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The bleak title of the article about the 2012 Supermarket News Analyst Roundtable was “Grim Prognosis,” but there are some “silver lining” opportunities that are worth considering by any food retailer who is serious about growing their business. The analysts provided some pointers to areas where supermarkets may be able to grow. We call out six of them, and offer a couple of ways to approach each one.
Middle class shoppers are feeling income pressure.
1. Serve the needs of price/value shoppers more aggressively.
Llimited assortment/dollar stores do a good job of serving the needs of price/value shoppers, but even so, there is a growth opportunity in the lower end of the market. If extremely price sensitive shoppers make up 25% of the market, but the percentage served by these hard discounters is lower than that, then there’s a growth opportunity in the gap. Here are two possible ways to convert that to potential sales growth.
- Create a limited assortment/dollar store section inside the supermarket that matches prices or is close to the value/price of these hard discounters.
- Negotiate everyday low-cost contracts with brand manufacturers and offer these products at margins that will appeal to price/value shoppers.
Some upscale retailers still generate strong comp sales.
2. Crack the code of successful upscale supermarkets.
Upscale supermarkets like Whole Foods and Fresh Market are growing, but other upscale retailers are losing business. How do the winners achieve that success? Partly this traces to the credit they get for quality, but there’s more to it. What are possible ways to capture some of this sales growth?
- Aggressively market unique high quality products to create larger trade areas for your business stores, and make the store a true destination for shoppers looking for something special.
- Use your fresh department to make unique offers that will draw shoppers to your store, and then leverage this into at least several others items while they’re there.
Shoppers are buying more fresh.
3. Ride the growth of fresh produce.
Shoppers are showing a strong interest in fresh produce – not just at retail, but also at farmer’s markets and in their use of community supported agricultural programs (CSAs). Here are potential ways to drive growth by taking advantage of the interest in fresh produce.
- Partner with local producers to sponsor a CSA offering in your own stores, and use your ordering and communications technology to increase the efficiency of the program.
- Develop and promote “price lines” in your produce department that provide a clear good/better/best option to appeal to a broader range of your shoppers.
Winning retailers have a strong value proposition.
4. Clarify and strengthen your shopper value proposition.
It’s not easy to differentiate a traditional grocery store, but the most successful supermarkets have created shopper value propositions that dominate on one dimension, while maintaining parity on the others. Here are potential ways to drive growth by strengthening the value proposition.
- Tap the research developed in the CCRRC study The World According to Shoppers to identify specific criteria shoppers use to evaluate stores on shopping occasions; then, improve performance on the ones you can own.
- Use consumer shopper research to identify the major weaknesses of your competition, and focus on improving your performance in those areas.
Millennials are still on the sidelines.
5. Connect with millennials the way they want to communicate.
Millennials, shoppers age 22 – 34, have proven to be an elusive customer for supermarkets. One reason is that they’ve been slow to create their own households; they face a bleak job market, and a larger than normal percentage still lives at home. However, they still spend. Here are potential ways to connect with millennials and establish relationships with them.
- Make it easy for them to shop with you without having to spend a lot of time in your store. Give them a click-and-collect option so they can order online and just pick up at the store.
- Help them see the value and convenience of purchasing prepared food from the supermarket.
The time is right for big game changing moves.
6. Ride the wave of consolidation taking place across business by adding a new major line of business.
Today’s market conditions are ripe for transformational initiatives. Here are potential options that supermarkets can use to transform their businesses.
- Extend the established presence of pharmacy into other healthcare services.
- Create a position as a local destination for pickup of products ordered online; this is increasingly appealing to shoppers.
Look to the edges
We may not be in a period of growth that’s generated by overall economic conditions, but for those who are determined to grow, there are opportunities at the edges. What opportunities do you see? It’s easy to come up with reasons why these ideas won’t drive growth, but that’s not the idea.
- Which ones have the most potential?
- What are examples of retailers doing some of these things?