There’s no denying that to many Americans, supermarkets are a bland and boring
necessity. Sure, they’re convenient. But the way they’ve been bleeding market
share for so long to other channels -- including drug, dollar, convenience,
club, limited-assortment, discount and specialty stores, not to mention online
retailers -- shows they just don’t generate loyalty.
A beefy new report from Hartman Strategy, a division of the
Bellevue, Wash.-based Hartman Group, delves into how some supermarkets are
becoming super again, while most are becoming increasingly irrelevant.
The best strategy, James F. Richardson, SVP of Hartman Strategy,
which focuses solely on the food and beverage sector, tells Marketing Daily, is
that supermarkets need to “focus on delivering great fresh food, which is
driving the majority of shopping trips.”
Too many chains, he explains, act as if consumers are driven by the
same pantry-stocking behaviors they were a decade ago. Hartman reports only 31%
of dinners typically involve cooking from scratch. Instead, shoppers come to
supermarkets to fuel their “what’s for dinner tonight?’ needs: Almost 31% of
immediate-consumption eating occasions involved an item purchased at a grocery
store.
And those so-called center-aisle products, the shelf-stable items
that still account for 70% of sales, are less important. Sales are shrinking,
not growing, and those slow-to-turn-over bottles of Worcester sauce, jars of
pickles, and boxes of confectioners sugar cut into profits.
These consumer changes present plenty of risks for branded products
as well. “The reality is that shifting volume out of grocery into discount
channels presents a real long-term danger for established CPG suppliers,” the
report says, “especially when discount channels are innovating in private-label
emulations (and don’t require brand promotional spending to grab share).”
It’s also time for stores to abandon the pretense that they are all
things for all people, he says. The fastest-growing leaders are those that are
either offering specialization in a purely upmarket option, such as Whole Foods;
one that is entirely downscale, like Winco; or an approach that varies its
up-or-down strategy on a store-by-store play, a strategy used by HEB.
Also critical: Making sure each store reflects local food culture.
Tesco’s failure with Fresh & Easy provides a cautionary tale.
“They ultimately designed an upmarket private label-heavy format
that competes directly with Trader Joe’s,” the report notes, but then “placed
40% of its stores in zip codes skewing low income and/or low education, and 30%
of its stores in Hispanic-heavy neighborhoods. The low-income, low-education
consumer audience was not interested in their offering.”
By contrast, it points out how well Wegman localizes its stores,
providing a high-end and differentiated experience to a broader audience.
Overall, the report says, it's time for stores to ditch the middle
class. “The middle class consumer is more trained than ever to trade up or to
trade down where appropriate in a multichannel food shopping context. They
prefer to do this, however, at specialist retailers, whose commitment to editing
the store against either of the market extremes is obvious, thorough, and well
regarded in their social networks. Each supermarket ultimately needs to position
itself at either extreme to outflank the local competition.”
