FEATURE

Food for thought: 7 trends set to define grocery retail in 2017

Online grocery, last-mile shipping, social media marketing, product transparency and differentiated shopping experiences will highlight the year ahead.

AUTHOR

Sandy Skrovan

PUBLISHED

Jan. 5, 2017

Grocery retail is undergoing dramatic shifts driven by changing consumer needs and expectations, technology advancements and a fierce competitive environment.

More changes can be expected as this year unfolds. Progressive grocers will continue to transform business models and tap new ways to attract and retain shoppers as they transition to compete in an ever-evolving grocery landscape.

Here’s a closer look at seven trends to keep an eye on in 2017.

1. Offline and online convergence

While grocery shopping online continues to lag behind general merchandise, home and apparel, progress is being made. According to the latest data from Prosper Insights & Analytics’ November 2016 survey, 7.7% of U.S. consumers shopped for groceries online in the past 30 days, up from 5.7% two years ago. Not surprisingly, younger generations are driving the uptick. One in ten millennials and Gen Xers did online grocery shopping in 2016, up from 8.4% and 6.8% respectively in 2014.

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The “convenience” of online shopping and grocery delivery means different things to different people. For some in crowded urban areas, getting to and from the grocery store may be a transportation issue. For busy working parents, grocery shopping may be a time issue. Others may just dislike grocery shopping and do anything to avoid the store.

Online is poised to become a bigger part of the overall grocery shopping equation going forward. More shoppers will start moving the mundane task of shopping for regularly replenished goods — beverages, paper products, packaged nonperishable food and other household basics — online.

Wal-Mart and Amazon undoubtedly will remain the frontrunners and will continue battling it out in the online space. Wal-Mart’s intention to escalate its grocery e-commerce game became quite clear with the Jet acquisition last year. The retailer also earmarked $11 billion in capital expenditures in 2017, much of which will be for boosting digital initiatives.

 

Credit: Wharton School of Business

 

Meanwhile, Amazon continues to ramp up its grocery offerings and expand its AmazonFresh online grocery business. The first Amazon brick-and-mortar grocery stores will likely open in the coming year as well — a bold move by the online giant.

While it looks like a two-player online grocery race, others will not sit idly on the sidelines. Developing an integrated and seamless multi-channel shopping experience will remain a strategic priority for many grocery retailers in 2017.

2. Figure out the last mile

The last mile — getting goods from the final delivery hub to a consumer — will continue to challenge grocery retailers in 2017. Is home delivery the answer? Do shoppers expect same-day delivery? Will curbside pickup do? Do retailers need to create a pickup point inside the store or perhaps at remote locations like Amazon Lockers? Are fulfillment and pickup areas adequate? Is staffing sufficient to meet shopper demand and expectations? Should third-party partnerships be considered?

Exploring these issues — along with shopper studies, location and real estate assessments, and return on investment analysis — will remain top of mind for grocery retailers in 2017.

3. Marketing dollars channeled toward social media

Mobile and digital influencers like Facebook fan pages, blogs, customer-generated reviews and friend recommendations are playing a bigger role in shopping decisions. Consequently, traditional marketing — pushing messages through TV, radio and print — will continue to give way to social media marketing in 2017.

Social media engagement allows brands and retailers to be where their customers are. Effective interactions generate excitement around a brand and keep retailers at the forefront of their customers’ minds, not to mention develop brand advocates in the general public.

 

Whether it’s Facebook, Twitter, sponsored blogs, Instagram, affiliate marketing or another platform, it is imperative to be part of the social chatter going forward. Social media also gives retailers and brands more opportunities to embrace and reward consumers who use it to spread the good word on their behalf.

According to Socialbakers Analytics Facebook monitoring tool, Wal-Mart has the most Facebook fans of any brand in the United States, with more than 33 million. Amazon and Target also make the top five list. Expect more groceries to aim for similar accolades in the coming year.

4. Transparency throughout the supply chain

Transparency will remain a buzzword in 2017.

“In this age of information with its accent on instant access to whatever you might want to know, the industry has seen a dramatic uptick in demand regarding ingredient transparency. Whether related to health, food safety, or environmental responsibility, consumer demand for information about the products they use and consume continues to be at the center of conversations throughout our industry,” stated Doug Baker, Vice President Industry Relations-Private Brands, Technology for the Food Marketing Institute in an FMI post last year.

A growing number of product certifications, health claims and icons on food packaging point to the food industry’s efforts to boost product transparency. New tools, including mobile applications like Shopwell and OpenLabel, and the Consumer Information Transparency Initiative’s SmartLabel platform, also push for increased product and supply chain transparency.

In the coming year, more food manufacturers and retailers are likely to embrace technology as well as available transparency tools to ensure their brands are accurately represented. Additionally, utilizing technologies like big data analysis to mine loyalty programs will allow retailers to quickly identify product purchases and alert shoppers of food safety issues or product recalls.

5. Shopping experience over price

Given the low-price positioning of Wal-Mart, dollar stores, Aldi and others — as well as the much anticipated U.S. entrance of European extreme value retailer Lidl in 2018 — it’s clear that price is no longer a competitive differentiator.

 

Credit: Robert Couse-Baker

 

Consequently, grocery retail value should be reframed to emphasize non-price factors such as freshness, quality, customer service and the shopping experience. 2017 could become the year when retailers stop primarily selling products and instead start selling services, solutions and quite possibly stellar shopping experiences.

Grocery retailers should find ways to deepen emotional connections with shoppers. Experiences to engage consumers and encourage them to shop longer, spend more and stay loyal are needed.

For example, could grocery shopping be positioned as an extension of a health and wellness lifestyle, with space at the store for premium and specialty brands and health-oriented services? Or what about a collection of departments complete with products, services and gathering stations? Some of these departments might include a coffee bar, wine-tasting section, dinner party solutions and farmer’s market.

6. Empowering frontline employees

Developing and improving customer-centric strategies should be high on every grocer’s checklist for 2017 and beyond.

Accustomed to having information — and answers — at their fingertips, shoppers increasingly will look to store employees as stewards for additional product information, nutritional advice, recipe tips or purchase recommendations.

Knowledgeable and empowered frontline employees who are equipped with the proper tools and technology and are readily available to answer questions and address customer service issues is yet another way grocers can raise the shopping experience bar.

7. Personalization enabled by big data and analytics

Big data mining and analytics will continue to gain traction among grocery retailers. The result will be more personalized grocery shopping experiences, which in turn could translate into increased sales and repeat visits by loyal customers.

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Credit: Flickr; Kārlis Dambrāns

 

Kroger, recognized as one of the industry's premier operators, uses advanced analytics from its Plus Card loyalty program data to predict the products consumers might want to buy.  The retailer then sends the shopper customized digital coupons for those products.

This kind of program has helped Kroger grow the number of loyal households shopping at its stores. And it boasts a remarkable streak of 52 consecutive quarters — or 13 years — of identical store sales growth, making it the envy of other grocery retailers.