Brick-and-Mortar on the Rebound

A few years ago, shopping for meat, milk and high-end makeup at the same location would have seemed a pretty unlikely possibility. Not today. Supermarkets nationwide are amping up their health and wellness offerings, moving beyond healthy foods and into natural beauty and personal care products, nutritional supplements, over-the-counter medicines and more. 

Consider Exhibit A: The Jan. 13, 2018, installment of Whole Foods Markets’ “Be Good to Your Whole Body” podcast series (wholefoodsmarket.com/file/2290), shot in the company’s new store in the heart of New York City. The video—which describes Whole Foods’ exclusive Mineral Fusion makeup—looks like it could have been shot in an Ulta or Sephora store.

There’s more: In February 2018, nutritionists from Beaumont Health, Michigan’s largest healthcare system, launched a series of free health tours at the Meijer store in Royal Oak, Mich.—each focused on a specific area of nutrition.

And Albertsons’ headline-generating news in February 2018 sums up the evolving state of the today’s grocery marketplace: “Albertsons Cos. and Rite Aid Merge to Create Food, Health and Wellness Leader.”

As company officials explained, the combination of the two retailers aims to provide customers with flexible and convenient access to a full range of food, health and wellness offerings. “We have always put our customers first, and our combination with Rite Aid will enable us to even better serve the valuable pharmacy customer by providing a fully integrated one-stop shop for our customers’ food, health, and wellness needs,” Bob Miller, Albertsons’ chairman and CEO, said at the time of the announcement.

Expanding Categories Is Essential to Success

According to the recent health and wellness retail drivers report Next-Practices for Redefining Category Roles & Strategies from Global Market Development Center (GMDC), supporting consumers’ health and wellness goals by providing in-store expert advice and authentic shopping experiences is “a top opportunity for industry transformation.”

The online competition brick-and-mortar retailers face makes that transformation essential. “Ninety-five percent of all products sold on Amazon consist of nonfood merchandise, which largely comprise the highest profit margin items in stores,” the report says. “With local retailers experiencing these losses directly in volume and profit, GMDC predicts some merchandise categories will completely leave physical retail by 2025.”

Carrying a broad selection of health and wellness products is the prescription experts say can help revive business at brick-and-mortar stores.

“The hard truth is that for many retail channels, traffic and trips are declining,” says Mark Mechelse, VP of insights and communications for GMDC. “The brick-and-mortar choice often wins by default when it comes to health and wellness shopping; however, long term, there are limited reasons for shoppers to stay loyal unless new engagement methods are activated.”

The key, Mechelse says, is conversion.

“If a retailer doesn’t convert on every trip, the chance of the consumer returning to that same retailer on his/her next trip is lessened,” he says. “Nowhere is this conversion opportunity more critical than in the health, beauty and personal care department.”

Product Lines with Promise

There’s a lot of information out there about consumers’ interest in healthy eating. But there isn't much focus on beauty products and things such as OTC medicines, vitamins and the like. Yet those are the kinds of products industry experts say can give grocery retailers a competitive edge.

“We feel these products are underemphasized by retailers as part of their overall plan with regard to health and wellness,” says Keith Wypyszynski, VP of member services for GMDC. “As consumers assess what they put in their bodies, they are also examining the products that they’re putting on their bodies or around their bodies, such as aromatherapy and cosmetics. The natural and organic movement the industry is seeing also includes natural personal care and homeopathic [items], especially for baby and children.”

Technavio’s Global Natural and Organic Personal Care Products Market 2017-2021 report, for example, projects that the global market for natural and organic personal care products will grow to $17.6 billion by 2021, at a compound annual growth rate (CAGR) of nearly 10% over the forecast period.

“When looking across total grocery baskets, the three largest market baskets are skin care (beauty), oral care (personal), and self care,” Mechelse says. “In fact, a self-care basket is more than twice the size of a non-self-care basket, according to our research partner, PlanetRetail.”

Making an Impact in Limited Space

With all of the merchandising challenges retailers face, adding new product lines—especially those traditional grocery businesses have never or only rarely dealt with—can seem daunting. But based on industry data, it is one they must explore to thrive.

“Just as the store-within-a-store department was at its highest popularity five years ago, grocery is now looking for ‘what’s next’ in order to compete,” says Mechelse. “With the rise of specialty and private label outlets providing a narrow focus, we see the best practices taking place within Wegmans, where natural and organic categories are now offered as mainstream selections with broader and deeper offerings.”

That kind of integration, Mechelse says, is a promising approach.

“Many of the innovative or alternative options that are highly desired by consumers are being integrated throughout the aisle alongside larger brand offerings,” he says. “In GMDC’s latest health and wellness driver report, our projections with research partner A.T. Kearney suggest that retailers continue with that trend and begin to expand into new and growing categories that are seeing better results than total stores sales year over year.”

Category sales results have been promising. Adjacent OTCs were up 4.3%, core OTCs were up 4.6%, vitamins and supplements were up 6%, weight management was up 6.1% and cosmeceuticals were up 9%, GMCD data shows.

“These [categories] are projected to become some of the key drivers of the health and wellness aisle by 2020 and beyond,” Mechelse says. “We’re seeing a greater infusion of health and wellness nonfood products that should be adjacent to food occasions, not only to complement but supplement the mindset of today’s consumer,” Mechelse says. “We feel this focus is the key toward retail transformation, and that we’re just now approaching the cusp of what is to come.”

Good News on the Health and Wellness Front

The recent health & wellness retail drivers report Next-Practices for Redefining Category Roles & Strategies from Global Market Development Center (GMDC) reveals that more and more shoppers are turning to retailers for health and wellness products and advice. Among the findings:

Source: 2017 GMDC Study in partnership with Nielsen and Rodale