May 28, 2013
How Can Grocers Win With Hybrid Shoppers?
According to Rabobank, a group of "hybrid shoppers" is driving a trend toward bipolar consumption in food retailing. Trading down on basic groceries and spending their dough on premium brands in supermarkets and fine dining, these shoppers are making it difficult for the middle market to keep share.
The Dutch multinational banking and financial services company said the recent global recession "has accelerated the existing market dualization." While looking to trade down on basics, consumers still want to occasionally indulge themselves with more premium items.
Other longer-term trends feeding the hybrid trend include:
- The increasing influence over household spending of women, who have shown to more be objective than men when it comes to purchasing decisions;
- Younger generations who grow up using social media and are more likely to make food choices based on merits rather than on brand loyalty;
- The advent of discounters that has added options to trade down in the food category;
- Upgraded private label products in recent years that have increased trading up options;
- The internet’s use as a research tool increasing consumer awareness regarding food product purchasing.
Rabobank said the trend is evident in above average growth between 2007 and 2012 in the U.S. among hard discounters such as Aldi and premium formats such as Whole Foods and H-E-B. Similar trends exist among grocers in Western Europe.
Rabobank offered three tactics to reposition grocers and brands around this trend:
- Move up to the premium segment of a specific product category. For example, by offering healthier alternatives, using more natural ingredients and incorporating corporate social responsibility or sustainable business practices.
- Offer value products within the premium segment and premium products within the value segment. By doing so, retailers can cater to consumers that have become more cost-conscious due to waning consumer confidence and purchasing power.
- Use value products to sell premium products. Supermarkets and food service outlets can use this strategy to attract customers with value-for-money propositions, while simultaneously aiming to sell premium, more expensive products to these same customers.
BrainTrust
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Discussion Questions
What has been the best repositioning strategy for stores or brands that are focused more on the middle market? Do you agree that the appeal around either premium or value positioning will be stronger in the long-term than those in the middle?
Poll
Here we are in the first business day of the week and we’re back to seeking ways to improve our marketing techniques via modern day sciences rather than innovating upgrading our merchandising know how.
Retailing and brand marketing appear to have become the by-product of fast-advancing technologies and their guidance, which we “experts” dwell upon, rather than applying innovation to the tradition methodologies we already understand. But time marches on and so must we.
Most people today still wish to strive upward. However, middle market folks are firm champions of equality when it concerns the class above it, but they are foes when it concerns elevating the class below it.
Stores and products focused on the middle market might be better served to reach upward via premium positioning since it may be better understood and desirable concept than value. That’s where a galaxy of successful stars sparkle.
A strategy based upon serving a “value minded” shopper in the commodity categories of dry grocery and a “taste and nutritional minded” shopper in the signature-fresh areas of the business is already a success for Costco and other large format stores that have been willing to invest in both people and product to support a “fresh” reputation.
For many traditional supermarkets, I believe their ability to adapt to this strategy while understanding how to price and present product in both signature and commodity categories for a profitable mix, will separate the winners from the losers in the next five years.
In the signature-fresh areas, this means upgrading product, people skills, and presentation. In the commodity categories success means pricing down to a competitive level with the big boxes, offering a range of store branded product, and understanding how to leverage customer data for both optimal assortment and store layout.
Both of these actions will require a new blue print for many traditional supermarkets. But lingering in the middle with a diminishing value proposition, while the business is moving towards the polar ends, is not going to end well for those that attempt it.
The Hybrid Consumer has been with us for years, we just have not recognized or categorized them. We have had the mother buying organic baby food, but not organic food for the adults. The Great Recession changed consumer buying patterns. Data mining has uncovered some of these changes, creating the classification of Hybrid Consumer. The improved quality of Private Label products has supported consumers switching to lower cost, basic or core products. With these savings consumers can afford other premium products. As the economy improves, the Hybrid Consumer will be a much larger segment than today.
The demise of traditional retailers has been predicted by many experts for many years, as the high- and low-end stores will win the future. Well, not so fast, because before all the experts started making predictions about the vanishing traditional independents, WE (I) have been adjusting to the needs of our communities quite well.
