A new study from Progressive Grocer finds that consumers seek the convenience of one-stop-shopping over the differentiation direction many supermarkets are moving in.
The recent mantra for grocers has been “fresh, value, and premium,” which has lead to differentiation strategies and reduced the variety of products many supermarkets sell. However, a new study, Progressive Grocer’s 69th Annual Consumer Expenditure Study (CES), has found that shoppers would rather go to a “one-stop-shop” but feel forced to visit multiple stores to get what they want.
Supermarkets have been facing tough times in recent years. Grocery sales are a huge business in America, bringing in more than $2 trillion in annual sales, and account for around 7.4 percent of total consumer expenditures, according to data from the Bureau of Labor Statistics. Their share of the grocery dollar (the money Americans spend on groceries) has dropped to 54.5 percent, down 6 percent from 2007.
While supermarkets have suffered, big-box retailers and supercenters have benefited. According to Progressive Grocer, supercenters and warehouse clubs saw their share of the grocery dollar grom from 25.1 percent in 2007 to 31.3 percent this year. Up almost the same amount as supermarkets dropped.
With supercenters offering price and variety, and new entrants like subscription food delivery services providing quality and convenience, supermarkets are facing threats from every corner. And supermarkets also are continually competing with restaurants for the overall food dollar. This all adds up to a tough proposition to the mid-size grocery store.
“Shoppers don’t conscientiously define which channel they want to shop – they’re just going where the products they want are available,” said Meg Major, Progressive Grocer’s chief content editor. “Supermarkets are in direct competition with every retail channel, including restaurants and subscription services like Blue Apron.”
The challenge for mid- to large-grocers, traditional supermarkets, is that consumers what fresh, quality produce, a large variety of products, and price – and it is incredibly hard to deliver all three. Nielsen recently reported survey results that found that freshness and quality are increasingly important.
Progressive Grocers’ CES has found further evidence of this trend, reporting that shoppers are spending more on fresh foods and the items near them. According to the study, more than half of total store sales are coming from the “perimeter and adjacent fresh categories.” Also, sales from the in-store deli, where much of the fresh-prepared products are sold, are increasing faster than total store sales.
Supermarkets are also seeing a boost in healthy snacks as consumers spend more on new beverages, nut snack packs, and healthier salty snacks. From the study, shoppers are spending more on nonessentials, including health and beauty products and alcohol.
Overall, the data from the study confirms the evolving and complex competitive environment supermarkets face. Consumers may want more from the stores than they can provide and they need to worry about both more prominent retailers offering price and variety and smaller retailers providing higher quality and service. To make matters worse, increasingly CPG companies are moving into direct-to-consumer sales, adding another competitor to the mix. Smart supermarkets will stake their claim to convenience, freshness, and variety – three areas they can win it and the ones that consumers are looking for the most.