|Ed McKiernan | President, Emerson Retail Solutions
Emerson Commercial & Residential Solutions
This is the third installment of our series on the top five trends shaping the grocery retail and chained foodservice markets through 2025.
Emerson worked with global research firm Euromonitor International to identify the megatrends that will have the strongest impact on retail and restaurant operations and facilities management over the next eight years. If you haven’t had a chance to do so, please check out our previous posts, where we focused on the first two trends: Digital Shoppers and Focus on Convenience.
With this post we take a closer look at the next trend: New Retail Formats. In case you haven’t noticed, the way people are shopping and purchasing items is becoming more complex than ever. Consumers, depending on what they need in different situations, are looking to leverage different channels and options that can meet those needs.
This fragmented and polarizing shopping behavior is creating a need for diverged formats that better meet changing demand. As a result, the look and format of traditional brick-and-mortar grocery models is changing. For instance, over the last 10 years, we have seen the square footage of stores consecutively shrink.
So the challenge for retailers and foodservice providers is how to better leverage that shrinking space and adapt new formats to address fragmented shopping behavior and align with the way consumers shop.
One way they are doing that is grocery stores are behaving more like convenience stores. There have been a few examples of this with major food retailers experimenting with smaller square footage stores, which have been expanding across the country and enjoying sales growth. Retail stores such as this have a condensed footprint and focus primarily on grocery items, operating similar to a convenience store in a modified format.
Another change in format we are seeing is the emergence of “Grocerants” that blur the line between retail and foodservice. These can include food service outlets selling packaged products that can be consumed later, as well as a high-end grocery store containing a café. Not only is this type of format providing stiff competition for traditional grocery outlets, they are also providing consumers an alternative to traditional restaurants. Research firm The NPD Group reports that Grocerants generated 2.4 billion visits and $10 billion in sales in 2016.
One factor we expect to further accelerate the new retail format trend is the impending entry of European retailers into the United States market in 2017. These competitors are more like a Trader Joe’s grocery store, offering a nice customer experience and affordable products, rather than a harder discounter that focuses less on the consumer experience. Competitive pressure like these challengers shows that business as usual is no longer an option.
So what should retail and foodservice organizations do in terms of facility management and operations to support the modernization and diversification of retail formats?
- Facilities – Enhance store layouts and introduce new dining areas to attract specific trip types and drive traffic with dining opportunities.
- Supply Chain – Offer curated, local assortment of items and value-based merchandizing to fulfill local tastes, provide unique selections and build equity against competitors.
- e-Commerce – Consider focusing on digital and outsourcing your online infrastructure as a way to satisfy new customer expectations and offsetting declining in-store traffic.
- Human Resources – Evolve staff skillsets and protocols to provide higher value interactions and experiences to customers.
- Customer Experience – Focus on convenience-based needs and ensure price points and offered products fit demand to increase basket sizes and foot traffic.
Be sure to join us for our next post, which will take a look at the Fourth megatrend: Experiential Retail.