Commentary

How Grocery Retailers Are Thriving In A Disrupted Market

The word disruption is used a lot these days, but for the US grocery retail market, you would struggle to think of a more accurate word to describe the scale of change that is taking place. Traditional grocery retailers, especially the regional and local players, such as Philadelphia’s iconic Acme Markets, are struggling despite once being pioneers in the category as they face competition on all sides—from the introduction of the discounters, Aldi and Lidl, Amazon’s entry to the space with its ‘own label’ offerings and acquisition of Whole Foods to a host of online competitors, including  food delivery services like Grubhub, UberEats and Postmates. Even Ikea is now getting into the space with a Paris test market of home delivery of food served in its furniture stores.

In fact, the European grocery retail market is now several years into a similar revolution and while the markets are not identical, there are lessons that can be learned from what retailers in Europe have been doing to survive that can help the US market. From doubling down on ‘own label’ strategies by reappraising value, reimagining portfolios and rejecting design conventions to more broadly improving the in-store experience, some of the strategies retailers in Europe have deployed could pay similar dividends here in the US. 

advertisement

advertisement

Reappraising Value

Redefining ‘own label’ value and moving away from purely ‘basic’ and ‘cheap’ cookie cutter design or injecting care cues, while keeping them clearly at the value end of the spectrum via design thatbrings in individual hand drawn type and illustrations, often can make consumers feel good about saving money. Gone are the days that value brands immediately signal lower quality to consumers so the branding of these products should leave outdated strategies in the past too.

Introducing tertiary brands has helped retailers like Tesco beat the discounters at their own game. Tesco has introduced eight new brands for its value fresh products, all based around the notion of authentic provenance. These are now being bought by over 25% of its customers and driving overall sales growth.

Optimizing Portfolios

Value will always be a key part of a grocery retailer’s overall ‘own label’ proposition. However, we’d argue that retailers must also start thinking beyond the traditional model of ‘good-better-best’ ranges and look at how a ‘hero’ range can communicate the retailer’s proposition too.

Greek retailer AB Vassilopoulos has done this with ‘Close to Greek Land’, which takes the best examples of Greek products from different regions and shares them with the rest of Greece. This has positioned it as an authentic retailer that wants to bring together consumers and producers from across the country. US retailers can leverage similar approaches by rethinking local or state sourced product strategies, demonstrating a commitment to local producers, but at the same time ensuring scalability nationwide.  

Creating Conventions

Another way retailers can strengthen their brand is by creating new category conventions with their ‘own label’ products to leapfrog named brands. As many European retailers have moved beyond ‘me too’ national brand strategies, they are redefining design conventions when it comes to food packaging.

Say, for example, by packaging a premium range in a white and gold livery, at a time when black has been seen as the premium color of choice and white, in grocery, was more commonly associated with value. Swiss retailer Migros did exactly this and positioned their own brand to stop looking like a follower and start looking like a leader in their field, setting new category conventions. By breaking some of the category conventions, US retailers can capitalize on what is working abroad. For example, using the color green is not the only way to communicate natural and drive preference in this competitive space.

Improving The In-Store Experience

One in five families will shop for online groceries in the next five years. That's why we are at a tipping point for grocery. KPMG recently published a study showing that close to half (48%) of US grocery shoppers purchased at least some of their groceries online and 59% intend to in 2019.

As the number of consumers grocery shopping online rises, retailers need to work harder to reassert the relevance of physical stores. This is becoming even more challenging with the growth in grocery-related omnichannel offerings such as the rise of meal kits and third-party delivery services like Instacart and Shipt.

Rethinking the in-store experience—through partnerships, pop-ups, moving beyond grocery and defining more experiential in-store moments—can help bring in new customers, as well as increase customer dwell time, and create an advantage for physical retail over online. UK retailers are bringing other vendors in-store, such as Sainsbury’s partnerships with Patisserie Valerie and Sushi Gourmet, demonstrating a commitment to quality, convenience and cultural relevance.

There are numerous ways US retailers can create successful changes in a rapidly changing environment, but the common thread is on building a differentiated brand which can cut through the noise and build real equity in a disrupted market. 

Next story loading loading..