As per usual, I spent a lot of time in stores around the world in 2018 and, as well as gathering lots of calories, I also assembled a number of observations and learnings that I believe some decent signposts for success as we embark on 2019. While this is not an exhaustive list – and by no means a guaranteed toolkit to flourish in brutally competitive markets – I like to hope this list of attributes might provide a thought-provoking way of slipping into what it sure to be another year of innovation, turmoil and surprises in the global grocery retail arena.
With the ongoing advance of low-price competitors – be they online players or discounters – many mainstream supermarkets have embarked on cost-cutting regimes designed to prop up further investments in lowering prices. While there is a degree of logic here, up until the point that cost-cutting starts affecting availability or service, I’m beginning to sense that some of this pricing activity is a little scattergun and often a little self-destructive.
One of the most underused words in retail is ‘appropriate’. While it might be sensible to ensure that the discounters do not open up a massive price gap, there is no shame in being more expensive than the likes of Aldi or Lidl. With wider ranges and the scope for superior instore experience and service, non-discounters can co-exist with limited assortment grocers by charging an appropriate premium for these benefits.
Value is a combination of price, quality and service, so retailers should strive for affordability rather than hurtling headlong into the ‘price war’ abyss.
For many years, supermarkets were based on the premise of being all things to all people. And for many supermarkets this remains the case: similar ranges organised in a similar way in a similar building with a similar experience. They cover enough bases to appeal to the broadest range of shoppers with little in the way of specialism.
Many senior supermarket and hypermarket executives I’ve spoken to are now talking in terms of ‘reasons to visit’ – how can they convince shoppers to devote extra time and a little extra money to visit their store rather than a discounter or a competitor. While this applies to general merchandise (see below), it applies equally to grocery categories. I’ve observed a number of retailers choosing to establish greater authority in particular categories in an attempt to achieve differentiation and destination status. Be this in wine, meat, fish, sushi, cheese, food-for-now, pizza, health & wellness, free-from, organics and even in confectionery, supermarkets are demonstrating that authority (or being famous for something) can provide a reason to cross the road from one store to another.
K-Citymarket in the Finnish town of Järvenpää sees people traveling for hours to sample its famous sushi
A similar logic applies to general merchandise. Many GM categories are literally disappearing (music and DVD spring to mind) or are being sold better or cheaper by specialist or online retailers. The theme here is of picking fewer battles: focusing on fewer GM categories in which credibility can be achieved. Non-food categories that we’ve seen several grocery retailers choose to focus on are fashion, homewares, beauty, kitchenware, baby and toys.
Success here can involve a number of factors, such as unique private label ranges, enhanced support from key branded suppliers and more of a focus on instore experience. An alternative is to invite specialist retailers in to operate specific GM categories, a move that can improve credibility, provide an additional reason to visit and reduce payroll. We’ve seen this in categories like pet care, clothing, footwear, electronics and nutrition to name but a few.
Sainsbury’s new concept in Selly Oak has a brilliant toy offer, supported by sister companies and branded suppliers
This leads us nicely into the theme of collaboration. This is a broad attribute that can encompass several different relationships, but primarily retailer to retailer and retailer to supplier.
The scope for retailer to retailer collaboration is extensive and can include buying, private label development, operating instore concessions or branded areas and/or soaking up excess space. With suppliers, collaboration can manifest itself in tradition ways such as category management and shopper marketing, but I’ve increasingly been seeing more space devoted in grocery stores to grandiose branded areas that help to create more of a department store feel.
Either way, there is a real sense now that retailers must become less insular and more open to partnerships with third parties to improve performance and shopper appeal.
Super Konzum in Zagreb is a fine example of supplier collaboration
It goes without saying that we are facing something of a health timebomb in many parts of the world. At a time when many people in the world (not just in so-called developing countries) are struggling to get enough to eat, others are eating too much or making poor nutritional choices, resulting in an acceleration of issues like obesity, diabetes and heart disease.
Many families are unclear – not just on which are the better products to consume – but also in terms of how to prepare and cook fresh foods. This leads to poor decisions, an overreliance on heavily processed foods and an increase in the share of calories consumed out of home (not intrinsically a bad thing, but the outcome is not always a salad).
There is a big opportunity here for food retailers. By educating and inspiring not just shoppers but also end-consumers, especially children, supermarkets can have a pivotal role in encouraging more healthful instore decisions, inspiring shoppers to cook from scratch and making it more likely that family mealtimes are restored at least on a partial basis. Making this change easier by providing recipes and grouping ingredients together, for example, is a tactic being adopted by many supermarkets.
Deen in The Netherlands has run several campaigns aimed at inspiring cooking and family mealtimes
With so much these days riding on transactional or hygiene factors (price, range, standards, availability, loyalty cards, process etc.) it is often easy to overlook that there could be (or even should be) more of an emotional bond between retailer and shopper and that the instore journey can create opportunities to create an emotional spark.
This might sound a bit fluffy, but simply by rewarding or acknowledging loyal shoppers, surprising or delighting them instore, making life easier for parents or by raising a smile during a shopping trip, those little emotional connections can be made, sowing the seeds for stronger loyalty and affinity.