Are we all doing the right thing? NO, but neither are the Walmarts, dollar stores, or the wholesale clubs.
Good independents have made the right moves for years, and know how to compete, and treat the customer. I need to please many different factions of customers, and many of them are poor, so believe me when I tell you, we’re in it for the long haul. Yes failure is still an option for the folks who run so-so markets, and many of them deserve their own fate, but with most towns overstored, it is bound to happen, and the deepest pockets always win.
The trends for deep discounting have been around forever, and all supermarkets need to upgrade in areas of service, pricing, gluten free, and again service. If not, then their fate awaits them, and it is not good.
Thanks to the NGA, and my network of associates, great information flows to those who want and need it, and it is up to the individual operator to determine what they need to do to survive.
That’s retail tactic number one: don’t get caught in the middle, right? But conversely, there’s another old retail saying, “someone has to be in the middle, or it wouldn’t be the middle,” which means there will always be room to thrive there. It depends on whether or not you’re willing to purposely TRY to dominate that sector, like Kroger or Kohl’s have.
In terms of grocery, for a long time now I’ve thought that Safeway, with the remodeling of all their stores and their own excellent private label goods, do the best job of swimming upstream. If they were anywhere other than California mostly, where you have at least 4 generations of health foodies, they would’ve skyrocketed to a higher level in their customers’ mindset by now and blazed to a new revenue level. But regardless of that, I think you have to give them proper respect for what they’ve achieved.
I also think that H-E-B and Hy-Vee have done well staying above the fray in the middle. Both have done so by placing primary importance on the customer over vendor relations, a tactic that somehow, most middle grocers don’t get…yet.
The “Hour Glass” effect is now in play. Top of the hour glass is the high-end retailers: Whole Foods, The Fresh Market, etc. Bottom of the hour glass is Dollar Stores, and other discount retailers. Drug and convenience stores also have grocery items.
I agree with Frank Dell—the Hybrid Consumer has always existed. Now, many retailers have the data to delve more deeply into her behavior, in order to fine tune the shopper experience. I’d want to know, what’s the ratio of her premium product: value product share of cart? Build a profile of your Hybrids based on your core shoppers’ behavior. Now you’ve got real knowledge around this target’s shopping behavior and can tailor messaging, promo’s, store displays, etc. to speak to her.
Yes, as Tony Orlando says, it’s all about the shopper, and the shopper’s needs are site-specific. Particularly if there is anything disruptive happening in your market, it can be very worthwhile to conduct a marketing survey of supermarket shoppers in your trading area to understand who your customers are, who else they are shopping, what share of wallet you are pulling, what is driving loyalty to your store, where you’d get the biggest bang for the buck in improvements, etc. etc.
This research is particularly useful for Independents and small chains who don’t have the corporate resources of a Kroger or Whole Foods. (You know they are doing this sort of research and analysis!) What you get: knowledge you put into action, deploying your time and money more efficiently and effectively to boost loyalty to your store.
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Here we are in the first business day of the week and we’re back to seeking ways to improve our marketing techniques via modern day sciences rather than innovating upgrading our merchandising know how.
Retailing and brand marketing appear to have become the by-product of fast-advancing technologies and their guidance, which we “experts” dwell upon, rather than applying innovation to the tradition methodologies we already understand. But time marches on and so must we.
Most people today still wish to strive upward. However, middle market folks are firm champions of equality when it concerns the class above it, but they are foes when it concerns elevating the class below it.
Stores and products focused on the middle market might be better served to reach upward via premium positioning since it may be better understood and desirable concept than value. That’s where a galaxy of successful stars sparkle.
A strategy based upon serving a “value minded” shopper in the commodity categories of dry grocery and a “taste and nutritional minded” shopper in the signature-fresh areas of the business is already a success for Costco and other large format stores that have been willing to invest in both people and product to support a “fresh” reputation.
For many traditional supermarkets, I believe their ability to adapt to this strategy while understanding how to price and present product in both signature and commodity categories for a profitable mix, will separate the winners from the losers in the next five years.
