More than Retail Price

A study released in 2016 by Deloitte, the Food Marketing Insti­tute, and the Grocery Manufacturers Association shows that more than half of Americans surveyed weigh “evolving driv­ers” in their purchasing decisions—health and wellness, safety, social impact experience, and transparency—in addition to the traditional drivers of taste, price, and convenience.

“Price is always going to be important; so is quality. But what we’re seeing here is a shift from value to values,” says Tom Compernolle, principal in the retail practice at Deloitte Consulting. “Some chains have hired registered dietitians to provide food and nutrition information. Others have showed innovation in their organic private-label programs. Even dollar stores and other small-store formats use signage to drive home environmental and health and wellness messaging.”

Jack Ringquist, global leader of consumer products at Deloitte, says today’s supermarket shoppers behave differently than even 3 years ago—and their preferences are becoming more fragmented than the food industry may have anticipated. “At one time health and wellness might have been considered outlying values,” he says, but “that’s no longer true. Technology has made information so pervasive that shoppers are making more informed choices about the foods they eat.”

Viewpoints differ when the conversation turns to Millen- nials, and the changes this cohort are likely to spur in the chan­nel. Still, whether folks argue that they’ll abandon traditional supermarkets or drag them kicking and screaming into the next decade, there remain a few truisms. Millennials do not have a reputation for loading up their pantry; they’re more inclined to think about what they’re going to eat when they get hungry. The idea of three traditional meals a day doesn’t mesh with their lifestyle; sometimes a protein bar is just right for breakfast, and on other days it’s perfect for dinner.

“Millennials don’t bring a lot of preconceived notions about foods and meals to the table,” says Phil Lempert, food industry analyst. “They like the idea of buying meats at a butcher shop. They are passionate about food but short on time, so home delivery and meal kits suit them fine. They’re changing the dynamics of food retailing because they’re not encumbered by all the reasons why they can’t” do things differently.

“The reinvention happening in this space is being driven by the consumer[s]. They’ve pushed the traditional supermarket operators to ask themselves, ‘How can I be iconic and differ­ent?”’ says Farla Efros, president of HRC Advisory, Hilco’s global retail advisory practice. “Consumers are … time-starved, they like online ordering, they prefer to pick [food] up at the store on the way home from wherever. It’s up to the traditional supermarkets to figure out how to make that happen.”

Prosper Insight and Analytics’ consumer research consis­tently shows that customers choose to shop at certain super­markets based on a handful of qualities: In order of importance, they are price, location, selection, quality, and fresh produce. Price is cited by 73 percent of shoppers, location by 70 per­cent. “Keep in mind that while new concepts and formats are springing up, nearly 20 percent of shoppers make Walmart their top choice for groceries—and price is the main driver,” says Phil Rist, principal and executive vice-president of strategy at Prosper. “At other stores, loyalty cards, fuel/gas rewards, and coupons could be significant drivers. The takeaway is really the need for marketers to understand what’s important to their cus­tomers—and what’s not—and to use that to carve their niche.” Because price is important to many shoppers, value super­markets such as Aldi can expect growth rates 55 percent higher than for premium chains and 228 percent higher than main­stream supermarkets.

Source: Barry Berman, Joel R Evans, Patrali Chatterjee (2017), Retail Management: A Strategic Approach, Pearson; 13th edition.