Some of us may get a bit sentimental at the thought of the small, independent grocery store – the store where the owner knew our names and the grocery sacker walked us to our car asking about the family or how the home remodel was coming along.
The 1916 launch of the Piggly Wiggly supermarket in Memphis, Tenn., largely marked the beginning of the end of independents. The concept was innovative. Instead of shoppers giving their list to a clerk who would gather the goods, the shoppers walked around picking up items for themselves.
Savvy entrepreneurs saw potential. A&P developed a standardized store format, private store brands and an integrated supply chain that meant lower prices for shoppers. A&P became a dominant national chain with more than 8,000 stores by 1923.
Fast forward to today when supermarkets are super big, super high-tech, super consumer-savvy. Food choices are endless and delivery systems are quickly evolving: online shopping from a laptop, phone or tablet with storefront pick-up or delivery, groceries – and complete meals – delivered to your doorstep.
And it’s not just about food anymore. Supermarkets house restaurants, clothing stores, banks, pharmacies, coffee shops, bars and more.
The old corner stores have nearly faded into oblivion and supermarkets have become shopping destinations. Through the decades, national chains have continued to grow larger. The top four food retailers controlled about 16 percent of sales in 1990.
Simeon Gutman, executive director of Morgan Stanley, puts today’s environment in perspective. “The grocery space has had the most number of bankruptcies over the last 20 years. Over that time the big are getting bigger. The top six companies in retail account for 75 percent of all incremental dollar growth.”
Good-Bye Grocery Aisle
Nearly half of millennials shop online and a quarter of all shoppers do so at least occasionally, the Food Marketing Institute found in its 2017 trends study.
In addition, more than 80 percent of people use a cell phone while shopping, either for digital coupons, to check recipes or to read product reviews.
Mike Lee is the founder and CEO of Studio Industries, a food design and innovation company specializing in the application of design thinking to food products and experiences. He previously led product development initiatives at Chobani. Companies count on Lee to spot important food trends. The food system, according to Lee, is moving from a centralized model toward a decentralized model.
“Traditionally, grocery stores set up somewhere and we all had to abide by the rules of where that is, and how late they’re open. We basically flex our lives around the centralized model of a grocery store.”
The centralized model is still prominent but it’s changing, according to Lee.
“We’re moving to a decentralized model – a more flexible way to buy food. There used to be only one way, and that was to physically go to the store, walk the aisles then walk out with your stuff. That’s going away.”
A Swedish company is developing a mobile store called Moby. Stores would be able to move from place to place along designated routes and deliver parcels via drone. Another concept would allow consumers to use a smartphone app to bring the store to a precise location. Similar experiments are taking place in Shanghai and in upstate New York, according to Lee.
In a world where groceries are easily delivered, especially the center aisle items that are consistent and largely commodity-based, the question becomes, “Why would anyone need to walk into a store?” Brick and mortar stores will have to be worth the trip, says Lee.
Stores must offer a good experience, according to Lee. Restaurants and food courts are increasingly common in grocery stores. Some are offering cooking classes featuring chefs and nutritionists where people can learn and discover.
Will “Big Grocery” Outpace Consumer Trust?
It’s clear that what we buy, where and how we shop are changing at an unprecedented pace. All we know for certain is that we will continue to buy food, and innovators will continue to find ways to capture opportunity in this rapidly changing disruptive market.
Ten companies own the majority of consumer food brands today, and many are struggling to innovate at the pace of smaller competitors. Large bureaucratic organizations can find it hard to keep up with the disruptive forces changing the market today. Decades ago, when the legacy brands were created, the companies were highly innovative, according to Lee. No longer. Today their growth strategy increasingly relies on purchasing smaller companies that are more innovative and capturing opportunity in the rapidly evolving food market.
But a note of caution as the grocery sector quickly evolves and consolidates – in a very visible way.
CFI research has continually shown the “big is bad” bias. Consumers believe that big food will put profit ahead of public interest at every turn. In the latest CFI survey, only 29 percent strongly believe small food companies are “likely to put their interest ahead of my interests.” However, 57 percent believe large food companies will.
Consumers now consider many farmers, food companies, restaurants and grocery stores big business. As a result, there has been a fundamental shift in what consumers expect from the food they buy and eat.
Grocery shoppers used to think almost exclusively about taste, price and convenience when buying groceries. While those things are still important, value drivers such as social impact and transparency increasingly motivate consumers today, research by the Food Marketing Institute and Grocery Manufacturers Association found.
One of the overarching value drivers is transparency, as consumers demand to know more about the food they eat. CFI research shows that transparency builds trust. Consumers are demanding transparency and they want platforms to engage with companies and have their questions answered promptly from credible sources in easy-to-understand language.
They also want to more about your practices. In other words, they don’t want to hear about what you’re doing – they want to see what you’re doing, whether that’s through tours, videos, blogs or pictures. That’s because practices are values in action – and the CFI trust model shows that demonstrating shared values is three-to-five times more important to earning trust than simply sharing information.
The verdict is still out on how consumers will react to the continued growth of “Big Grocery.” Will they welcome convenience and innovation that come with mass customization, or will they push back against a large institutional system that is trying to evolve to meet new needs?
As the sector gets bigger, so does the challenge to earn trust.
CEO of The Center for Food Integrity
Excerpted from the book: “Size Matters: Why We Love to Hate Big Food”