There’s a big role here for instore colleagues. While some shoppers couldn’t care less about interacting with a member of staff, others look forwards to these encounters, or need some help on particular occasions or within particular categories. In the current environment, it might be tempting to see associates as an expendable cost. For me, they can be an invaluable asset.
While my kids have grown up with the assumption that fruit, vegetables, cheese, meat and fish all smell like cellophane, consumers in other countries are able to enjoy sumptuous produce displays, theatrical fish counters and expansive cheese displays, all complete with the opportunity to sample products and enjoy value-added services.
I’m simplifying somewhat, of course, but it seems that so many retailers are failing to exploit the opportunity afforded to them by fresh categories. Fresh has two main potential benefits: providing an incredible statement of intent as shoppers enter the store and doing things that discounters are unable or unwilling to do.
Carrefour Market in Spain offers an amazing produce department
For many, grocery shopping is a dreary, grudgeful chore. This can be true at the best of times, but perhaps even more so for parents where a mundane trip to the supermarket also necessitates entertaining bored children at the same time.
Our shopper research has told us that parents would be grateful for anything that helps to constructively distract kids during the shopping trip, including ideas such as creating a scavenger
hunt to engage kids around the store. There is plenty of scope for making the shopping trip more enjoyable for shoppers of all ages.
I’m not suggesting that stores should start resembling Disneyland, but making the instore experience a little more engaging would not go amiss.
Hand in hand with a growing awareness of seasonality and food miles, shoppers are looking to their retailers to offer more prominence to (or actually start listing!) locally produced food and drink. While the definition of what constitutes ‘local’ might vary from location to location – it means very different things in Texas compared to the UK for instance – there is little doubt that demand is increasing and that retailers are becoming more mindful about supporting local producers and offering shoppers local alternatives.
This is not just about ranging though. This is also about community engagement: supporting local schools, voluntary groups, sports clubs and charities. Many retailers are cognisant that they rely on their local communities for their turnover, so giving something back is not just a good thing to do, it is the right thing to do.
Morrisons in the UK has recently enhanced its locally-sourced proposition
The environmental implications of the grocery retail industry are colossal, touching on myriad facets like sourcing, logistics, store design, packaging and refrigeration. Luckily for food retailers, many decisions that are good for the planet are also good for the bottom line: this explains why Aldi and Lidl were light years ahead of the rest of the industry for charging for plastic bags and why Walmart has invested heavily in research into more efficient trucks.
Nonetheless, public awareness of environmental issues like single-use plastic, recycling and more energy-efficient stores is growing, and retailers are being expected to demonstrate that they are proactively changing the way that they work in order to minimize their environmental footprint.
It’s also worth remembering that in areas like food waste, shoppers would appreciate improved guidance in how to minimise in-home waste, with opportunities to provide storage recommendations and ways to better reuse leftovers or surplus ingredients.
Ekoplaza garnered plenty of positive press coverage with its plastic-free initiatives
Food retailers are having to become more and more nimble to respond to evolving trends in food, lifestyles and demographic trends. While some trends are little more than fads, others such as vegan, free-from and Halal are longer-term shifts that require longer term strategies.
It has been fascinating, for example, to observe retailers’ different approaches towards the surge in demand for vegan or meat-free products. Some – like Jumbo in The Netherlands – have been all over it for years and already have dedicated vegan meal counters in their stores, others have been much slower to embrace the opportunity, only now launching their first dedicated vegan ranges.
The decline of homogenous national diets is well and truly underway and those retailers with better skills in anticipation and responsive action will fare better in 2019 and beyond.
Jumbo Foodmarkt has introduced vegan meal counters
I’ve banged this particular drum many times before. Food has an aroma. Food has a taste. Despite this, I’ve lost count of the number of stores where these two sensory open goals have been well and truly missed. Last year, I was in stores in Spain where the produce department was a sensory riot. Stores in Poland where the aromas of a meat smoker were irresistible. Stores in the USA where you could sample cheese to your heart’s content. Stores in the UK where the waft of a curry counter was like a siren’s call.
As things stand, Amazon can’t provide tastes and smells. Supermarkets can, but don’t. What a wasted opportunity.
One of the pleasures of grocery shopping (for some) is the lure of the unexpected. Whether this is a happy punter walking away from Lidl with a chorizo and a chainsaw or someone leaving Waitrose with a case of a new favourite Chardonnay after an encounter with the instore sommelier, the capacity that food retailers have to provide the joy of adventure and discovery is immense.
This can be achieved through merchandising, demos or sampling. It can be achieved through a constantly varying range of limited time offers. It can be achieved through instore cafes and restaurants.
Shoppers are human beings. Human beings are social creatures. Food stores offer a chance for shoppers to interact with friends, family or – indeed – strangers. It is noteworthy that many supermarkets are offering improved opportunities for this interaction: improving instore catering, providing space for community meetings and classes, building cookery schools, providing wine and beer tastings and holding more instore events.
Again, this is something that discounters and online retailers cannot do. It would be great to see more supermarkets and hypermarkets take this chance to become hubs for the community – another way of building a connection with loyal customers.
Harmons in Salt Lake City has huge areas devoted to social interaction and also provides a cookery school
As I said – just a few thoughts to kick off 2019. I hope you have a good one and it will be interesting to see what surprises are in store.
Global Insights Director