Penny For Your Thought: Grocery Shopping Practices Are Shifting!
Offering convenience in location and selection, the grocery store has been a good proxy for the economy, the family, and technology. Today, the grocery industry no longer has a lock on where consumers get their food. The erosion in supermarket share of the consumer’s food budget is well documented (see FMI, Supermarket News, and Progressive Grocer) and reflects that we live in a ‘choice-full’ world in which power of trade has shifted to the consumer. Consider the state of the grocery industry in the U.S over the past 24 years. The average net profit of grocery store chains is just over a penny per dollar of sales (1.1 % ) and never in any one year, over this same period, did net profit hit above 2.0 % of sales (FMI statistics). Once upon a time, the supermarkets had near exclusivity to perishables, today portions of this category can be found in many other retail formats; however, it remains a destination for supermarkets and an opportunity to differentiate.
How an industry acknowledges and shifts investments (in people, systems, and processes) to match new and necessary behaviors will determine its long term success. Today’s shopper is more sophisticated in the sense of having more information at their fingertips than at any other time in history; she can compare prices, content, freshness, and other quality/value indicators – and tell her friends – at the press of a button. There is a continuing blurring in the mind of the consumer around the entire food category.
The grocery executive is facing a lot of headwinds in growing, let alone maintaining, their business in 2009: longest business and consumer recession in 25 years, rising national unemployment (some states well in the double digits), changing demographics and tastes, and greater consumer demand for healthy, nutritious, and safe foods (and supply chains). A random review of grocery headlines in the past week offers a glimpse at the complexity and opportunities facing the grocery executive:
- More supermarket bankruptcies (Bashas’)
- Leadership changes and business re-organization (Supervalu)
- Adapting to changing consumer base (Food Lion)
- Consumers allegiance to their pocketbook (Roundy’s)
- CPG companies successfully leverage technology and social media to directly reach shoppers and niche markets (General Mills, Betty Crocker)
- Increase in retailers’ private label share of food & beverage sales (all majors)
- Supermarket enters and wins prestigious wine awards (Fresh & Easy)
- The mainstreaming of organic, and soon to be: Non-GMO foods category (Wholefoods)
Clearly there is much on the mind of the shopper and the grocery executive. Each of the above headlines has sufficient business, financial, and policy implications to deserve its own blog with open and candid exchange. These will offer fodder for future blogs and discussions by the BPX community. The shopper is at the heart of the value chain, adding to the unprecedented set of pressures on retailers with regards to expectations for value, quality, and service. The future of the grocery industry and what it stands for begins today with the decisions you make and the data you capture at headquarters and stores to impact the efficiencies and effectiveness of your personnel, and build a differentiated shopping experience throughout your stores and on the web.