Shoppers want convenience, value, selection and a little excitement from their shopping experience, and will want even more in the future. They will be buying more fresh foods in the next three to five years, although they may not be buying them in supermarkets.
g strategies leap from EDLP to high-low and on to micromarketing.
Now it's the Internet that is being talked about as the next revolution that will stand the traditional models of retailing on their collective heads.
But one true thing remains: Regardless of how retailers conduct their businesses or the strategies behind it, it's the customer who will decide if any given retailer is offering the right products and services.
It's easy to see who the winners were in the past by using income statements and market-share information. Determining the winning formats and the leading retailers of the future can quickly devolve into little more than speculation.
This report gets beyond speculation: To provide retailers with insight into what shoppers are thinking about, and to get managers thinking about how to retain and grow their customer base, SN commissioned a survey on shopping trends both current and future. Conducted by The NPD Group, Port Washington, N.Y., the survey shows what consumers are looking for in their shopping experience both now and three to five years in the future. It also examines which categories will be purchased at each of seven retail formats. They are supermarkets, membership clubs, Internet, mass merchant, drug stores, convenience stores and health food stores.
The current state of the shopping experience
Respondents state that the majority of features they seek in a food-shopping experience are currently available in the supermarkets in which they shop most often. However, roughly nine of 10 respondents state that on-line shopping, home delivery, babysitting services or dry cleaning services are not currently available in these supermarkets. Although on-line shopping, babysitting and dry cleaning services are not currently available at most supermarkets, the survey indicates this is not a necessary area for improvement. Less than 20% of the respondents state that these features would be beneficial if they were available.
However, these services are relatively new ideas for supermarkets and respondents may not currently see their value. In addition, as income increases, so does interest in these services. For example, 54.5% of respondents with an income of more than $40,000 reported on-line shopping would make their supermarket-shopping experience better vs. 18.2% of those making less than $20,000. Also, interest in on-line shopping varies widely depending on age, with younger shoppers much more interested in this service than older shoppers (36.4% for people under 40 as compared with 18.2% for people over 60).
Membership and frequent-shopper cards are an area where there is improvement needed for the 52% of supermarkets that do not currently offer this feature. While only 28% of shoppers stipulate that cards would make supermarket shopping better, roughly twice as many (61%) shoppers, who do shop in supermarkets with this feature, say this does make the supermarket shopping experience better.
The difference in responses could mean that shoppers in supermarkets without shopper cards are not receiving enough information from the retailer and so do not currently see the benefits of membership/frequent-shopper cards.
Full bank services are viewed similarly. Two out of five respondents who say their supermarket has full bank services state that the feature makes the supermarket experience better. However, only 22% of those who are not currently offered the service say it would be beneficial if it were offered. Once again, it seems that respondents are not seeing the benefits of the service until it has been used.
Additionally, offering ethnic foods is perceived as a benefit among respondents who shop in supermarkets with a full ethnic product section (47% of respondents feel this is a benefit). Only two in 10 of those who are not offered this feature feel it would make the shopping experience better. Here again, interest in ethnic foods correlates with income and age. The more a shopper makes or the younger the shopper is, the greater interest in ethnic foods.
Weekly coupon fliers, while available in the majority of supermarkets, would be an added feature for 43% of respondents who currently shop in supermarkets without circulars or rotos. Not surprisingly, three-fourths of the respondents state that having lower prices and a faster checkout would make their supermarket shopping experience much or somewhat better. Additionally, the majority of respondents state that secure/safe parking, having a fresh bakery and being a good place for one-stop shopping would make supermarket shopping much or somewhat better.
Although 59% of supermarkets that are shopped in most often are open 24 hours a day, 42% of respondents who state this feature is not currently available feel this feature would make supermarket shopping much/somewhat better. Respondents with children and those in higher-income categories are more likely to say this is a benefit than those without (61% vs. 33%, respectively).
It is interesting to note that although offering home delivery is seen as beneficial by only 23% of respondents (who shop in supermarkets where this feature is not available) those who live in the West have a significantly higher opinion of this feature (44%). Married respondents are more interested in home delivery than their non-married counterparts. Age and income only played a small factor in a shopper's inclination toward home delivery.
