Why Supermarkets Aren’t So Super

This Foodie Friday is all about shopping. After all, with the weekend upon us who isn’t going to head to the market to purchase small things such as snacks and refreshments or larger things such as meats and produce for a late season cookout? I got to thinking about how we all do our shopping and how it differs from how our parents or grandparents did theirs and what those differences have meant to the industry. As it turns out, it may have something of relevance to you no matter what your business sector as well.

Supermarkets were less common many years ago. There was a local butcher, a fish monger, maybe a dairy store, a bakery, a vegetable stand or two, and a general store that was mostly about canned goods but often has some of the items found in the other places as well. In some bigger cities, those purveyors were aggregated under one roof, as in the Arthur Avenue Market in the Bronx, which is still in existence today. Each piece of the market was an independent operation and although shopping had been made more convenient by not having to travel from place to place, the personal experience remained. Each vendor was there to listen, to suggest, and to serve.

Fast forward to today. According to a study by Ipsos Marketing, shoppers who shop at only one grocery store are in the minority, as only a quarter of the population shop at one grocery store. 45% of grocery shoppers shop at two or three grocery stores and the remaining 30% shop at four or more stores for groceries. In theory, this is backward, since today’s stores have all of the goods that used to be spread out among many retailers.

As it turns out, not all stores are equally “susceptible” to this multi-store phenomenon. There appear to be some retailers that are more likely to be the only store that a consumer shops at for groceries, and obviously the key is to figure out why some stores are better at fulfilling all of a shoppers’ needs than others will help retailers compete better. We can put aside geography for a second since it’s equally obvious that if there aren’t any other shopping options nearby that would change a shopper’s behavior. I’d suggest it’s service as well as the quality of the product.

Club stores and deep discount stores had almost no loyalty nor any exclusivity even though they contain many of the same food items at better prices. What’s faded from the markets of old has been the personal attention given to each customer. Meat is mostly pre-cut and pre-wrapped. We can’t usually see the whole fish from which a filet is cut. Moreover, it’s hard to expand our eating vocabulary without someone who knows our usual shopping habits making suggestions of new things based on our past preferences.

Maybe by spending more on service a store can cut a competitor out of the three or four store mix. I know how thin margins are in the grocery business but I also beleive, given that the lowest rung and last stop in consumers shopping are the club or discount stores, that better service can negate slightly higher prices. Maybe that’s true in your business too. Maybe?

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Filed under Consulting, food, Thinking Aloud

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