Total US MULO (multi-outlet) sales of groceries are slated to increase 2.5% this year to reach $652 billion. Meanwhile, sales at supermarkets will grow just 1.9% in 2016 to $317.8 billion. Supermarkets have not held the majority share since 2011. While research from Mintel’s Grocery Retailing US 2015 report reveals that nearly a quarter of US primary grocery shoppers claim to be spending more at supermarkets today than they did last year, this percentage actually ranks second to last relative to other channels where consumers are spending more.

Grocers turn to experiential retailing to help preserve share

A new study from Progressive Grocer reveals that grocery shoppers feel like they have no option but to visit several stores to get everything they want when grocery shopping. Even though nearly half of primary grocery shoppers plan out their trips versus making impromptu purchases, they still plan to make multiple stops along the journey despite desires for one-stop shopping convenience. Furthermore, supermarkets continue to lose share as consumers hop from store to store. Progressive Grocer reports that supermarkets’ share of total grocery spending has fallen more than six percentage points since 2007 to reach 55%. Mass merchandisers, warehouse clubs and drug stores are gaining ground. Mintel research confirms that nearly two in five consumers shop secondarily at Walmart, the highest retailer “also shopped” for groceries. Progressive Grocer’s study also indicates consumers are spending more on fresh foods and stores that offer convenience, spending half of the grocery budget on items from the perimeter of the store and in fresh categories. Health, wellness and beauty-related items are also performing well.

Retailers are extending beyond price and product selection in order to compete, with more and more turning to innovation and experiential retailing to hold onto – or grow – market share:

  • Kroger plans to invest $2.5 million to build a culinary center in Cincinnati where it’s headquartered in order to train the chefs in all its stores, and provide a forum for them to share ideas and best practices.
  • Similarly, Walmart recently debuted its Culinary & Innovation Center where it plans to develop new private label and branded food items.
  • Select Whole Foods Markets feature a putting green (Augusta, Georgia) and a spa (Boston), while some have bike repair stations.
  • ShopRite in Morristown, New Jersey offers an in-store restaurant, juice bar, oyster bar and even a daycare center for parents with children in tow. A store in Hanover Township in New York includes a fitness studio and a cosmetologist on weekends.

What we think

Shoppers are not defining their shopping trips based on what retail channels they want to visit, but rather basing their decisions on where the products they want are available. Retailers need to make sure they have the basics down first (such as ample product selections) before trying to lure customers with lifestyle-oriented experiences.

We’re seeing that many enhanced stores are being placed in affluent areas where shoppers are more likely turning to other channels such as online or meal prep delivery services. While it’s justifiable to build these stores in heavily populated areas, it might make more sense to build stores in smaller food deserts. The number one reason consumers choose their primary grocer is because it’s conveniently located to where they live or work. When asked what innovations they’d like to see when grocery shopping, consumers pointed to promotions and coupons customized to their personal shopping habits as the top improvement area. As data becomes king in retail, personalized marketing represents another opportunity for retailers to create distinction, especially for those best equipped to analyze and predict data-driven behavior.

Diana Smith is a Senior Retail and Apparel Analyst at Mintel. She brings a unique background and perspective having previously spent her career growing up in advertising agencies, specializing in media planning and strategy.

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