Shoppers report that offering weekly coupon fliers, lower prices, faster checkout, safe/secure parking, a fresh bakery and being a good place for one-stop shopping are features that are beneficial to supermarket shoppers. Additionally, offering membership or frequent-shopper cards, full bank services, and ethnic foods could potentially be an added benefit.
However, it seems as though respondents are unable to see these benefits until they have experienced them first hand. Although on-line shopping, home delivery, babysitting and dry cleaning services are not perceived as a benefit by a majority of shoppers, they are fairly new services that respondents may not know much about.
Roughly nine in 10 respondents state that both supermarkets and mass merchants accept credit cards. Additionally, both supermarkets and mass merchants are believed to offer safe parking (64% and 60%, respectively). Approximately two-thirds of respondents say both supermarkets and club stores offer in-store sampling. Significantly more respondents feel supermarkets offer a fresh bakery than any other stores. These perceptions are fairly consistent across geographic region, ages of head of household and income levels.
A key tactic to boost excitement at retail, in-store sampling, is seen as a feature that would make the shopping better by more than one-third of the respondents. Younger shoppers, shoppers with children and those making more than $40,000 per year also tend to be most interested in the sampling feature.
Seven out of 10 respondents state that both supermarkets and convenience stores are a good place to pick up last-minute items (69% and 70%, respectively). However, more respondents feel supermarkets are a good place for one-stop shopping as compared with convenience stores (70% and 28%).
Club stores, followed by supermarkets, are perceived as offering membership or frequent-shopper cards (74% and 59%, respectively). In terms of price, club stores and mass merchants take the lead with 71% of respondents stating these stores offer lower prices. Supermarkets have the highest awareness of frequent sales, followed by mass merchants and drug stores (84%, 77% and 61%, respectively). Again, these perceptions are fairly consistent across geographic region, ages of head of household and income levels.
Only 35% of respondents state they shop on the Internet. This, however, could be because less than 40% of the U.S. population has access to the Internet, and because the sampling was made up of a majority of middle- to lower-income people. There is a direct positive correlation between higher income and higher Internet use.
The respondents report that supermarkets offer more features than any other store. Additionally, supermarkets are perceived as a good place for one-stop shopping, significantly higher than convenience stores. On-line shopping, overall, is very low; however the majority of the population does not have access to the Internet.
Current and Future Category Purchasing
There is evidence that respondents will be eating healthier in the future. Nearly one-third of respondents state they will be eating more produce, and 38% of households with children state they will be eating more produce. One-third (32%) of respondents anticipate they will be eating fewer salty snacks, and 24% of respondents say they will be eating fewer prepared meals or less deli product.
There is a consistent trend, which holds that shoppers with higher incomes will be eating more healthy foods than shoppers with lower incomes. Nearly three-quarters of respondents with income of more than $40,000 indicated they will buy more produce in three to five years, as compared with 60% of the respondents earning less than $20,000 (although the higher-income group is also more likely to eat salty snacks than the lower-income group). Families with children are also looking to be more healthy in eating behaviors, with 73.4% buying more produce and 73.6% buying fresh meat vs. 67.3% and 66.4% for respondents with no children (here again the families with children will also be consuming more salty snacks).
Respondents state they purchase all food categories listed on the survey most often in supermarkets. This excludes health and beauty care and pharmacy products. Indeed, 80% of respondents state they purchase at least one category most often in supermarkets. Respondents are slightly more likely to purchase health/beauty care products at mass merchants, while pharmacy products are most likely to be purchased in a drug store.
There is no indication of major changes in purchasing behavior within the next three to five years.
The stores in which respondents are shopping now, and the categories they purchase the most in each store, will most likely be very similar in the next three to five years. However, respondents are slightly less likely to purchase fresh meat and produce in supermarkets during the next three to five years. Although there does not appear to be an increase in purchasing of these products in any of the remaining stores listed on the survey, these items may be purchased more often in other stores, such as small produce stores, in the future.
In the end, there is only one truth in grocery retailing, and that is that shoppers are fickle. They don't follow any concrete, machine-determined pattern, and they probably never will. The challenge for retailers is to conceive sales and marketing plans that capture the imagination of as many consumers as possible without giving the profit margin away trying to accomplish that goal. Interestingly, that is the same model that created the industry in the first place.