Grocery store formats for the future

by | Jun 7, 2018 | Omnichannel, Retailers

The traditional supermarket may be in trouble.

While big supermarket brands — Kroger, Safeway, Publix — are still making billions of dollars per year, industry experts are getting a little uneasy about the future of the traditional supermarkets.

Even a few years ago, grocery retail experts were worried about an upheaval in the grocery market. As we reread a 2014 story in the Washington Post (“Why supermarkets are in trouble“), we can see some of their predictions are starting to come true.

Back in 2014, they were predicting that “Limited selection” stores like Trader Joe’s and Aldi’s, and “Fresh format” stores like Whole Foods would see unprecedented growth (38.4% and 92.2% respectively) by 2018.

And they weren’t far off. We’ve seen high growth and popularity in those two particular grocery channels as several brands pop up more new stores in new cities every year, including small format stores from Walmart’s Neighborhood Markets and Target’s Target Express.

Recently, the stakes were upped even more. According to projections from the Food Marketing Institute and Nielsen, 70 percent of shoppers will be buying their groceries online within five to seven years. Both organizations originally estimated it could take up to 10 years for consumers to warm up to buying groceries on the web.

Seeing this kind of growth, along with our own work in the grocery industry, we’ve got a few ideas about what future grocery store formats are going to look like.

Smaller footprints, more services

For one thing, expect smaller stores with more limited selections to show up in smaller markets. It’s easy to find at least one Trader Joe’s or Aldi’s in bigger cities like Chicago and New York, as well as smaller metro areas like Indianapolis, Minneapolis, and Orlando. But now we’ll start seeing them in smaller and smaller cities. The smaller stores emphasize shopper convenience of being able to get in and out of the store quickly because it takes less time to get to the back of the store and all the different departments. Additionally, many are catering to different types of shopping “units” – not just the families with parents and two or three kids who buy the bulk packs of pork chops, but couples, retirees, singles and college students.  This is a similar tactic to what larger retailers are doing, such as Walmart’s Neighborhood Markets and Target’s small-format college and university stores.

The big grocery chains are also expanding their services, offering online ordering, buy-online pickup in store, curbside pickup and same-day delivery. Target is even teaming up with Google Express to allow voice-activated ordering of products and free two-day shipping via a Google Home Assistant. We’ve already seen Amazon offer this with their Alexa home assistant, and now Google and Target are finding a way to compete as well. Speaking of Amazon, their Whole Foods acquisition is already poised to accelerate and evolve the online grocery shopping landscape.

Grocery delivery is not particularly a new concept. Schwan’s has been doing grocery delivery for more than 60 years. Simon Delivers was a grocery delivery service in the Twin Cities area founded in the year. It was later bought by Coborn’s grocery chain and is now known as Coborn’s Delivers. This isn’t a new concept, it’s just making a big comeback.

Fresher foods offered more ways

We’ve written previously about how the layout of grocery stores are changing as a result of consumer demands for more fresh foods and less processed fair. The perimeter of the store, where produce, dairy and frozen foods can typically be found, is gaining more and more traction while the “heart” of the store, where pre-packaged and shelf-stable goods are kept, is shrinking. This means more freezers and refrigerator cases and less space allocated for shelves of boxed and canned goods.

Speaking of fresh foods, we’re also seeing the rise of the “grocerant,” the hybrid multi-service grocery store–restaurant. Not only can you walk in and buy your groceries as before, but you can pick up ready-to-eat items at the deli or lifestyle section. We’ve seen delis that serve entire roasted chickens, as well as stores with salad bars, sandwich bars, and even soup, Chinese food, wood-fired pizza, and a glass of wine while you stroll through the aisles.

Other grocery stores are even going so far as to become a destination for more than food – a food for the soul, if you will, in the form of community. They’re offering healthy eating and cooking classes, showing people how to cook with this season’s popular vegetable, or showcasing a new food supplier. And then of course, once they’ve armed their customers with this new knowledge — and helped reinforce their customer loyalty — they turn them loose in the store to buy the ingredients they need to make the dishes they just learned how to cook.

The grocery store industry is rapidly changing, thanks to a changing population and their new preferences. SPS Commerce can help guide you toward that future, identify the technology, partners, and trends that will help you satisfy your customers.

To learn more, please visit the SPS Commerce website and request a free demonstration. Or ask to speak to one of our grocery store experts to learn more about what you can do to secure your grocery store’s future.

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Scott Bolduc