Millennial shopping trends disrupting the traditional grocery supply chain

by | Sep 21, 2016

Through their numbers, tech savvy and buying power, millennials are driving change like no other peer group before them. Their shopping habits are causing disruptions for grocery stores, who haven’t had to make big changes to their business models for decades. Grocery stores and other more traditional retailers should seek to cater to this age group when making plans for the future – their survival may just depend on it.

Millennials: Reigning generational heavyweight

If you haven’t noticed, millennials are in charge. Also known as Generation Y, this age group was 18 to 35 years old in 2015 and there are 75.4 million of them, making up almost 25 percent of the U.S. population. They have overtaken the previous largest generation, the Baby Boomers who at ages 51 to 69 are shrinking in number. It’s not just their sheer numbers that is causing the disruption, though.

The era in which the millennials were raised has molded their expectations, desires and shopping habits. They don’t need to learn technology, they grew up with it. They value versatility and flexibility.  They typically want to be earth-friendly, socially aware and health-conscious. And most worthy of note, they are questioning everything, throwing out old, potentially outdated norms and ushering in greater expectations and new ways of looking at the world.

This difference in attitude from previous generations has had a profound impact on food, how millennials select what to eat, where and how they buy it. That in turn has sent grocery store supply chains into new territory trying to cater to their needs. Grocery shopping trends are changing as the Millennial generation makes its tastes and preferences known. They want fresher, healthier foods and that tends to mean more shopping trips, but the grocery store isn’t their only possible destination option anymore.

More frequent shopping, less loyalty

Millennials shop more frequently, with Boomers visiting the grocery store an average of 3.6 times per month, while millenials visit 4.1 times per month. Even so, millennials are not loyal to these stores, buying only 41 percent of their food at traditional grocery stores, compared to the boomers’ 50 percent. Where else are they getting their food? Millennials are busy and highly value convenience, so they’re more likely to buy groceries from retail giants like Target and Walmart, mini markets, local delivery services and even online from AmazonFresh.

Just as millennials aren’t loyal to any one grocery provider, they’re not typically loyal to the brands they buy. Instead of buying the same products over and over again like the Boomers, millennials are more likely to try another brand or a generic version of a product if they perceive the quality to be the same at a less expensive price.

On a similar note, as Boomers age and go into retirement or onto an otherwise fixed income, they seem to be more likely to stick to food staples and basics, which is bad news for grocers seeking to expand their bottom line. On the other hand, millennials are gaining more expendable income, making them more likely to sample new products, try new services and pay more for attributes they value.

Fresh is in, packaged is out

One trend, which we recently discussed, is that the center of the grocery store is shrinking. Millennials are buying less boxed, canned and bottled food, and they’re buying more fresh produce, meat and dairy, all of which is located on the outer perimeter of the store.

Newer grocery stores, such as Trader Joe’s and Whole Foods, are capitalizing on this trend and orienting their stores and assortments to address this generational buying group. They deal with mostly fresh foods, limited packaged goods and local food items. We’re also seeing other grocery brands, like Hy-Vee and Kroger, buying up old stores and refurbishing them to be more Millennial-friendly.

Healthy options reign

Another major health trend has been picked up Amazon. The prevailing wisdom was that Amazon would aim to encroach on the low cost Walmart food business. Instead Amazon is building their food business on the convenient delivery of Whole Foods-like consumable products. Amazon, through their AmazonFresh offering, now provides all sorts of healthy foods, any kind you could want in wide varieties, with same day delivery in several U.S. cities.

Food companies are also beginning to embrace the changes brought on by more people making healthy choices. For example, Pepsi recently took aspartame out of their soft drinks, because healthy consumers said they didn’t want it. Coca-Cola has resisted, saying there’s nothing wrong with it, as long as you practice moderation. But Pepsi is giving consumers what they want (they’re even adding aspartame back in for customers that want it, adding yet another product to their assortment, but that’s a topic for another time).

There’s even an initiative in the industry called the Smart Label. This is a QR code (more new technology) that consumers can scan to find out more about their food. The Smart Label hasn’t really taken off yet, although the Grocery Manufacturers Association has embraced it and are starting to implement it for packaged foods. There’s also a law proposed to use QR codes to identify foods that contain GMOs. The hope is that more people start to look at these labels as they shop to assess for themselves the healthfulness of the foods they buy.

How to embrace fast change

These trends are happening so quickly, it’s hard for food-related companies to keep up. The industry is trying to respond to meet consumers’ demands and as a result, product data is exploding and supply chain cycle times are shrinking to ensure the right food is in stock when and where millennial consumers want it. More quick-order, quick-delivery, accurate assessments of quality have to take place, and technology is struggling to keep pace. Cloud-based supply chain solutions could be the answer for grocery store supply chain management. Whether its tracking more product attributes, speeding up the order, ship and logistic processes or finding suppliers up to the task, the appropriate retail network can give you the insights you need to lighten your load, without having to create your own data center from scratch.

Want more information? Learn how Winn-Dixie finds the right suppliers with for their consumers with help from SPS Community Development.

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Scott Bolduc

Scott Bolduc

Director of Supply Chain Strategy at SPS Commerce
Scott Bolduc is a multi-time winner of the Supply & Demand Chain Executive Pros to Know. He has worked with e-commerce retailers on their growth strategies and helped retailers transform their freight spending strategies to maximize efficiencies.
Scott Bolduc

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