INNOVATION IN AISLE….
Grocery brands are on the cusp of innovating the way we shop. And diverse competition (that isn’t your typical grocery store)--combined with technology--is pushing household name brands to work even harder to deliver what their customers now expect.
Grocery brands leading in digital is a natural play. Sure, we tend to think of massive tech companies when we hear “digital” and “innovation.” Apple is innovating the way we communicate and connect out in Cupertino, producing products that we know and love. But grocery brands have a slight upper hand even on brands like Apple. They don’t have to create a demand. More often than not, they just have to connect with it.
Last year, Amazon launched Amazon Go, their walk-in, walk-out grocery store in Seattle. A place where human communication is optional and products can be snagged directly off the shelf and you can be on your way. The competition amongst grocery brands for digital dominance has been heating up ever since.
Grocers are fighting to keep up with new customer expectations by providing in-store pickup options and more e-commerce-style strategies. The question is, are they able to compete with the Amazon experience? Or could they potentially provide something even better?
With the very definition of a “grocery brand” getting blurrier each day, new players and new technology are redefining the barriers to entry for this industry.
We’ve been paying close attention to these subtle, yet important shifts. With clients in the retail and grocery space, we regularly track and audit the competitive landscape of the industry.
We watch what kinds of campaigns Meijer, Kroger, and Target (and smaller-scale players) are running, what’s successful, and what misses the mark. We can see what types of content on social media are resonating, and potentially driving in-store foot traffic with coupons and specials. Tracking everything from robust vendor programs and user-generated content to Facebook Live engagements gives us the inside track on our clients’ competition.
As we look at both the digital and non-digital experiences that are driving the future of grocery innovation, several critical trends surface that grocery brands need to stay ahead of to avoid uncertain futures.
TREND #1: OUTSOURCE IT
Of all of the obstacles to having dinner at home with the family, lack of cooking skills ranks almost dead last. People want to cook. The labor that goes into the process is just an inhibitor to doing so. Food Marketing Institute (FMI) data from this year shows that differing schedules, distractions, and lack of time to prepare meals is driving people to cook less for themselves and for their families.
Services like Blue Apron and Sun Basket are changing the game for busy families and individuals alike. The problem with these services becomes driving customer retention with this new way of receiving and preparing meals.
“Ecommerce in general tends to have a relatively high churn rate. Customers who complete a single transaction do not come back for whatever reason, or they transact infrequently,” said Carrie Bienkowski, CMO at grocery delivery service Peapod. “We’re focused not only on new customer acquisition, but reducing our customer churn rate. That’s critical because unlike other categories, grocery is not a discretionary spend. People buy groceries every single week. In theory, there’s a lot of headroom with frequency."
Services such as these aren’t the only place that customers are turning to in a pinch. In fact, 67% of households with kids outsource cooking meals to the grocery store at least some of the time (FMI, 2017). And even Target’s Chief Merchandising Officer, Mark Tritton, mentioned recently that they are also looking to add more ready-to-eat, heat, or cook offerings.
TREND SPOTLIGHT: Delivery meal kits and on-the-go professionals. What can your brand do to cater your services to your customers’ needs?
TREND #2: SELECTIVE SHELVING
Millennial purchasing habits are changing the way grocery stores and retailers are stocking their shelves. Forty-three percent of millennials have said that they shop online for groceries at least occasionally (FMI, 2017). However, this doesn’t mean that grocers should close up shop and take their entire operation online. This demographic that has been in retailers’ sights for years now is highly selective in what they buy online versus offline.
In-store vs. online purchasing habits of millennials (FMI, 2017)
Millennials are less likely to buy online: non-prescription drugs, fresh bakery items, fresh meats and seafood refrigerated dairy foods, and fresh produce (FMI, 2017).
Millennials are more likely to buy online: baby food, pet food or treats, household cleaning products, salty snacks, and sweets (FMI, 2017).
Brands like Trader Joe’s, Aldi, and Lidl have been quick to stay ahead of this trend by offering deep discounts and limited assortments that cater to the selective shopping habits of millennials. “The customer doesn’t have to walk in the store and have so many options and take time to decide. We’ve done that work for them,” Liz Ruggles, Aldi’s marketing director, recently told Bloomberg.
The discount and more “boutique” stores like Aldi are capturing the attention and wallets of millennials. Though, their work is still cut out for them, as they duke it out against mass merchandisers and supermarkets.
TREND SPOTLIGHT: Millennials are interested in more than just grocery delivery services. A unique understanding of the specific needs of this generation is key to connecting and driving repeat millennial customers.
TREND 3: CUSTOMER-CENTRIC ENGAGEMENT
The most important attributes when selecting a primary grocery store are none other than their stock of high quality fruits, vegetables, and meats. What follows the need for high-quality products? Store cleanliness, friendly employees, location, store layout, and a fast checkout.
While high-quality products need to remain the core focus for grocers (and any successful brand), brands can’t forget about the need for rounding out their entire brand experience. An experience that lives both in-store and online. Both negative and positive experiences should be recognized and navigated as smoothly online as they would in person.
TREND SPOTLIGHT: Retail executives are pushing for stronger in-store and digital customer experiences. Is your brand replicating its in-store successes online?
Keeping Pace With Grocery Innovation
In a world with one-click buys and Amazon Dash buttons, how can grocery and other retail brands stand out? It starts with listening to the needs of your customer and meeting them where they are. What works for a millennial couple, might not be the right solution for an unmarried baby boomer. What works in-store needs to be replicated online. As the definition of a grocery brand continues to blur, it’s about creating customer experiences that someone would want to go out and find.