Over the years, society has seen a great pendulum swing in the retail grocery industry. Just like a grandfather clock, the pendulum was pulled far to one side and now it’s starting to swing to the almost opposite extreme.
What does this mean for grocery stores? What does it mean for the consumers and suppliers? Let’s take a look at the changing trends.
When Walmart took its low-price strategy to the grocery store market, it forced other grocery stores to make similar changes to remain competitive. Customer service features such as helping customers out to their vehicle with their groceries went by the wayside as retail grocers tried to compete but still make a profit. Customers were willing to sacrifice a little bit of service to save those dollars. Soon, most big box stores went with this trend of offering lower prices but less customer service and less convenience.
Other grocers also started offering what I call “high-low” offers, which is when they attract customers into the store with ridiculously low prices on certain items but then keep their standard prices on the rest of their inventory; prices that were typically higher than their always low-price counterpart.
Now, that pendulum is swinging the other way as the Millennial Generation and, to some extent, the older Generation X and younger Generation Z are exhibiting different priorities. They are more interested in better service and quality that comes from smaller stores. They no longer find it necessary to find everything they could possibly want in one giant store. These generations are increasingly willing to perhaps pay a bit more to get better, more convenient items.
A major indicator of this movement happened earlier in 2017 when Amazon purchased Whole Foods. This forced Walmart to take an even harder look at what they offer and how they offer it. The retail giant was already trying to respond to customer demands for organic food, more food variety, and fresher produce. Walmart was also starting to offer grocery pickup services in 2017. I believe that Amazon’s purchase of Whole Foods, which led to lower prices on some food items at the high-end grocer, pushed Walmart into an even more competitive mode.
The Millennial Generation will continue being the driving force behind this pendulum swing and retail grocers—all retailers, really—need to pay attention or be left behind. The number one thing that is driving Millennial buying habits is the convenience factor. How quickly and accurately can they receive their items? Can it be delivered to them?
Millennials also strongly value fresh food and are generally more willing to try food from other cultures compared to their older counterparts. They want clean stores where they can have a positive experience, not just get in there and get out while paying very little money.
All these preferences lead to the growth of produce and other food items being necessary items to sell in the grocery section. Not only are Millennials eating at restaurants that offer more exotic food, they are more interested in making those dishes at home, either from scratch or the more likely option of a meal planning subscription service.
This opens the doors for produce providers from other countries to get their proverbial foot in the door, and for more regional farmers to differentiate their crops. Just look at the Farmer’s Markets around Northwest Arkansas! Many vegetables and fruits that are usually found in Asian and other cuisines are now commonplace.
Here’s both the question and challenge for today’s retailers: how are you making it easy for your customers to do business for you? Keep in mind that while the Millennials are driving the changes, you still have all the generations within your customer base. How are you making things more convenient and fresh for the newer generation while educating and accommodating the needs of your older consumers?
Those grocery retailers who are able to meet the challenge by answering that first question will be the ones who stay on top.