Food Retailing for the Me Generation
NATIONAL REPORT — When looking at consumers, retailers and consumer packaged goods companies tend to segment shoppers by generation. Gen Xers, millennials and baby boomers, for example. But today's reality really boils down to just one generation — the "Me Generation."
"The reality is that Me really is all about the shopper, as in truly Me and personalization toward Me and I," Craig Rosenblum, senior director at Inmar Willard Bishop Analytics, said during a recent webinar presented in partnership with The Food Institute and BMO Harris Bank.
Calling the evolving food retailing industry "a bizzaro world," Rosenblum pointed out several new realities in the competitive landscape:
- Changes in ecommerce, like Amazon building brick-and-mortar stores and Walmart buying Jet.com for more than $3 billion;
- Continued growth of limited assortment stores;
- The Me Generation wanting their products delivered to them anywhere, anytime, anyplace;
- Curbside service; and
- Grocery shopping online.
"The ability that I can get what I want, when I want, how I want it, the way I want it, wherever I want certainly is something I'm sure many of us never saw coming many years ago," he said, noting that traditional grocers are now beefing up what they offer from the standpoints of ecommerce, online, and pickup or curbside delivery.
"The leaders are not sitting idly standing by," said Rosenblum. "The investments Walmart is making in curbside pickup all over the country; even regional players like H-E-B or Kroger are moving in that direction."
Pressure from the large players like Walmart has not only led to competition in the click-and-collect world, but it has also led to changes in brick-and-mortar formats. Rosenblum cited Kroger's brand-new Fresh Eats MKT format, which emphasizes convenience.
The convenience channel is not sitting idly on the sidelines, either. "The reality is we are seeing more and more gas stations really become the new grocery store of the future," he explained. "Convenience stores account for 11 percent of millennial food shopping experiences."
Larger, regional convenience store chains are boosting their foodservice experience and becoming another place to consume on-the-go prepared food, or fresh food, Rosenblum added, and this trend is continuing to expand.
"We really are talking about a time of unprecedented disruption in food retailing, whether it be social, digital, format, meal kits, foodservice or grocerants," he said.
Delving into analytics, Jim Hertel, senior vice president at Inmar Willard Bishop Analytics, reported that for the first time in six or seven years, the industry is seeing a cumulative effect of the many changes and it is starting to be reflected in the numbers. In 2016, traditional grocery saw sales decrease 5.9 percent and market share decline by 1.7 percent. Non-traditional grocery sales increased by 2.6 percent and market share grew 1.1 percent.
"The sales decline of 5.9 percent is an outstanding number in a roughly $5-billion class of trade," Hertel said. "It's reflective of a number of different impacts. It's a combination of long-term customer-count declines in the range of 1.5 percent to 2.5 percent over the years. But those customer-count declines were masked by food inflation."
Over the past two years, food deflation has removed a lot of the cover for traditional grocery stores, according to Hertel.
As for other retail channels, sales at dollar stores were up 4.2 percent, while drugstore sales increased slightly, up 1.5 percent. Sales at supercenters increased 5.6 percent, and wholesale club sales inched up 2.2 percent. The mass channel decreased 12.3 percent in sales and 7.3 percent in store count.
Breaking it down by who is growing and who is not, ecommerce is leading the pack in the food retailing world. It is still a relatively small player with a market share of roughly 2.2 percent, but it is "growing significantly," by 24.4 percent, said Hertel. Traditional supermarket and mass merchandise are bringing up the rear.
SHOPPERS & THE SHOPPING JOURNEY
To understand the Me Generation, the industry needs to step back and understand how the consumer is changing and how that impacts the shopper journey.
"As we think about the changing consumer, we have talked about the notion of boomers, to millennials, to Xers, but the reality is also that the dynamics of how shoppers are shopping today are continuing to be vastly different," Rosenblum explained.
For example, many retailers are trying to figure out how to address localization and local assortments, as well as how to serve the center store and perimeter of the store. In addition, retailers need to address the eating habits of elderly shoppers.
A key trend in the market today is the reality of shoppers moving away from being culinary experts at home and toward prepared foods, meal kits and grocerants.
"We have to be able to provide all the different ways to enable what is becoming a non-culinary group the ability to have a culinary experience at home," noted Rosenblum.
Planning is still front and center for many shoppers, with 60 percent preparing a list before shopping. But thinking about planning influencers, it is no longer about the shopper just looking into a cabinet and seeing what he or she needs. According to Rosenblum, it is also the reality of time moving into the equation.
Loyalty, rewards and coupons, along with social recommendations, likewise play roles in planning.
"There is also this phenomenon going on of more information, more insight, more understanding, wanting more," Rosenblum said. "Whether you are buying a car or a refrigerator or a television, we now have access to more information than we ever had before, and the reality is we are taking advantage of that as we research what it is we are getting and how we can get the best or most recommended, or the best price along the way."
This is occurring in grocery, too. According to Rosenblum, shoppers and their motivation can be divided into three buckets: budget conscious, intentional about savings; and digitally engaged. Elements of these buckets could be behind the popularity of loyalty programs.
As he pointed out, loyalty programs will continue "to be front and center," but will begin to evolve. More than 80 percent of shoppers currently belong to at least one grocery store loyalty program; however, 53 percent of shoppers belong to multiple grocery store loyalty programs. Seven in 10 use a loyalty card every time they shop.
"On the one hand, you can say we have done a great job of trying to drive loyalty with loyalty cards and engagement. On the other hand, we can say we really taught the shoppers that in order to save in our stores, you better have a loyalty card or some way for us to identify you so you can get these offers," he stated.
"Beyond the changes in behavior in regards to where consumers are shopping and how they are consuming food, the level of digital engagement we are seeing out of the consumer today is really driving digital tracks across the landscape," Hertel told webinar participants.
The ability to dig into the digital tracks, understand the information, and incorporate those learnings into marketing plans will be the cornerstone of success, he advised.
For example, by using purchase metrics, retailing companies can create the most relevant offers for its shoppers. A key step is to take the information on shoppers' purchases and develop a picture of their behavior — not on a category level, but a total store level.
"Once you understand the behavior at the consumer level and a granular level and raise it up, it allows you to target offers to consumers directly," Hertel said.
Delivering a targeted, relevant offer is a critical asset. "The last thing you want to do, especially with these new generation consumers, is bombard them with content they believe is not relevant for them," he cautioned.
"The Future of Food Retailing: Winning The Me Generation Through Shopper Analytics" webinar was sponsored by BMO Harris Bank.