As grocery shopping trends continue to evolve, changes in the market have created an increasingly competitive landscape where customers have access to more choices for meeting their grocery needs. These choices have developed along a couple primary themes:
- Greater expectations regarding product and service quality
- Increased demand for low price alternatives (value-based pricing)
Brands like Whole Foods and Trader Joe’s have set the standard for product quality and enhanced service in the grocery industry. With such rapid growth, they really no longer can be considered alternative formats as they’ve become central to the supermarket industry. Trader Joe’s is expanding at a reported 40 stores a year, while Whole Foods plan is to expand to 1,000 stores (roughly the size of Publix), which is over triple the amount of their current store count. Other chains considered more traditional historically are also following a high service model such as Publix, Wegmans, HEB and Harris Teeter.
Product quality demand is being driven by more health-conscious customers and the organic foods revolution. Consumers are becoming increasingly weary of what they put into their bodies as evidenced by California’s recent proposition to implement legislation for mandatory labeling of genetically engineered food, which failed to pass, but by a small margin (53% - Yes, 47% - No).
Warehouse clubs and supercenters remain the key competitor to traditional supermarkets. These chains place considerable price pressure on the industry. With the continued expansion to new markets by big box retailers like Walmart (see this article) and the rise of dollar stores offering grocery items, grabbing the attention of price-conscious shoppers is no small feat.
The supermarket industry is in a position where understanding consumers’ perceptions of their brand is critical when determining how they should approach the market. Some banners are better positioned for quality and service, while others are positioned for price. For a recent customer intercept study executed by TrendSource in a regional market, customers were asked for their opinion regarding the most important factor when designing an ideal grocery store. The customers were interviewed as they left specific grocery stores known to have the particular reputations. We found that:
- At a grocery chain known for having high quality products and exceptional service, customers cited premium quality products and great customer service.
- At a grocery chain known for value-based price offerings, they cited low prices.
The relative importance placed on price and product quality differed significantly, illustrating the perceived strengths and overall positioning of these banners in the minds of their respective customers. Based on these kinds of customer perception classifications, management can either embrace their market position and define the right behaviors for associates to fulfill that service promise or take action to reposition their brand.
A pathway to success is then established through clearly defined measurements for performance that will support high achievement by associates. Ongoing evaluation is critical in this process, with the most successful strategies incorporating some element of recognition and reward to reinforce desired behaviors and identify opportunities for improvement. This continuous, systematic approach is proven to raise success standards and facilitates competitiveness in the rapidly evolving marketplace.