In the signature-fresh areas, this means upgrading product, people skills, and presentation. In the commodity categories success means pricing down to a competitive level with the big boxes, offering a range of store branded product, and understanding how to leverage customer data for both optimal assortment and store layout.
Both of these actions will require a new blue print for many traditional supermarkets. But lingering in the middle with a diminishing value proposition, while the business is moving towards the polar ends, is not going to end well for those that attempt it.
The Hybrid Consumer has been with us for years, we just have not recognized or categorized them. We have had the mother buying organic baby food, but not organic food for the adults. The Great Recession changed consumer buying patterns. Data mining has uncovered some of these changes, creating the classification of Hybrid Consumer. The improved quality of Private Label products has supported consumers switching to lower cost, basic or core products. With these savings consumers can afford other premium products. As the economy improves, the Hybrid Consumer will be a much larger segment than today.
The demise of traditional retailers has been predicted by many experts for many years, as the high- and low-end stores will win the future. Well, not so fast, because before all the experts started making predictions about the vanishing traditional independents, WE (I) have been adjusting to the needs of our communities quite well.
Are we all doing the right thing? NO, but neither are the Walmarts, dollar stores, or the wholesale clubs.
Good independents have made the right moves for years, and know how to compete, and treat the customer. I need to please many different factions of customers, and many of them are poor, so believe me when I tell you, we’re in it for the long haul. Yes failure is still an option for the folks who run so-so markets, and many of them deserve their own fate, but with most towns overstored, it is bound to happen, and the deepest pockets always win.
The trends for deep discounting have been around forever, and all supermarkets need to upgrade in areas of service, pricing, gluten free, and again service. If not, then their fate awaits them, and it is not good.
Thanks to the NGA, and my network of associates, great information flows to those who want and need it, and it is up to the individual operator to determine what they need to do to survive.
That’s retail tactic number one: don’t get caught in the middle, right? But conversely, there’s another old retail saying, “someone has to be in the middle, or it wouldn’t be the middle,” which means there will always be room to thrive there. It depends on whether or not you’re willing to purposely TRY to dominate that sector, like Kroger or Kohl’s have.
In terms of grocery, for a long time now I’ve thought that Safeway, with the remodeling of all their stores and their own excellent private label goods, do the best job of swimming upstream. If they were anywhere other than California mostly, where you have at least 4 generations of health foodies, they would’ve skyrocketed to a higher level in their customers’ mindset by now and blazed to a new revenue level. But regardless of that, I think you have to give them proper respect for what they’ve achieved.
I also think that H-E-B and Hy-Vee have done well staying above the fray in the middle. Both have done so by placing primary importance on the customer over vendor relations, a tactic that somehow, most middle grocers don’t get…yet.
The “Hour Glass” effect is now in play. Top of the hour glass is the high-end retailers: Whole Foods, The Fresh Market, etc. Bottom of the hour glass is Dollar Stores, and other discount retailers. Drug and convenience stores also have grocery items.
I agree with Frank Dell—the Hybrid Consumer has always existed. Now, many retailers have the data to delve more deeply into her behavior, in order to fine tune the shopper experience. I’d want to know, what’s the ratio of her premium product: value product share of cart? Build a profile of your Hybrids based on your core shoppers’ behavior. Now you’ve got real knowledge around this target’s shopping behavior and can tailor messaging, promo’s, store displays, etc. to speak to her.
Yes, as Tony Orlando says, it’s all about the shopper, and the shopper’s needs are site-specific. Particularly if there is anything disruptive happening in your market, it can be very worthwhile to conduct a marketing survey of supermarket shoppers in your trading area to understand who your customers are, who else they are shopping, what share of wallet you are pulling, what is driving loyalty to your store, where you’d get the biggest bang for the buck in improvements, etc. etc.
This research is particularly useful for Independents and small chains who don’t have the corporate resources of a Kroger or Whole Foods. (You know they are doing this sort of research and analysis!) What you get: knowledge you put into action, deploying your time and money more efficiently and effectively to boost loyalty to your store.