The Grocery Store Is an Asset

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The Grocery Store Is an Asset The Grocery Store Is an Asset How Food Retailers Use It In the Future Will Determine Success or Failure An IDC InfoBrief, Sponsored by Precima | November 2017 IDC Infobrief | The Grocery Store Is an Asset: How Food Retailers Use It In the Future Will Determine Success or Failure Grocery Industry in Transformational Turmoil A $1.4 TRILLION FOOD WAR Grocers and other food retailers have lost 29% of their market share since 1991. That’s $310B of lost annual revenue Societal changes are driving consumers to shift meal occasions from cooking at home to takeout food, fast casual dining, schools, recreational venues, and other places (traveling, workplaces, hospitals, universities, etc.). Today, fast casual restaurants are marketing their catering services to families eating at home. Sponsored by Precima | Page 2 IDC Infobrief | The Grocery Store Is an Asset: How Food Retailers Use It In the Future Will Determine Success or Failure Meanwhile, the industry is changing dramatically: • Price wars unleashed by the largest food retailers Walmart, Kroger, Target • Prices have deflated in recent years. Prices of supermarket items declined 1.3% last year, says the Agriculture Department’s Economic Research Service • Recently two European price leaders, Aldi and Lidl, have brought radically different, more efficient financial models into the US. Both are expanding. Consumers are buying into their combination of limited selection and rock bottom prices • Amazon bought Whole Foods for $13.7B and slashed prices on 500 items the first week. Foot traffic is up. Amazon promises more efficient buying to slash prices further • New competitors like Blue Apron, Fresh Direct, and Purple Carrot are creating a whole new category—meal kits U.S. % of Food Spending Today 35% 65% Home from Home delivery, mail food stores order, out of home... Sponsored by Precima | Page 3 IDC Infobrief | The Grocery Store Is an Asset: How Food Retailers Use It In the Future Will Determine Success or Failure The Changing Shopper Landscape: Plan for the Future, But Attend to Today Boomers and Millennials are huge cohorts Boomers and Millennials have different needs - Retailers have figured out Boomers but Millennials not so much. It’s important that retailers don’t forget about Boomers, as they are still a significant portion of the shopper base, but retailers need to evolve their value proposition in the right way: • Older generations more so than younger generations value a lot of options in the assortment of fresh fruit/vegetables and meat Retailers face the challenge of satisfying shoppers’ desires for narrower assortments in some areas • Younger generations more so than older with their more varied preferences and tastes in generations value a lot of options in Home products and Health & Beauty Care (HBC) others. In addition, established national brands are more important to older generations; new products, • Coincidentally, younger generations are more environmental products and niche products are willing to purchase online, especially Home more important to younger generations. products and HBC Sponsored by Precima | Page 4 IDC Infobrief | The Grocery Store Is an Asset: How Food Retailers Use It In the Future Will Determine Success or Failure Fragmentation of Shopper Spend Complicates Matters More Why Shoppers Wander Today 25% of shoppers (growing to 32% within two years) prefer shopping at multiple stores to satisfy their grocery needs. And while better prices are important, that’s not all shoppers want: 40% want products to suit different shopping missions 75% are60% finding products are searching for they want better prices 23% are looking for more convenience What Will Bring Shoppers Back to Their Primary Food Store Product quality, fresh produce, and improved assortments are key to encouraging shoppers of all sorts to consolidate their spending with their primary food retailers. Sponsored by Precima | Page 5 IDC Infobrief | The Grocery Store Is an Asset: How Food Retailers Use It In the Future Will Determine Success or Failure To Win, Retailers Need to Build on the Basics and Drive the Differentiators Delivering on the basics of the retail value proposition meets what most shoppers across all age groups simply Consumers in all age groups are expect of food retailers (though significantly more so interested in personalized prices and among the oldest of shoppers) while the differentiators promotions and in-store experiences. diverge across generations in some areas. Younger shoppers are more interested in value-added services, prepared foods, plated meals and meal kits, and ecommerce. Sponsored by Precima | Page 6 IDC Infobrief | The Grocery Store Is an Asset: How Food Retailers Use It In the Future Will Determine Success