The grocery retail industry is changing quickly due to technology advancements, changing consumer needs and expectations, and an intensely competitive market. According to a new study conducted by the Food Marketing Institute (FMI) and Nielsen, 70% of grocery shoppers will be shopping online by 2024. The research predicted that by 2025 consumer online food and beverage spending could reach $100B. However, FMI and Nielsen report that the pace of change and adoption has outrun initial predictions, where the popularity of online engagement could cut the timeline by half.
Consequently, traditional retailers are facing pressure from alternative formats as consumers are more rapidly adopting new platforms, brands, and retail models available to them. Consumers are less loyal to retailers and more willing to shop for groceries online. Before trying to attract new customers, it’s essential for retailers to keep the ones they already have. To retain consumers, it’s necessary that retailers understand what drives them to switch from one retail format to another.
According to Dunnhumby’s inaugural Retailer Preference Index study, based on calculations that combine consumer survey data with retailers’ financial performance metrics, price and quality are the essential preference drivers. The highest performing grocery retailers share effective strategies focusing on price, value, and quality. Essentially, the grocery brand defined by the focus they put on each of these factors.
Grocery stores that index high enough on price and quality can then turn their focus to other factors in the value chain such as speed, convenience, and digital information. Trader Joe’s, for example, does not offer the convenience of online shopping, however, the retailer took the top position in the study due to other factors such as excellent customer service and affordable pricing. Consumers are willing to travel to the store to take advantage of those benefits, as they create an enjoyable shopping experience and ensure customer satisfaction and loyalty. Retailers that deliver minimal value to their shoppers should focus on enhancing value perceptions and reconnect with their shoppers, or they will have trouble thriving in an increasingly competitive market. Retailers need to focus on strengthening their core values and branding.
To take advantage of other motivating factors such as convenience, speed, or rewards, retailers can use 3rd-party services, preferably white-labeled so as not to detract from their brand. For example, following a pilot with Instacart, Texas supermarket chain H-E-B revised its strategy and is now experimenting with a hybrid grocery delivery model in which store employees pick and bag online orders while 3rd-party companies deliver the orders to customers. H-E-B employees identify with the brand and also can be directly supervised to make sure that they are picking high-quality items, as a customer would do themselves. Therefore, they are better qualified to communicate the store’s brand and provide higher quality customer service than 3rd-party companies.
Developing and improving their brand is key for retailers to grow in this evolving grocery landscape and keep consumers happy. Retailers must differentiate themselves, define their uniqueness and own it. Selling food is no longer enough, as shoppers seek meaningful and memorable experiences, not just functional. As the grocery retail industry continues to evolve, retailers must recognize that the customer experience is no longer linear but has become an omnichannel experience. Brands must create seamless experiences that connect desktop, mobile, and in-store interactions. The brands that survive will find ways to improve shopping experiences and provide consumers with the most meaningful, satisfying, and loyalty-building experiences. By partnering with companies like Bringoz to oversee retail expansion needs such as grocery logistics and delivery, retailers can focus on their core values without worrying about providing new services to their consumers.