Cultural Shift: How Consumers Now Use Neighborhood Supermarkets

2017-01-10

As America’s supermarkets continue to suffer overall market-share loss, many operators are focused mainly on survival…store by store. The temptation to race to the EDLP bottom is ever greater as operators see the bulk of that market share going to hard discounters or Club.  

Yet what we’re seeing in recent data suggests that, in aggregate, American grocery shoppers are sending a very different signal to supermarket operators. It is a counterintuitive one based on the one fundamental magnetic attraction all supermarkets have had: they are the most convenient source of fresh food for most Americans.

In the last few years, Americans have quietly increased the amount of fresh perimeter and specialty foods they are buying at the local supermarket. Is it because supermarkets are finally renovating their offerings to compete with the likes of Whole Foods and The Fresh Market? In part, yes. But there is something else going on.

As Americans have become committed multichannel shoppers, they have become quite used to evaluating specific stores (and channels) in terms of which specific food and beverage categories they want to obtain from each, based on a complex calculus of relative value. Low-stakes, high-velocity staples move to Club or hard discounters. Higher-stakes items move upmarket or to the local supermarket…if it is well run.

As more and more staple purchases of center-store product have moved to alternative channels, including e-commerce, the net effect has been for consumers to fill their baskets and carts more and more with fresh and special-occasion foods…as well as convenient fill-in purchases. The massive pantry-stocking carts of yesteryear are very hard to see anymore.

The result is that we are seeing American consumers increasingly use their neighborhood supermarket as they once used specialty stores. And the supermarket chains that have seen this trend early are already shifting their stores upmarket to simulate a specialty-store experience, primarily in the perimeter departments. Kroger, Raley’s and Schnucks are perhaps three of the best examples in the past five years.

The key is to have faith that higher-priced specialty items will sell and sell well and that, yes, the fresh perimeter, not just the center store, can be a major source of profit.