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One of the most dramatic trends today is how competition for the shopper has redefined, and is continuing to redefine, retail. Conventional “class of trade” boundaries have blurred or even been eliminated as retailers, foodservice operators and others compete to satisfy the shopper’s need for meals.
This competition for the shopper is particularly intense in the business of deli. Today’s shopper can choose from among a plethora of options all aggressively competing for the shopper's attention and meal choices. These traditional options include grocery stores, supercenters, mass merchants and club stores. In addition other major channels, including convenience, drug and dollar stores, are increasing their offerings of fresh and prepared foods. And beyond just retail, foodservice and other alternatives are aggressively competing with curbside pickup and additional shopper-friendly approaches.
So, today and looking ahead, how does one tap the potential of today’s deli shopper? And how can doing so build not only deli, but also total-store sales and profits?
To learn how best to tap the potential of the deli, Progressive Grocer, Tyson Foods and Meridian Consulting Group sought to find out how retailers were currently pursuing the deli opportunity, as well as to understand future critical needs.
This study included a diverse group of retail thought leaders across various channels, including supermarket chains and independents, as well as mass merchants. Respondents represented multiple functional areas, from category management and procurement to marketing and market research, and included merchandising as well as operations. In addition, multiple levels of experience were incorporated, with participants ranging from manager and senior manager level all the way up to president and CEO. This article captures the highlights of what we found.
The study identified three major findings:
1. In a world of intense cross-channel competition for meals, the deli holds the key to redefining the grocery store.
Today’s deli is very different from yesterday’s in many ways -- first is in the range of product offerings. The deli of the past was strictly focused on lunch, in particular sliced meats and cheeses. While today’s deli continues to provide shoppers with lunch options, most deli departments have been broadened to include solutions for the most important family meal: dinner. With a broad array of dinner options available, including main and side dishes, snack items, and additional hot and cold products, a modern, up-to-date deli can play a much greater role in the shopper’s life, thus unlocking the opportunity to redefine the total store.
To that end, many retailers note that the name often used for this department -- “deli”-- is no longer appropriate in terms of what it represents to today’s shoppers. As several respondents noted, the name "deli" came from what one would expect in a local corner deli -- essentially lunch items, with a limited set of companion or additional items such as potato salad and other products. Given the much broadened array of food selections offered, “deli/prepared foods” is a much more apt description.
While perhaps not a significant change in name, this represents a tremendous shift in the strategic role of deli/prepared foods within the total store. By definition, the primary reason for being of a grocery store is – or, we should say, was -- to sell groceries. Respondents resoundingly underscore the importance today of deli/prepared foods to gain share of the food dollar versus restaurants/takeout. And looking ahead, 98 percent of respondents say deli/prepared foods has the potential to be an even stronger destination department for meal choices in their stores. Yet while the importance of the department is widely recognized, fewer than half of all respondents (47 percent) said the deli/prepared foods department is one of the top three priorities in their organizations.
Two representative retailer comments further illustrate this growing strategic importance:
- “As grocery gets more competitive, competing just on selling cans of coffee is death. We need to become a perishables store that also sells groceries instead of what we are today, which is a grocery store that happens to also sell some perishables.” -- Retailer
- “There is a definite carryover from deli to the rest of the store. If a shopper buys an entrée or meal in deli, they'll also pick up sides or even nongrocery items while in the store.” - Retailer
2. To capitalize on the full potential of deli/prepared foods, a much deeper understanding of the early stages of the shopper purchase pathway is needed.
In many categories, most of the shopper research conducted focuses on “choose product within category.” In fact, Procter & Gamble coined the term “first moment of truth” as understanding shopper needs when he or she is in front of the shelf deciding which product to buy.
While this is valuable research, it’s insufficient in deli/prepared foods, where early stages in the shopper purchase pathway -- particularly “choose channel/retailer" and “choose department/category” -- can have a profound impact. Developing a better understanding of how shoppers are making decisions at these earlier stages can help retailers to influence the shopper’s decision. As a result, they can drive the shopper to choose their channel, their store and ultimately the deli/prepared foods department to meet her meal needs.
Think about being in the shopper’s mindset. She likely begins to think about this evening’s meal outside of your store. Her choices are endless: Something at home in the freezer/refrigerator? Going out to eat at a restaurant? Getting pizza delivered? Picking up a takeout option? The key at this stage is understanding how to influence her to come to your store. Once she’s in your store, she’s again faced with a myriad of options to meet her meal needs, from fresh meat, frozen foods, something from the produce department -- or perhaps the deli/prepared foods department. Then, finally, once she’s reached deli/prepared foods, comes the final choice of what product to purchase. As you can see, there’s a lot to understand and influence before she gets to your department.
This early-stage shopper research can be more difficult to collect because it demands an understanding beyond the confines of the store. However, it’s valuable to develop this more complete understanding of the shopper purchase pathway. And clearly, an understanding of these earlier stages will be critical to capitalize on the current and growing importance, as well as the long-term potential, of deli/prepared foods.
3. Best practices for deli/prepared foods are unique in that they must address two important areas: “front room” elements (what the shopper sees) and “back room” (retail operational considerations).
Best practice requirements in deli/prepared foods can be challenging to define and execute relative to other departments of the store. While many other departments have similarities to each other, deli/prepared foods is unique in its need to perform much like a foodservice establishment within a grocery environment. Requirements must also reflect different retailer strategies, store formats and resources.
- “In deli/prepared foods, you can’t just put a product on the shelf and expect it to sell. It requires careful operational coordination, along with what you put in front of the shopper.” -- Retailer
“Front room” best practice elements (what a shopper sees) include two broad areas: variety and shopping experience. In the study, 94 percent of respondents noted variety as extremely/very important, and 87 percent emphasized shopping experience. However, there are significant gaps when compared with the ability of one’s organization to deliver on these attributes. In addition, it’s important to note that both variety and shopping experience must be addressed. Simply increasing variety through the addition of more items without enhancing the shopping experience will only result in moderate success. Addressing the shopping experience in such areas as theater, communication before and in the store, and most importantly customer service, is an equally critical element in driving significant marketplace results.
“Back room” best practices (retail operational considerations) also include two broad areas: organization commitment and understanding at all levels and across functional areas, and training on both operational and customer service requirements. With “back room” best practices, respondents also note significant need for improvement.
Finally, it’s important to note that there are a few lead retailers that have embraced these practices and are showing strong in-market performance. These winning retailers are successful because they’re co-ordinating and integrating both of these “front room” and “back room” best practice elements.
This is the first in a series of articles on "Tapping the Potential of Today’s Deli Shopper.” In upcoming months, we’ll examine new learning from an extensive shopper study conducted by Tyson across the shopper purchase pathway. And finally, we’ll hear from Tyson management regarding how they plan to put this retail and shopper learning into action.
For more information on capturing the full potential of the deli/prepared foods shopper, contact Eric LeBlanc, director of deli/prepared foods marketing at Tyson Foods, at [email protected].