older shoppers are loyal to established center store brands but value assortment in fresh categories. In contrast, younger shoppers want value-added services, prepared foods, meal kits and e-commerce.
- The report also reveals that 75% of all shoppers come into physical stores looking for deals, but just 60% find what they want. This indicates a need for grocers to better leverage data analytics to understand and amplify their merchandising and assortment.
Dive Insight:
This study hits on several important trends taking place across retail grocery today: the spending shift away from ingredients toward foodservice, meal kits and meal solutions; increasing consumer demand for fresh foods; and the steady growth of online grocery shopping.
It’s important, however, for retailers to carefully balance the basic in-store offer — that is, typical grocery store fare and center store brands that consumers love and have come to expect — with differentiated departments and services that pique consumer interest.
There are several key areas where grocers should be investing to ensure they remain relevant and resonate not only with today’s shoppers, but tomorrow’s as well, the report notes. As center store sales stagnate and shopper demand for fresh foods and better-for-you groceries grows, supermarkets are developing best-in-class perimeter departments. These store sections include fresh produce, fresh meat and seafood, in-store artisan bakeries and value-added products, like prepared foods, meal kits and foodservice departments.
If they haven't already, supermarket operators must increase their online grocery presence. The IDC/Precima study finds that over 20% of shoppers purchase groceries via e-commerce at least once per month. This number is much higher for different consumer segments: families (over 40%), millennials and urbanites (almost 50%), families (over 40%) and high-income shoppers (over 30%). Shelf-stable goods like non-perishable canned, boxed and bottled goods, as well as health and beauty items, have easily transitioned to an online model. In fact, the Food Marketing Institute and Nielsen research projects that 40% of all center-store shopping will come from online shoppers by 2025.
As a result, grocers need to determine how to reinvent existing stores to best serve evolving shopper needs. This could mean reconfiguring physical store space to focus on convenience, providing a stellar assortment in perimeter departments, and scaling back center store aisles where shoppers have less interest in spending time.
Grocers must also balance changes in the store in order to serve different shopper segments. Grocers can’t afford to ignore aging boomers because they remain a huge cohort with significant grocery spending power. At the same time, they must figure out the wants and needs of millennials because they represent the next generation of shoppers. One way to strike this balance is to offer more and unique fresh produce, meats and seafood. Grocers should also focus on specialized assortments, including innovative up-and-coming brands. And even though it's time-consuming and expensive, retailers need to increase their digital touch points, both in-store and online.