All Articles Food Food Retail How grocery stores are expanding from food retailers to one-stop shopping destinations

How grocery stores are expanding from food retailers to one-stop shopping destinations

Shoppers are looking for convenience and value in nonfood purchases and grocers are answering the call.

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Time spent on Saturday errand-running has been getting a little bit shorter for shoppers across the country thanks to the rapidly growing trend of nonfood sales at traditional food retailers. According to data from Circana, nonfood purchases account for as much as 25 percent ($250 billion) of the $1 trillion in sales at food retailers. While this figure is an impressive one, grocers are taking advantage of the room to grow nonfood sales since total retail sales of items such as paper products, skin care, pet food and kitchen gadgets total more than $3 trillion – of which only 8 percent are sold through grocery stores.

Opportunities abound

“There are unrealized opportunities for grocers to expand sales to current customers and solidify loyalty by focusing on categories such as pet food and digestive health,” said Dave Wendland, vice president of strategic relations for Hamacher Resource Group. “When shoppers realize these items are competitively priced and recognize how convenient it is to pick them up as part of their regular weekly trip, they’ll wonder why they haven’t been purchasing them at the grocery store all along.”

Wendland moderated a breakout session entitled “Bringing Nonfood Destinations to Life” at the Midwinter Executive Conference hosted by FMI – The Food Industry Association, where he was joined by panelists Joe Toscano, vice president, trade and industry development, Nestle Purina PetCare Company; Bill Wolfenden, vice president food and alternate channels, Haleon; and Jill Blanchard, president, Enterprise Client Solutions, Advantage Solutions. In addition to sharing insights about merchandising tactics and omnichannel trends, the panel discussed best digital marketing practices to increase nonfood sales and utilize nonfood categories to engage customers and boost shopper loyalty. 

“Traditional grocery is challenged right now with consumers leaning into discount channels,” Blanchard said in an interview with SmartBrief. “They still have shoppers coming in the doors and are focused on strategies to add one more product to the basket.  Nonfoods is a great way to get that extra item in the basket, and they have a few strategies to leverage to make that happen.”

Consumers are currently seeking both value and affordable indulgences and luxuries, Blanchard explained. 

“Value means different things to different shoppers,” Blanchard said. “It could be a trade-down from a premium brand to mainstream, could be shopping for a product on sale, could be buying a larger size for a better price/size, could be buying a smaller pack size at lower price point, could be in-home versus out of home (think hair color, nails and other beauty treatments).  At the same time, consumers are curbing more of the big-ticket spending and out-of-home entertainment and substituting with affordable luxuries and indulgences (premium health care, beauty products). Grocery retailers have a great opportunity to meet both of those needs in the same shopping trip with nonfoods versus the consumer having to go to one store to get value deals and another to get luxuries.”

Nonfoods are also a great way to grow the online basket, Blanchard said.  

“Consumers buy disproportionately more nonfoods products online, and retailers should lean into this to grow the online basket with food sales,” she said.

Overcoming perception

Grocery stores, however, have their work cut out for them. Many shoppers see grocery stores as places just to buy food and some avoid nonfood aisles altogether because they have the perception of nonfood items costing more or not offering good value at grocery stores versus other channels, according to The Power of Nonfoods at Retail 2023 report from FMI. To overcome those perceptions, grocers must create value in nonfood categories by offering seasonal general merchandise sales, incorporating them into store loyalty programs and taking advantage of tactics that make the most of nonfood impulse purchases, the report found.

According to information from the report cited in FMI’s nonfoods blogpost series:

  • Price (51% to 53%) and good value (41% to 42%) trump quality (21% to 24%) in many household necessities purchases, but in some cases brand preferences can be strong, particularly when it comes to toilet paper and laundry detergent.
  • When it comes to pet food purchases, pet owners focus more on quality than with most other nonfood items, with 31% of respondents specifically seeking out high quality products and 38% of respondents seek out brands they prefer – a high percentage compared to other nonfood items.
  • Grocery stores make up 26% to 28% of the personal care product markets for a total $11 billion dollars in annual sales – well behind mass retailers who comprise 52% to 56% of the market.
  • Skin care and cosmetics sales are split between online and in-store purchases, with 37% of consumers using both equally. 
  • Nearly 60% of kitchen gadget purchases are planned but 17% are impulse purchases, which is high compared to other categories.
  • Grocers sell more than $24 billion in nonfood products that support shoppers’ health and well-being.

Creating a nonfoods community

“One of the things that we have been interested in doing at FMI over the course of the past five to eight years, is making sure that, as an organization, we represent the four corners of the supermarket,” FMI President and CEO Leslie Sarasin said in an interview with SmartBrief at FMI Midwinter. “We are creating a nonfoods community and bringing together the companies that are engaged in buying and selling and manufacturing the products that fall into the nonfoods category.”

To that end, FMI now hosts a nonfoods event that brings together food retailers, wholesalers and product suppliers to focus on increasing nonfoods category performance at the grocery store.

“If you think about just the food side, you can buy food almost any place you go, at any retail location – whether it’s the drugstore or Home Depot or wherever – you’re going to find food to buy,” Sarasin said. “And in the reverse, you’re now also able to buy hardware and floral and cosmetics – all of these things that are not food – you’re able to buy in the grocery store. That’s an exciting prospect, and I think it creates a nice sense of competition. It creates an opportunity for differentiation among our companies to really focus on who they want to be for their customers, and what kind of community they want to build among their clientele.”

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