More retailers turning to grocery partnerships to boost traffic

AUTHOR

Alicia Kelso@BGbunster

PUBLISHED

April 9, 2018

Dive Brief:

• Karstadt, a German department store chain, plans to open an Aldi in its Hamburg location, according to Forbes. It is the latest example of a non-food retailer adding a grocery presence.
• Walter Loeb, who wrote the piece, said this type of partnership can “bring shoppers back very often,” and could lead to more examples of food-retail marriages. 
• Though the idea has contributed to success at Walmart — with grocery accounting for 56% of the company’s total sales — it has fallen short at Target.

Dive Insight:

In the race to keep up with the Amazon juggernaut, more general retail stores are taking this “all things to everyone” approach. Karstadt’s addition of Aldi, and Kohl’s Aldi’s test are the latest examples. Target’s well-documented struggles with its grocery business indicate that these partnerships are no silver bullet for retail, especially if the grocery component is added without a clear identity. 

Additionally, for a soft goods retailer like Kohl’s, the addition of a meat section may be cumbersome for consumers — or even come across as desperate.

But, these are desperate times for retail, with an abundance of bankruptcies and closures controlling the narrative. For brick and mortar stores to maintain relevancy in a digital world, they must do everything they can to enhance and optimize their space to get customers in the door. That could mean taking an “all things to everyone” approach and providing the utmost convenience for consumers.

An added grocery component can be leveraged as major differentiator for retailers. Moreover, if these partnerships are successful, the cumbersome factor will eventually fade as consumers warm up to the idea of buying their sweaters, linens and eggs at the same place. For Kohl’s and Karstadt, it will also help that there is a separate, dedicated space in store for grocery, which allow both the grocers and retailers to maintain their autonomy.

Time will tell if consumers think there is too much of a disconnect for a soft goods retailer to add groceries. On paper, the idea is a win-win, providing traffic gains for the retailer and one-stop-shop convenience for the consumer. Right now, two things are clear: retailers need to do something to update their businesses or they’ll continue to spiral into digital-induced irrelevancy, and grocers need to be flexible to meet quickly changing demands for convenience. Both of these demands can be met by better meeting today's shoppers' needs.