Changing demographics, evolving consumer demands and growing competition all will exert pressure on the supermarket industry in 2017.
“Demographics will continue to change and broaden,” expanding with the country’s population of “multicultural consumers” – Hispanic, Asian and African-Americans – who represent 17% of a $4.2 trillion market, notes Naomi Sleeper, director, business development for Imperial Distributors, a prominent grocery wholesaler-distributor.
This will extend into the fresh produce department according to John Karolefski, supermarket analyst and producer of GroceryStories.com, who says “the growing number of Hispanic-American shoppers will prompt grocers to stock such products as tomatillos and jicama” – if they haven’t already.
Millennials are starting families and becoming major buyers of groceries, he also points out. That demographic is helping to fuel greater demand for products that are perceived to be healthier.
Sleeper agrees that the sale of natural, organic, non-GMO, and eco-friendly products will continue to accelerate. A study by the Natural Food Retailers reveals that natural and organic sales (including dietary supplements) in all market channels grew to nearly $91 billion in 2016.
She is seeing this trend extend to the health, beauty and wellness (HBW) product segment across all categories, including vitamins and supplements; baby care; oral care; deodorants; feminine hygiene and intimate products; hair care; skincare and cosmetics; as well as products in the pet, baby, housewares and cleaning categories.
Bridging the Digital Divide
To maintain the loyalty of Millennial shoppers, supermarket chains have been ramping up their digital tactics by deploying various new methods and strategies that reach far beyond the old Internet-based approach, Karolefski stresses.
He points to supermarkets that are outfitting their stores with beacons – sensors that are embedded throughout a store’s shelves, signs and product displays. The beacons interact with smartphones using low-energy Bluetooth signals to provide coupons and other discounts.
According to a recent study 37% of shoppers say they already use their mobile devices in grocery stores to compare prices, search for product information, or check on the availability of products at a certain store.
Karolefski says more grocers will promote their own mobile apps that allow shoppers to obtain discounts and specials.
He also predicts that online grocery ordering and delivery will grow as shoppers opt for this convenience as delivery services and store pick-up options grow. Sleeper agrees, citing studies that project online sales to hit $24 billion in 2017.
“While urban dwellers are the largest online shopper segment, more ‘time-starved’ consumers are shopping online with home delivery, or are taking advantage of the ‘click and collect’ programs now available from many retailers.”
We also can expect to see an increase in the number of smaller store formats, Sleeper says. The average square footage of supermarkets has fallen since 2006 and is now only about 46,000 square feet.
Smaller size formats of 25,000 square feet or less, modeled by chains like Trader Joe’s, Aldi’s and Lidl, have proven to be successful, she notes, as have smaller formats being tested, such as Ahold’s bFresh stores and Whole Foods 365 markets,
In order to compete, larger supermarkets need to find new ways to make shopping easier, more enjoyable and less time consuming, Sleeper says.
She points to some supermarkets deploying full-service restaurants in their stores, and sponsoring special in-store events like wine tasting, food preparation seminars and cooking demonstrations.