Perspective For The Grocery Wars: Shoppers Crave Experience

Tom McGee , CONTRIBUTOR

Amazon’s acquisition of Whole Foods Market is getting the attention these days, with the deal grabbing headlines since June. But there’s also revolution occurring in the food aisles: Grocers are adapting quickly to surging consumer demand for fresher items, personalized options, and digital power to give themselves an edge in the battle for the grocery dollar.

We see it every time we walk into a supermarket. Dynamic chains are meeting the demand for sea-to-plate and farm-to-table by giving their shoppers the backstory of their food. Now, you can expect more than the price per pound on the catch of the day – you can learn about the harvesting conditions, and tips on how you can prepare the food at home. In the produce section, right next to the stack of organic apples, you will see a photo and short bio of the family that grew them.

This is smart business – and it’s the way grocers will win business. Demand for organic fruits and vegetables is up, according to a recent study of food preferences. The research found that half of consumers say they are likely to buy organic produce, while 32 percent of shoppers say at least half of their groceries are organic. In addition, 34 percent of respondents said they were buying more organic foods in 2017 compared to the previous year.

Consumers have also made it clear they want personalized options as part of a purpose-driven lifestyle. In the hot-foods section of many supermarkets, the menus for made-to-order meals are as extensive as any restaurant’s. The options mirror our eating habits and dietary requirements, with paleo, gluten free and vegan options conspicuously marked on the menus. Others offer craft beer tasting areas, cooking classes and stores-within-stores for natural foods.

Grocers are also adapting the food-buying experience using the type of technology that is part of so many other consumer purchases. According to Deloitte, the digital influence on grocery sales shot up from 33 percent to 51 percent over the past year. Overwhelming majorities of shoppers use digital devices to research the groceries they intend to buy, and the firm also found evidence that points to greater spending when shoppers use digital tools.

And as we were reminded with Amazon’s announcement of plans to acquire Whole Foods, online retailers are recognizing the value of owning a piece of the grocery in-person channel. But that’s not to overlook the challenges. The grocery business is a notoriously tough industry. Profit margins are thin. Money spent on dining out has surpassed grocery sales. Consumers are gradually forgoing the weekly grocery run in favor of snacking and prepared foods. Sensing this trend, companies in the $1.5 billion meal kit industry have muscled into the market, though grocery chains are creating their own prepackaged food kits, too.

And yet, despite these competitive challenges, the market for supermarkets is strong. Brokerage and advisory firm Marcus & Millichap predicts a wave of grocery store openings, and the absorption of 25 million square feet of commercial space over the next five years. Both national chains and German discount supermarkets Aldi and Lidl are opening U.S. locations. Smaller-format stores are also likely to make up part of the mix.

Amazon made a big splash in the grocery aisles. The company’s distribution expertise and ambitions are too big to overlook but clearly Amazon’s acquisition is just one of many shifts taking place in the grocery business.