People Need to Eat; Grocery Store Uprising

by | 09 July 2018

Every human needs food and water, so it should come as no surprise that as shopping malls lose their retail anchors, grocers are next in line to claim their stake on prime properties in urban and suburban markets and shopping malls.

Investments in grocery-anchored shopping centers climbed 5.3%in 2017 in the U.S. and, perhaps inspired by domestic mergers and acquisitions, similar transactions are occurring overseas. Alibaba and French retail investor Auchan have invested sizable stakes in Sun Art Retail Group, the largest operator of supermarkets in China. All this movement in the food and grocery market is just the tip of an iceberg responsible for trillions of dollars in revenue globally.

Community-based environments play a huge part in capturing today’s consumers, especially as their shopping behaviors and interests shift, leaning toward options that provide convenience, quality products, value and savings. Take, for instance, the enterprising owner of the Stonestown Galleria in San Francisco. After losing flagship anchors Nordstrom and Macy’s in relatively quick succession, General Growth Properties brokered a deal with Whole Foods to develop a portion of the existing 286,000-square-foot building into a mixed-use space anchored by the high-end grocer. The gamble Stonestown and other similarly positioned properties are making is for the next generation of mixed-use development. When combined with experiential conveniences, residential properties and a supermarket, these properties have the potential to attract new audiences and energize under-performing corridors.

Macroeconomics also plays a huge part in redefining how grocery stores must adapt. As the middle class continues to shrink, the emerging demographic for grocery shoppers has segmented into three distinct categories: urban experiential (affluent), pick-up-and-go (rural/suburban) and dollar store-frequenters (low-income). (Source: Creditntell Retail Symposium, 9/17/17). The segments may appear to be disparate, but they have a shared commonality to feed their family with a preference for multiple access points — brick and mortar, meal services, and online — to fulfill the basic need for nutrition and nourishment.

Shopping patterns will continue to evolve as technology drives change in-market. A study conducted by the Food Marketing Institute and Nielsen predicts that 70%of consumers will buy at least some groceries online in the next five to seven years. Although online delivery services are enticing to some, two-thirds (64%) of Independent Shoppers surveyed say they are very satisfied with their local supermarket, with over 80% of shoppers preferring to frequent their local store to an online alternative. Some people enjoy going to the store and browsing what’s available, and as a foodie, I enjoy the tactile sensory experience of selecting fresh produce at my neighborhood grocer and local farmers’ market.

Amazon/ Whole Foods isn’t the only grocer leveraging technology to learn the nuances of consumer behavior. Kroger has a dedicated team of app developers and data scientists to mine consumer data from their in-store technologies. The data provides invaluable insights into shopping behaviors that can inform everything from inventory to store design and layout. Independent grocers who embrace Point of Service (POS) and data analytical tools to identify operational efficiencies and cost-reduction solutions are better positioned toward growth. Trends suggest that analyzing inventory to determine what products meet their consumers’ needs while generating the most revenue is imperative. Ultimately the brand value of a local grocer is entrenched in how much savings they can pass on to its customers.

High-end in the malls, value-minded in the burbs

The growing popularity of discount supermarket chains is encroaching on America’s supermarket circuit. Although the nation’s favorite grocers are U.S.-based, German brands Aldi and Lidl have muscled their way into secondary and tertiary markets all across the country, winning over value-minded consumers in the rust belt, Midwest, and small rural communities.

Aldi’s appeal is simple as it offers “honest to goodness savings” with an extensive selection of in-house low-priced quality basics. Its rival Lidl has had some impact in local markets with its mixed bag of owned, non-owned and imported brands. Either way, both brands have been strategic in choosing commercial real estate properties that add value to underserved communities. For instance, Aldi has secured locations in smaller towns and cities with limited access to mainstream grocers.

As the grocery market continues to evolve offering perks beyond home delivery to engage consumers across all demographics, we’re sure to see a variety of innovations. From self-checkout kiosks to pay-what-you-can initiatives and the integration of restaurant concepts, one thing is for certain: the brick and mortar grocery store is an anchor unto itself.

Anjee continues to be an insatiable collector of all things retail. She’s a student of culture living next door to future shoppers, whose fleeting trends constantly change the retail landscape … driving retailers, landlords and developers crazy!

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