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Log In / Register | May 24, 2017

Does Online Grocery Shopping Hurt Legacy Chain Grocery Stores?

When an industry sector is capitulating customers, sales, and retail format customer relevance they seemingly want to blame someone else. One company told me, “it’s not our fault customers are migrating to other formats."

Well, yes it is!

You cannot blame technological change for a loss of customers. Consumers are dynamic, not static. Today, consumers want fresh food and they expect it fast. The retail foodservice landscape is evolving.

Fresh food fast can be found at many more locations than a legacy grocery store's labyrinth maze that is designed to trap a consumer into a longer stay; when all they want is fresh food fast.

In fact, driving to a legacy grocery store is difficult for millennials. NPD reports “Over half of millennials don't own a car.” So, millennials seek out new non-traditional retail locations with grocerant niche fresh-prepared Ready-2-Eat and Heat-N-Eat food. Specifically, local fast food restaurants and convenience stores, where they also buy ‘impulse’ items with high margins, are driving incremental day-part sales resulting in bottom line profits.

According to Nielsen, online food shoppers buy the ‘basics’ and hard to carry / awkward products online. Those items have become commodities. While the online shopper may initially come to your site because of your brand , they only stay if the price is right. The online shopping experience saves consumers time. It has fast become a commoditized space.  

Commoditization is not branded differentiation.

The NPD Group reports that “52 million U.S. consumers, or roughly one sixth the size of the population of the United States, already buy groceries online. Those who are lapsed or new to the process plan to do more of it during the next six months”  Note they don’t buy weekly. What they do buy are the ‘basics’ and hard to carry / awkward commoditized products. 

NPD goes on to say “Younger generations in particular, especially millennials and members of Generation Z, who grew up with technology, favor grocery shopping online, finding it "second nature ... to use the Internet for all types of purchases." However, without cars. fresh fast food are not found online nor are  consumers buying much of high margin ‘impulse’ items online as they shop.

Today there are 27 restaurants in the United States for every grocery store.  Without a car how many restaurants will a millennial be willing to walk by before buying a fresh fast meal at a legacy grocer?  It is time for legacy grocery stores to rethink their footprint and adjust location formats to customers' evolving lifestyles. Why is there a rush for legacy grocery stores to sell commoditized products online when technology is not their strong suit, yet fresh food is?

Legacy brick-and-mortar retailers need to do what they do best—sell fresh food fast. If not, fast food retailers will start selling CPG fresh food faster. There are 27 restaurants for every grocery store. It is time for legacy grocery stores to re-examine your business model.

Have you considered doing what you do best; selling fresh food fast with portability and differentiation?  Remember commoditization is not branded differentiation.

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