• by Sarah Mahoney  @mahoney_sarah, April 20, 2016

Food retailers’ usual game of musical chairs is moving a little faster these days, with a flurry of niche-shifting moves. Walmart is expanding its curbside pickup option to include 30 markets. Kroger is partnering with Lucky’s Markets, with its “Organic for the 99%” positioning. And Whole Foods Markets is closer to opening 365, the Gen Y-focused budget store, which is also aiming for zero waste. Marketing Daily asked Mike Paglia, director of Kantar Retail’s research and analysis on value discounters and dollar stores, to help us keep up.

Q. First, what do you make of Walmart’s announcement about expanding curbside pickup for online orders?

A. We are definitely starting to hit a critical mass, and seeing so many different retailers trying to get in the game. And it’s not just the big, nationally scaled stores. Even smaller, regional chain stores are doing e-commerce, like Woodman’s in Wisconsin. Our forecast is that the online grocery opportunity is around $125 billion. And yes, it’s still very small, at about 2% now. But we expect it to increase to about 7%.

Q. Are any of them making money on online grocery sales?

A. Retailers don’t provide a whole lot of detail about the profitability of these sales, so I don't know. But if anybody is making money, it’s not much. It’s a matter of getting in the game and establishing a place in the market. A lot of stores will have fee-per-order, and others a minimum spending amount, to offset the costs.

Q. So experts keep saying we’re on the verge of wider acceptance. What’s been holding shoppers back?

A. Part of it is generational. It’s very easy for younger shoppers to settle into a heavy online shopping pattern. As they make more money and have families, they are growing to drive that online growth.

Q. Speaking of generational shifts, what are your thoughts on Whole Foods Markets’ new 365 stores? What if all shoppers abandon the traditional Whole Foods format to save money, not just the Millennials?

A. I think there’s a risk of cannibalization, but the degree is still uncertain. The 365 formats are designed for urban areas with high concentrations of young, affluent professionals. I suspect that what Whole Foods is trying to do is leverage the 365 format as an entry point for younger shoppers in the retailer’s “ecosystem.” Once those shoppers have bought in, they’re more likely to shop Whole Foods’ traditional stores when they marry, have families, and move to the ’burbs. But it’s a difficult tightrope to walk.

Q. Which grocery channels are holding up best right now?

A.  It’s been a really interesting time. Certainly, the supermarket space is mature, but stable and strong. It’s facing a lot of new pressure from other retailers. Discounters are doing a really great job at meeting needs for consumables. And Walmart is still rolling out Neighborhood Market, which is essentially a supermarket. Kroger has been on a shopping spree. And Aldi is making a big play in Texas.

Q. How many of these changes are driven by consumers looking for greater value?

A. In the wake of the recession, frugality got turned up to level 10, and certainly, people have relaxed their attitude since then. But I’d say it came down to a 6 or a 7, and it still isn't as low as it was pre-recession. Looking for the best price is now foundational to the shopper mindset.