Grocery wars once meant triple coupons or almost-free staples.
Today, the competitive landscape is much more complicated – and the growing number of retailers in the grocery realm are embracing new strategies and innovation as consumers’ shopping patterns change.
“The challenge for any retailer is that we want to stay very focused on the customer and recognize that we need to stay relevant to shoppers shopping in a different way,” said Frank Guglielmi, spokesman for Michigan-based Meijer Inc.
Michigan’s grocery industry generates $1.8 billion in annual sales, according to the Michigan Grocers Association.
Yet the average net profit is 1.3 percent, the MGA says. That puts the sector among the lowest in retail, and compares to 15-20 percent goals for many businesses; it’s at 3 percent for Walmart, the nation’s largest retailer and grocer.
At the same time, traffic patterns of grocery shoppers are changing. People are making more trips per week, while turning more than ever before to nontraditional sources. Areas of highest grocery sales growth are online e-commerce and fresh format stores. And, studies show, many shoppers over recent years now say they have no primary store allegiance.
That leaves groceries to increasingly strategize about how to win and retain customers, with sales and market share the prize.
That national battle is playing out in Michigan, with small and mid-size grocery chains joining the supercenters and nontraditional outlets in pursuing innovation at a rapid pace.
- Walmart is testing the use of robotics in a “vending machine tower” at its Woodhaven store, where shoppers can pick up online orders with just a barcode.
- Busch’s just opened an in-store barbecue restaurant at its Canton store, hiring a chef to oversee the menu and integrating food prep with in-store merchandise.
- Meijer Inc. partnered with Shipt to provide home delivery service, a move that started this year in Grand Rapids and already resulted in expansion for the delivery company as it moves from test markets to across the Midwest.
“The challenge for these stores is that they have to keep raising the bar,” said Ken Nisch, chairman of JGA in Southfield, a retail design and brand strategy expert.
“… Even basic stores are raising the bar in presentation and experience,” he said. “That keeps them in the game with other companies.”
In Michigan, customers are seeing that in a wave of store remodels: Walmart is overhauling 12 stores this year among hundreds across the country. Aldi is on a national plan to update 1,300 of its 1,600 stores by 2020, with many of its 70 stores in Michigan already showing upgrades. Kroger announced remodeling plans for 11 stores through late 2016.
“Shopping is changing. Shoppers’ habits are changing,” said Anne Hatfield, communications director for Walmart. “We need to make sure we’re keeping up.”
Many remodels across chains pick up similar themes, reflecting some of the Whole Foods premises that propelled that chain to market distinction a decade ago.
Typical store perimeters, where fresh foods are located, are expanding; space for staples at the center of the store is shrinking. More room is devoted to prepared and specialty items. Shelves are lower; more signs aid navigation. And aisles are now wider, creating room for carts and passing.
Superstores, like Meijer, are embracing those changes while new smaller-concept stores like Fresh Thyme – which is affiliated with Meijer – enter the market by building the brand around those attributes.
“We’ve made a serious shift in the last couple of years to remodels … and taking more capital and putting it into the store experience,” Guglielmi said. That’s totaled over $1 billion over three years, even as the chain expanded to its 6th state and into the Upper Peninsula.
The use of technology looms as a major growth area for groceries. That trend includes retail giant Amazon, which is experimenting with fresh delivery and bricks-and-mortar sales, and direct sales by companies like Proctor and Gamble.
But it’s also the more common online loyalty programs or “click and collect” programs from traditional grocers.
“Online shopping for groceries may still be relatively small, but shoppers are using digital tools prior to and during shopping trips,” according to a report from FMI on grocery trends. The highest areas of activities, it said, are using digital coupons (49 percent do it occasionally or frequently),looking up recipes (47 percent) and checking weekly sales (46 percent).
And about half of all shoppers engage with food digitally through social media, FMI found.
A report from Willart Bishop said e-commerce in groceries will grow 23.1 percent through 2020. At Meijer, for example, the Shipt option has paid off by attracting new customers. That confirmed for Meijer that it’s on the right track.
“We will continue to look for ways to marry the digital experience with in-store shopping to make it easier for shoppers,” Guglielmi said.
The other side of technology is automation in stores. That’s where the Walmart “vending tower” comes into play, using vertical store space to hold online grocery orders and processing the sale before the customer reaches the store.
Customers scan a barcode at the device that they receive after ordering. “You can just scan it and be on your way,” Hatfield said.
That, along with many other devices, is being tested as just a handful of Walmart stores in the U.S.
Other innovations in test mode at Walmart include a scan and go app, an in-store order kiosk at the deli, allowing a shopper to bypass a line by placing the order, then returning a few minutes later; and inventory screens at the end of aisles, allowing shoppers to place an online order with Walmart if they can’t find a specific product in a store.
“Customers want convenience,” Hatfield said. “It’s about giving folks more choices so they can shop how they want to shop.”
At Busch’s, the Ann Arbor-based chain has used online order for years, said Marla Booth, director of marketing for the 17 stores in Metro Detroit. Changes in IT keep making it easier for shoppers to use, and stores still dedicate space for the pickups and staff to shop for customers.
Today, Busch’s balances that by retaining its focus on a high-quality customer experience, Booth said.
The Canton store showcases that: Besides the 150-seat restaurant that will feature weekly live music on Tuesday, this new store has a gelato bar; fresh juice station, with made-to-order juices; a larger hot food bar; and the chain’s first partnership with Starbucks.
And while all Busch’s have sushi bars, the Canton store pairs its version with the chain’s first hot Asian bowl station, with udon and ramen noodles.
“The reason behind that is a shift in the industry and what consumers are demanding,” Booth said. “Fresh food they can take home, or fresh foods that are ready for them to eat.”
Visitors to the Canton store will notice “the majority of the store is geared to perishable items,” she added.
The changes show how Michigan grocery stores are changing to stay viable as shoppers shift their patters – and to pull new money into the sector, primarily by blurring lines between restaurant and grocery spending for a consumer.
Nisch noted that stores increasingly are creating social spaces. Examples are markets – like Lucky’s and Horrock’s – that serve beer or wine, along with prepared foods.
Looking ahead, shoppers are likely to spend less at traditional groceries by 2020, with declines or flat sales also at convenience stores and drug stores.
Growth is forecast at supercenters, wholesale clubs and fresh formats.
“They’re moving to address consumption in a more hybrid way,” Nisch said. “Convenience used to be defined as doing everything in one place. Now it doing it when and where and I want.”
Source: Michigan Live