The New World of Retail
How competition is giving rise to a fresh produce focus
In the highly competitive new world of retail, fresh fruits and vegetables have the opportunity to play a much more pivotal role. Retailers of all types—traditional grocers, deep discounters, club stores, ecommerce platforms, and even convenience stores—have been pushed into a fierce battle for foot traffic and market share amid changing consumer shopping habits and shrinking margins.
Steve Grinstead, founder of the Grinstead Group near Dallas, TX, calls it “a perfect storm” compelling retailers to try to stay a step ahead of rivals. “The ever-changing retail grocery business has gone from evolution to revolution,” he declares.
As a result, retailers are looking for ways to entice consumers into their stores by offering meal kits, salad bars and cafes, mobile checkout, artificial-intelligence powered advertising, specialized service kiosks, and other conveniences to ensure shopping is not a chore but an experience.
Of Millennials & Meal Kits
Millennials are embracing ecommerce-based meal kit services like Blue Apron, Home Chef, and Hello Fresh, pushing grocers to renew their efforts in this category. Last year, Albertsons purchased meal kit service Plated and H.E.B. launched Meal Simple, while this year ShopRite debuted Chef’s Menu, to name just a few examples.
While respondents to the 2017 U.S. Supermarket Experience Study conducted by the Retail Feedback Group touted saving time as a primary reason for using meal kit delivery services, cost was a deterrent. In contrast, 15 percent of shoppers said their primary supermarket had a meal kit offering—and the top reasons for purchasing from this channel were value, quality ingredients, and saving time. Is this not a clear message to retailers?
“While it remains to be seen whether meal kits are permanent or not, our research shows supermarkets have a key advantage over meal kit services in the area of value,” confirms Brian Numainville, principal at Retail Feedback Group. “So providing meal kits that are solid in terms of quality and value could be a win for supermarkets.”
“There are really two issues for supermarkets,” observes Chris Baker, partner in the retail and consumer goods practice at Oliver Wyman in Chicago. “First, is it a good idea and do customers want it? And second, is it profitable? There’s demand in many places, but the challenge is on the profitability side.”
“Retailers are trying to figure out where they fit,” notes Mike Kienzlen, principal at Retail Profit Solutions, noting that grocers from Kroger and Safeway to independents are getting into the segment. “Can they make money on it? Are they cannibalizing their own sales?” Another concern is shrink, which can be greater than 50 percent on meal kits, along with the marketing dollars and display space required.