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Ease v. experience:
How grocery stores are facing off

Ease v. experience: <br>How grocery stores are facing off

By Brad Hanna
EVP | Director of Business Strategy

Depending on how you fill your fridge, you’ve either noticed that your shopping experience has gotten a lot easier than it used to be, or that your hometown grocer has knocked out the health food section to make room for bath bombs and baby clothes.

Maybe both.

The formula for food sale success used to be simple: price plus quality of perishables. Advertise sales, calendarize offerings, repeat. But traditional grocery stores are quickly losing its share of U.S. food and consumable products consumption: last year it dropped 2.5 percentage points, to 35% of the $1.25 trillion market, and forecasts show by 2023, it's share will fall below 33%. And while taste and price are still the most important factors driving food performance today—representing 50 percent of the most important factors modern consumers consider before purchasing—our research shows it’s the other 50 percent that’s shifted, with more emphasis on health benefits, quality, safety, trust and social impact. As a result, grocery chains around the country are standing toe-to-toe on a line that separates their go-to market strategies into two distinct categories: ease versus experience.

Food, Fast and Frictionless

Consumers love an easy button, and many grocery store chains are investing in creating frictionless experiences that center on convenience, presence and value. Walmart is leading this movement with their development of online ordering: in-store, drive-up and delivery services. With more than 3,100 stores participating, the behemoth brand recently announced another 800 stores will offer these services by the year’s end.

Other retailers to watch as they innovate for ease include:

Takeaway: Consumer expectations are going to continue evolving at a rapid pace. A study by Forrester and Digimarc shows that 39% of consumers had left a store due to long lines and 56% said they’d switch stores if a better experience was offered. Grocers that can cater to those expectations with speed and agility will ultimately win.   

An Experience to Remember

On the other end of the grocery retail spectrum are the stores rising to meet the needs of and connect to consumers looking to experience and discover new things, from fresh food to fast fashion. Getting consumers in the store means offering nontraditional retail experiences that may have some consumers doing a double-take as they walk from the store’s bar and past the luxury shampoo aisle to buy their apples.

Evolving grocery store experiences include:

  • Private labels are leading a movement away from single-brand items. Think Kroger’s Simple Truth, which reached more than $2.3 B in sales, or Target’s Good & Gather line that will expand to 2,000 all-natural products by the end of 2020. These private brands act more like consumer brands in their image and propositions.
  • Prepared food has stores like Kroger acting more like a restaurant than a retail store, offering meals, recipes and trends from its concept experience, Kitchen 1883.
  • Restaurants and bars are offering dine-in and drink-up destinations in stores like Wegman’s, Whole Foods, ShopRite and Mariano’s.
  • Fashion apparel like Kroger’s Dip is currently sold in 300 stores, with plans to expand into homewares and furniture in 525 stores this year.
  • Luxury beauty products enticed Hy-vee to take space away from its health market to make space for its Basin and Beauty boutiques, where it sells cosmetics and bath bombs.

Takeaway: As retailers like Aldi and Walmart continue to push for lower prices, grocer retailers must evolve experiences to meet the needs of modern consumers, focusing on other ways to create preference and differentiation. Modern consumers will continue to demand more than just price to compete.

In a joint study with Jeffries and Accenture, we uncovered three next-generation capabilities consistently seen across brands with sustainable, profitable growth, including those mentioned above.

Consumer Insight + Strategy Formulation

Continually renewing market awareness driving a consumer centric brand portfolio strategy.

Brand Activation: Bringing Brands to Life

Meaningful consumer engagement integrated in consumers’ lives through deep insight, agile innovation, and authentic, relevant brand stories.

Operating Model Agility

Living organization with modular plug-and-play structure that adapts to changing market conditions, balancing speed, flexibility and efficiency.

Leading grocery brands see where consumers are headed and formulate those insights into their strategy. They activate on those insights with meaningful experiences. They go to market with the speed of operational agility. All three of these capabilities are required in today's modern marketplace.

Further Thinking

As consumer expectations and categorical opportunity continue to evolve, these are the questions winning brands are having today in order to succeed:

What are your examples from each of these capabilities areas?
Which areas are you strongest and which are you weakest?
What will be required to build out all three of these capabilities within your organization?  


Barkley US

Oct 25, 2019

filed under:
Retail

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