There is a fundamental shift afoot in the grocery world, one that promises to recreate the shopping experience in customers.
Retailers, however, may not be so charmed and some will not survive the transition being driven by the following forces.
Changing Consumer Habits
The shift to healthier eating has already changed grocery retail. There is more emphasis on fresh foods, prepared foods, organics and those considered “free from” artificial flavors or ingredients. This move to cleaner eating has migrated from certain geographic and demographic pockets and taken off throughout America.
Retailers from Kroger to Walmart and Aldi have increased offerings in these categories, driving prices down and increasing access for U.S. consumers to healthy foods. Whole Foods has already felt the impact of this–posting six consecutive quarters of sales declines–and has ceded ground that used to be exclusively theirs. Natural foods and exotic ingredients are now more available and more affordable.
Lidl is readying its first U.S. store and the German-based chain has changed U.S. grocery retailing, even before the first grand opening.
Lidl is a hard discounter, similar to Aldi. In Europe, the two are fierce competitors and that competition is expected to be just as heated in the States.
The two European retailers’ virtues extend beyond price, although Lidl and Aldi will usually beat just about any traditional grocer or mass merchant in that regard. Both offer mostly store brands and strive to create a unique in-store experience. Think Trader Joe’s but for the average Joe.
Lidl’s newest format offers a peek at what’s to come and is already forcing change at Aldi. Aldi plans to spend $1.6 billion to remodel 1,300 U.S. stores complete with expanded fresh foods, organic selection and crisp new logo.
U.S. shoppers are in for a treat, as traditional retailers also remodel and revamp assortment. Kroger is a leader here but is by no means alone, adding organic and free-from store brands at competitive pricing and building out the store perimeter, where fresh offerings are found.
Amazon vs Walmart And The Rise Of Online Shopping
For some months now, I’ve been writing about the battle between Amazon and Walmart. This competition is not exaggerated for headline’s sake but is a very real conflict that will impact shoppers.
Walmart is the largest retailer in the U.S., followed by CVS Health and Kroger. Amazon sits at No. 4, according to Euromonitor. How can Amazon conquer Walmart? “They need to conquer fashion and grocery,” says Michelle Grant, Euromonitor’s head of retailing. “Grocery is definitely in its sights.”
Online shopping for grocery items – both fresh and packaged goods – is very low and this trend is only beginning. Both Amazon and Walmart have a number of tests in the works. Amazon Fresh has been delivering groceries in many major markets and Walmart launched its first effort in 2011, with a dedicated pickup location for online grocery orders. Both these tests have grown exponentially and what Amazon and Walmart are doing will have the greatest impact on how we grocery shop than any other factor.
All this positioning and posturing among grocers will result in more consolidation, particularly among the remaining independent and regional retailers.
Just 36.9% of U.S. grocers are independent, according to Euromonitor. “We see these going out of business or being acquired,” Grant says. “They can’t compete on this scale.”
All this adds up to big change for shoppers. There are few things more personal to consumers than grocery shopping. Supermarkets are the places we frequent most. We trust them to stock safe products and then feed our family from their shelves. Some customers will lose their favorite stores. Most will see big changes inside, with new fixturing, services and products. Many will take advantage of new technology that delivers goods to home or office.
How this all will shake out is unknown, but one thing is certain–grocery is about to get very interesting.