Supermarkets Confront Competition by Making Innovations a Priority

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Staying ahead of the competition is essential for success in any industry. For supermarkets, it’s becoming increasingly difficult to stay at the forefront of a competitive grocery industry that grows larger every year.

With new entrants in the marketplace such as online storefronts and niche food retailers, traditional grocery retailers are finding it more important than ever to find the perfect balance of differentiating tactics. Paradigm shifts in shoppers’ food preferences and buying behaviors add further complexity to the challenge of staying ahead of a crowded field of competitors in the grocery industry.

In a recent report by Nielsen Retail Vertical, President Steve Matthesen, summarized the challenge facing the retail industry: “Hyper-localization and specialization are fueling today’s retail growth. As lifestyle and consumption habits change, we’re seeing a structural shift in where consumers shop and what they buy, and some small formats are driving big growth. Mass-market strategies are also losing relevance as consumers look for unique experiences that meet their personal demands.”

What is your supermarket doing to confront the changing face of competition?

Price reductions, expanded selection and loyalty programs are all important, but in today’s marketplace innovation is the key to true differentiation. In North America, grocery retailers seem to be doing a fairly good job of giving consumers the kinds of innovation they’re looking for, Nielsen’s study indicates.

While nearly half of all shoppers around the world say they view grocery shopping as a chore on which they want to spend as little time as possible, North Americans give their grocery stores high marks for providing the products, offers and value they want, Nielsen reports.

What are American grocery industry retailers doing right?

The majority of shoppers (83 percent) surveyed by PricewaterhouseCoopers (PwC) say traditional grocery stores are still high on the list of the places where they prefer to grocery shop. Price, value, selection, convenience, proximity to home and in-store experience are among the factors that keep them coming back to their favorite supermarkets.

The stores staying ahead of the competition are maintaining their position through innovations that provide consumers with a more specialized experience and/or additional variety. They’re employing winning strategies that include:

  • Experiential shopping — Research shows shoppers are making more frequent food-buying trips. In order to keep the task from sliding into the realm of a “chore,” they’re looking for entertainment while they shop. The PwC survey found 52 percent of shoppers return to their supermarket of choice because of the experience it provides. Supermarkets are upgrading every aspect of the experience, from higher-quality shopping carts and more attractive displays to offering wine bars, cooking demonstrations and speciality cheese sections.
  • In-store restaurants — In the Twin Cities area, at least one Cub grocery store offers a sushi bar, and southern supermarket chain Harris Teeter offers sushi bars, pizza bars and dine-in seating areas at select locations. Americans are preparing fewer meals at home. Those who eschew the fat and calories of fast food, but crave a faster dining experience are finding “groceraunts” an appealing alternative.
  • Expanded selection of specialty items — Grab-and-go gourmet offerings, organic and GMO-free foods, locally sourced options and ethnic cuisines all work together to differentiate supermarkets in consumers’ perceptions. Shoppers view this expanded selection as part of the overall shopping experience, giving higher marks to grocery industry retailers who deliver greater variety.
  • Online ordering/delivery — With online retailers like Amazon establishing a firm standing in the grocery space, it’s clear consumers are open to the idea of making food purchases online. They’re not just buying gourmet items, either. Staples are showing up in their virtual shopping carts, and with a few clicks consumers can have these essentials delivered directly to their homes. Smart supermarkets are experimenting with online ordering and delivery programs in an attempt to capture consumers who want to avoid the grocery aisles altogether.

As evolving consumer preferences continue to drive growing competition in the grocery industry, grocery retailers will need to increase their innovation throughout every aspect of their operations.