Specialty, fresh format, and value grocers are outpacing traditional chains

Weekly visits to the grocery store are up, and those shoppers are headed to specialty, fresh format, and value grocery chains, according to a new white paper from Placer.ai. 

Shoppers are willing to travel further to access niche products at stores like Sprouts Farmers Market, Trader Joe’s, and Great Wall Supermarket, prompting larger, traditional grocers to expand their own niche banners like Joe V’s Smart Shop by Texas grocer H-E-B and Dollar Fresh by Hy-Vee, Placer.ai noted in the report “Specialty and Value Chains Transform Grocery in 2024.” 

The data analytics firm said that foot traffic at grocery stores got a boost in early July, when it jumped 4.6% year over year. Following the rush of shoppers stocking up for Independence Day barbecue and picnic items, foot traffic dipped and then picked back up in September, when foot traffic growth ranged from 2% to 2.9%.

Much of that growth came from specialty, fresh format, and value chain stores, according to the white paper. 

“The two segments offer markedly different shopping experiences: Specialty chains tend to emphasize harder-to-find ingredients and fresh produce — sometimes even at higher price points than traditional grocery stores — while value grocery stores focus on affordability. But both categories are experiencing outsize visit growth in 2024, highlighting consumers’ dual interest in both quality and value,” the report noted. 

While traditional grocery stores’ foot traffic increased 3.1% in July and 0.9% in August, value and specialty chains experienced much higher growth ranging from 4.7% to 7.7%, respectively, over the same period.

That trend continued into September, when visits to traditional grocery stores fell 0.5%, but value stores saw 5% growth and specialty chains saw 5.2% growth. 

Placer.ai noted that shoppers are willing to travel further to visit non-traditional grocery stores, adding that 18.5% of visits to specialty and fresh format stores were less than a mile away, compared to 23.9% for traditional stores and 23.2% for value stores. 

Nearly a third (31.3%) of visits to fresh and specialty stores came from one to three miles away from the store. 

“And a look at changes in visitor behavior at three key specialty chains — Trader Joe’s, Sprouts Farmers Market, and Great Wall Supermarket — shows that even as these brands expand their footprints, customers are increasingly willing to travel the distance to visit them,” the report said. “Between 2019 and 2024, all three chains saw a marked increase in the share of visitors traveling over seven miles to shop their offerings.”

Asian specialty chain Great Wall Supermarket, which operates 22  locations in eight states, attracted shoppers from the farthest distance in the third quarter with 32.3% of shoppers traveling seven miles or more. That figure was 28.8% for Trader Joe’s and 22.9% for Sprouts Farmers Market. 

Value grocers are also attracting customers rapidly due to the rising cost of living, Placer.ai said. 

“Like visitors to specialty grocery chains, value grocery shoppers demonstrate segment-specific behaviors that reflect their preferences and habits. And perhaps most strikingly, foot traffic data reveals that these shoppers tend to stay longer in-store than visitors to traditional and specialty grocery chains,” the report noted. 

Those longer visits are likely due to discerning customers looking closely for deals. 

The trend in shoppers taking time and effort to visit non-traditional stores is prompting traditional grocers to open their own specialty and value banners, such as H-E-B, which operates 11 locations under its Joe V’s Smart Shop banner, and plans to launch several more in Dallas.

“In Q3 2024, the average visit duration at Joe V’s was 37.8 minutes, compared to just 26.8 minutes at H-E-B — a full 11-minute difference,” the report said. “At the same time, while 38.5% of Q3 visits to H-E-B were made by customers frequenting the chain, on average, at least four times a month, just 11.8% of visits to Joe V’s were made by visitors reaching that threshold.”

Similarly, regional grocer Hy-Vee opened its first Dollar Fresh discount store in 2018 and now operates 25 locations under the banner. 

“In Q3 2024, the ‘Pastoral Pride’ family segment represented 11.4% of Dollar Fresh’s captured market, compared to just 5.3% of its potential market. This over-representation of lower-middle-class consumers from small towns in Dollar Fresh’s captured market indicates that the chain is especially effective at drawing customers that belong to this segment,” according to the report.