The chase for a new retail space

By Ralph Schwartz, Potandon Produce

The ability to present shoppers with strong visual and sensory experiences will help brick-and-mortar survivability in the future.

The brick-and-mortar retail landscape is poised for significant change over the next decade. As shoppers digitally connect, the influence factor on item and brand decisions by retailers has been diminished. “Showrooming” has replaced “window shopping,” but the process remains the same. Consumers look at a wide variety of planned items in multiple channels, reviewing both features and prices, before a final purchase decision is made. As traditional retailers invest significant dollars into reaching their customers via email or on web-based applications, information overload to consumers becomes staggering. So it is time to take a hard look at the future and understand that in order to survive, there will be the need for serious changes, but with effective planning those changes can ultimately lead to higher potential earnings for those that survive operation as a physical store.

Historically, growth at retail has been measured by percentages, store count and profit margins. Future growth will be measured with an expanded set of metrics and the understanding that less might equate to more may be a tough concept for some to grasp. The customer will be the center of the new retail measurement platform instead of the store. Success will be calculated by how well the store interacts with their base. Measurements that web-based businesses routinely use will be applied to brick-and-mortar locations such as time spent in the store, which apps or websites were accessed while shopping and if a store-level prompt drove the shopper to make another purchase. If retail outlets are to prosper, then the focus must be on measuring and extracting the maximum lifetime value of a consumer.

Analysts predict that online shopping will impact a measurable portion of the market over the next decade, with social media poised as a key driver in communicating product information to consumers. With advertising on powerhouse sites like Facebook up 85% in just the last year, it is clear that manufacturers are shifting their focus by steering spending into electronic channels where it is presumed that the customers are better understood. Holiday shopping has shown that the comfort level with buying online has risen to a level where selling food online is a reality, with a strong future.  Several major players are building large-scale home-based delivery systems and their lead is being followed with new upstarts entering major markets on a regular basis.  If brick-andmortar stores are to survive, they must be as nimble and informed as their online competition.

So what does this mean? What will the playing field look like in the future, and how will the corner store survive? These questions swirl over the grocery landscape, leaving many independent retailers nervous about their legacies.  Large chains and wholesalers will rise to meet the charge by offering competing services within their own organizations. National retailers such as Walmart and Target possess the large-scale distribution networks necessary to be profitable and have dedicated online capabilities to meet the demand.  Many regional chains are immersed in an observation mode, sitting on the sidelines watching things unfold, hoping to move with the best trends. Smaller groups and independents may hope their service areas or geography insulates them, but without fail, this trend will eventually reach every market and every consumer. The solution lies in capturing and putting consumer data to work—to not only take care of the physical needs of shoppers, but also to satiate their social and emotional needs.

The change seems daunting, but the good news is that there is light at the end of the tunnel. Yes, the number of retail stores will shrink; but by how much is the big question. The stores that survive will not be cookie-cutter operations replicated across many markets. Future distribution channels will become more flexible to compete with the expected surge in home grocery delivery. Technology will grow in value and importance in the next decade.  Price points will become diluted as new models for profit generation emerge and value measurements change. New profit centers will emerge based on the ability of stores to offer different services and changes we have seen in the last fifty years will seem small in comparison.

Embracing the “new” can be very profitable to those who adapt. All signs point to the “reinvented” stores of the future being successful using a full court press with perishables leading the way. Online shoppers are swayed by the best price on a laptop for a set of flatware, but when it comes to food, especially fresh items, more factors emerge. Offering consumers lettuce, fresh fish or meat on an internet-based fulfillment site puts the consumer at a disadvantage as compared to a brick-and-mortar location. A website cannot replicate the smell of freshly baked bread, feeling the heaviness of a ripe watermelon or the color of a fresh cut of beef.

Fresh leads the way

A retail space, which has an abundance of fresh produce, fresh meat, dairy, bakery, deli and prepared foods items as the focal point, can bring about a highly positive shopping experience and maintain sales and profits. By adding other high-volume items such as snacks, prepared foods and beverages—you can see a highly successful blueprint. This mixture of high velocity and highly perishable items will encourage more frequent trips, which offers multiple opportunities for consumer engagement through suggestive selling tactics, sampling and eye-catching merchandising. This idea is not that radical as there are outlets like this already in existence, yet many are too focused on a particular fad or trend—organic or natural stores are a good example of how to understand this. They present a wonderful offering of items but due to their very nature exclude mainstream America. Other formats such as dollar stores are focused on price with limited selection. The heavy discount sector often carries unfamiliar brands and lacks perimeter consistency.   

It is obvious that we need to take off our supplier hats for a few minutes and switch our thinking to that of a consumer. Let the creative thought process get moving along. Ask yourself, would you be satisfied shopping in a store where you could buy the items you consume most often, that those items were of excellent quality, with brand names you know and trust and priced fairly? What if that same store was filled with emotional triggers that brought the feeling of entering a working kitchen, such as bread baking and prepared foods simmering in waiting kettles? How about fresh crisp produce, both conventional and organic, drawing you into a well lit and smartly laid out shopping arena where value and freshness lived harmoniously? A meat, deli and dairy department that offered a balanced mix of high velocity items but were not limited by anything other than taste? Finally, add some finishing touches of fresh seafood, a prepared food counter and a cluster of small islands where you could pick up your favorite beverages, chips and a candy bar or two? 

Sounds fabulous to me, and I am betting a lot of others would agree.

Taking the cream of the average shopping basket and offering it at its peak of freshness at a fair price is a strategy for success. You could probably add toilet paper and maybe baby formula and diapers, and soon you will be tempted to add other items and rationalize it as a high dollar sale, but soon you will be right back to the model we see today, along with the high inventories and costs.

Smaller, more intimate stores have lower operating costs and can be located in neighborhoods versus shopping malls, which by the way are also are poised to be on the endangered species list due to the surge of online shopping. The brick-and-mortar store described here will be nimble, technologically savvy and focused on freshness and convenience—traits which are proven winners in the chase for a new retail space.

Ralph Schwartz is vice president of sales, marketing and innovation for Potandon Produce. He can be reached at [email protected].