or Failure To Win, Retailers Need to Prioritize Departments Where Shoppers Value Spending Their Time in Stores Shoppers of all ages value spending their time in store in the Fresh Fruit and Vegetables and Fresh Meats, Poultry and Fish departments; there is lower interest in spending time in center store categories. The younger generations prefer more options in Home products and Health & Beauty Care. Older shoppers value a lot of options in the assortment in the fresh categories but are generally loyal to established brands in center store categories. Sponsored by Precima | Page 7 IDC Infobrief | The Grocery Store Is an Asset: How Food Retailers Use It In the Future Will Determine Success or Failure The Role of Ecommerce Is Only Going to Increase, More So with Specific Departments and Shoppers Selecting and buying is moving online via Web and mobile technologies. Up to 36% of shoppers want to select and purchase food and common items bought at food retailers outside the store. Health and Beauty Care and Home Products top the list, but even in fresh categories, where inspecting the piece is important, attrition rates exceed 10%. Trend accelerators: Preferred Place for Selection and Purchase (%) • Over 20% of shoppers purchase groceries via ecommerce at least once per month; ecommerce is most popular with valuable segments: Health and Beauty Care 62 38 Home Products 71 29 » Families (over 40% shop online at least once per month) Salty and sweet snacks, cookies 75 25 Various canned goods 77 23 » Millennials (almost 50% shop online at least once per month) Frozen and fresh ready to go meals 79 21 » Urbanites (almost 50% shop online at least once per month) Fresh fruit and vegetables 85 15 Fresh meats, poultry, fish 87 13 » High Income (over 30% shop online at least once per month) n Current Retail Store n Other Channels* Shoppers are already experimenting with various home delivery services. Services like Amazon Prime, Google Express, and Instacart are raising minimum customer expectations. Established players like Peapod have met the challenge. Home delivery will become more widespread as consumers experiment and like it. *Other channels include retailer’s website, mobile app, Amazon, and auto-replenishment. Sponsored by Precima | Page 8 IDC Infobrief | The Grocery Store Is an Asset: How Food Retailers Use It In the Future Will Determine Success or Failure Serve Up Prepared Foods to Beef Up Comp Store Sales Most shoppers purchase prepared foods—family-style wealthy families, 29%, expect to spend more on trays, packed-for-you deli items, portioned meals, prepared foods next year. and serve-yourself hot and chilled dishes on at least • Single adults are more motivated by aspiration— 25% of their shopping trips. These items satisfy many variety and need, cooking skills, or interests. needs, especially time, budget, and variety across most customer segments. • The top three groups most likely to be spending more than last year and more still next year: There are subtle differences. » Millennials 44%/38% • Millennials are slightly more likely to say they can’t » Urbanites 41%/36% cook, less likely to have concerns about cost, and » Households with children 39%/36% expect to spend more next year by a margin of 3-to-1 while it’s just the opposite among seniors. Reasons for Buying Prepared Foods • Women are more likely to cite reasons of time, budget, and variety than men. Men are more likely to To save time 56 cite not being able to cook and special occasions. Costs less than a restaurant 54 • The wealthy and working poor buy prepared foods To enjoy something different 42 to save time while middle income households are more likely to buy prepared foods for special I can’t or don’t like to cook 24 occasions. Slightly more working poor, 32%, than Special occasions 23 Sponsored by Precima | Page 9 IDC Infobrief | The Grocery Store Is an Asset: How Food Retailers Use It In the Future Will Determine Success or Failure Make Way for Meal Kits There’s growing demand for meal kits, all the measured Consumers prefer buying meal kits from grocers and ingredients and recipes needed to cook and serve want them to grow and improve their offerings: homemade dinners, across many shopper segments. The • Consumers report that they buy 86% of meal kits from concept may not be widely understood yet—a blurred line grocery stores and other retailers between them, take-out meals, plated meals, and self- service bars. Even more millennials, boomers, families with children, and urbanites want more space in stores dedicated to meal kits. Meal kit spending is increasing Still, retailers must address consumers’ concerns, not just • 20% of consumers report they increased spending on about high prices: meal kits over the last 12 months, twice as many as those who spent less • High
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