You are here
Is fresh overrated?
Well, no. Although nonperishable products have definitely gained traction as part of a distinctive in-store experience, to differentiate themselves meaningfully, grocers must still primarily think fresh.
In rating the most successful departments, 67.1 percent of respondents to this year’s Annual Report survey chose meat as the top draw, while deli/grocerant/prepared foods occupied the second spot, with 60.8 percent attesting to its popularity. Other big lures were third-place produce, down from last year’s top spot; beer/wine/liquor (if applicable), up from fifth place last year; and private label, which soared from No. 12 to round out the top five, in line with store brands’ greater importance to the in-store experience.
In fact, meat scored as the most influential department in driving stores’ overall brand, image or point of differentiation by a wide margin, followed by deli/grocerant/prepared foods, produce, organic, private label and center store.
When asked what big issues were keeping them up at night, 42.8 percent of respondents identified competitive threats, which leapt from 14th place last year to third as a major concern. This response indicates a much rockier competitive landscape for grocers, caused by supermarkets’ extremely tight margins and the need to keep up with rapidly changing trends.
Greater competitiveness could explain the uptick in limited-assortment stores, with their promise of quality products at value prices, from 3,325 stores to 3,396, with sales up a whopping 39 percent to account for 3.5 percent of the total supermarket sector, up from 2.6 percent last year.
Be that as it may, the benefits of differentiation are clear: Looking at EBITDA over the last five years, research firm Deloitte LLP found that if a retailer provides differentiated products and experience, then growth is almost 13 percent in that particular segment compared with the average growth of 2 percent, according to Progressive Grocer Senior Editor Randy Hofbauer’s coverage of the National Retail Federation’s Retail’s Big Show in January.
When it comes to ways to enhance the in-store experience, 69.5 percent of respondents zeroed in on private label, landing it in first place, up from No. 3 last year. Retailers that have used this strategy effectively are H-E-B, with its Texas-centric offerings, and Ahold Delhaize, which creates “artificial scarcity” through its “Limited Time Originals” cross-category platform bringing together unique items across the store based on seasonal flavor profiles. Other popular merchandising and brand enhancement strategies include locally sourced products, holding steady at No. 2; signature products, which climbed from sixth place last year to third this year; grocerant/prepared foods, last year’s top program, which slid to the fourth rung; and rounding out the top five, cross-merchandising, which dropped a slot from last year.
In the area of customer interaction, community involvement, seasonal special events and sampling demos all retained their spots in the top three, while healthy-eating store tours rose from seventh place last year to fourth this year, tying with in-store restaurants, which advanced from the fifth slot last year. Descending a rung from last year, this year’s No. 5 was wellness events/counseling.
As for in-store services, on-site butchers, community programming and seafood specialists continue to hold the lead, at Nos. 1, 2 and 3, respectively, while promoting a store’s florist as a point of differentiation (new to this year’s survey) captured fourth place, and event planners/concierge services/catering dipped from No. 4 to No. 5. Also new to the survey were offering vegetable “butchers,” a service that’s received a lot of attention for its inclusion in the recently opened Bryant Park Whole Foods Market in New York City, at No. 6, and providing self-checkout/check-less capabilities, in 11th place.
The complete Annual Report of the Grocery Industry can be found in PG’s April digital edition.