Investing in produce, meat and other fresh departments is essential for grocery retailers that want to compete for today’s consumer -- both in store and online as ecommerce sales of edible grocery gain momentum.
Online sales still account for only a small portion of total grocery sales and, despite their demand for convenience, US consumers are actually making more trips to brick-and-mortar stores.
Last year, shoppers made an average of 1.6 weekly trips to the store, up from an average of 1.5 weekly trips the previous year and 1.2 trips in 2012, according to data from the Food Marketing Institute.
More than 80% of consumers surveyed in July by Gallup for its annual Consumption Habits survey said they shop at grocery stores at least once a week, including 37% who do so more than once a week.
These increasing trips to the store are a reflection of consumers’ increasing interest in fresh and a desire to choose items that meet their specific needs, according to food industry analyst Phil Lempert.
“What they’re doing is they’re spending the time really self-curating those products,” he said. “Especially when we look at millennials and Generation Z, they're willing to spend more for what they want.”
For many consumers, these more frequent trips are replacing larger, “stock-up” shopping trips as they place more emphasis on perishable items they intend to cook or eat in the next few days. Bon Appetit Food Director Carla Lalli Music espouses this philosophy of shopping more often and in person for fresh items while turning to online ordering for pantry staples in her recently released cookbook “Where Cooking Begins.” In the book’s introduction, she writes, “The romantic in me wants to shop strictly for ingredients that spark inspiration and the desire to cook.”
Lempert said appealing to these types of shoppers is key for retailers, who can stand out in the crowded field by making their fresh departments a place where shoppers enjoy spending time.
One example of a store that has used this strategy to its advantage is Kroger, which created a destination for shoppers with its addition of Murray’s Cheese Shops in hundreds of its stores nationwide. The grocery retail chain acquired the New York-based specialty cheese business in 2017 and “they’ve really built that business,” Lempert said.
“The reason that they bought it was frankly that they have trained people behind that cheese counter...to really explain the cheese and really paint a picture and be romantic about the cheese.”
While Kroger took a store-within-a-store approach with Murray’s, fresh departments don’t have to be so elaborate to be considered a destination by shoppers. Having well-trained staff who can answer questions, suggest cooking methods and perform value-add tasks like grinding meat or pre-chopping vegetables can act as a major point of differentiation.
Lempert urged retailers to “make sure you have qualified staff that can talk to consumers, because what consumers want is that relationship.”
Building these relationships with shoppers is paramount as retailers prepare for more of their business to eventually move online, because “most consumers, when they think about first transitioning some of their business online, almost always think about doing that with their regular grocer,” said Bill Bishop, co-founder of Brick Meets Click.
Although ecommerce only accounts for about 3% of sales of edible grocery -- compared with the cross-category average of 20% -- online grocery sales are expected to see a compound annual growth rate of 13% over the next five years, according to the July 2019 Food & Beverage Sector Report from Edge by Ascential.
"We're going to see a major shift to online and omnichannel over the next few years with edible grocery," associate analyst and report author Violetta Volovich said in a news release. "The barriers to adoption and growth in this sector are coming down, and retailers are investing heavily in technology, supply chain and partnerships that will make for an easy, seamless customer experience."
Partnerships with third-party partners such as Instacart can seem like a simple and attractive way for retailers to offer ecommerce to shoppers, but Lempert warns that retailers that let these services own their ecommerce business are giving up the relationship they have with shoppers. Instead, he urged retailers to “take a long, hard look at their websites.”
In much the same way that a well-stocked and well-staffed store can be a destination for shoppers, a website that acts as more than a store locator or a landing page for the weekly circular can be an extension of that relationship. Allowing shoppers to search products by dietary restriction or recipe can give them the same guidance they appreciate in-store. “The same way 40,000 products in store is overwhelming to shoppers, 40,000 products online is even more overwhelming,” Lempert said.
One store that Bishop commended for its ability to bridge the gap between in-store and online is Ohio-based Dorothy Lane Market, which lets shoppers narrow search categories for organic or gluten-free items, and offers a selection of recipes that include a shoppable list of all the necessary ingredients. Shoppers can build their cart online and select delivery or drive-up collection.
It will undoubtedly take some time for consumers’ comfort levels with buying fresh items online to catch up to those of packaged goods, but there are steps retailers can take to build trust.
“Some additional, almost real-time communication between the shopper at home and the professional shopper building the order is seen as a real value,” said Bishop.
An open line of communication between the store and the consumer can keep consumers informed about necessary substitutions when an item is sold out, or let them voice their preferences about size, ripeness or other qualities of fresh items. Being able to substitute scallions on the spot when chives are sold out or select a perfectly marbled pork chop can give consumers the feeling of being in the store without actually having to make the trip.
“That kind of engagement, that kind of service treatment, is a point of difference that strengthens a grocer’s ability to compete,” Bishop said.
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