Feed the need to reimagine the grocery experience

Leading grocers are combining cutting-edge technology and unique in-store offerings to elevate today’s grocery experience

BY STUART FOXMAN

GUS Battaglia has spent 40 years working in the grocery business—impressive when you’re only 47. His first job was collecting buggies at Cousins Market at age seven. His father Pasquale opened the Mississauga, Ontario store with his two cousins in 1978. Now Gus and his brothers run it.

For their 40th anniversary, they’ve invested $3 million in a renovation, expanding at a time when the industry is wondering how to address e-commerce and changing consumer demands. The project includes a new chef’s kitchen to prepare meals daily, a broader array of meats and cheeses, a new dining area (with salad bar and homemade soup island), and more healthy choices in the bulk department and beyond.

For Battaglia, the future of grocery looks a lot like the past: great quality, a homey feel and a sensory experience. “Our store revolves around freshness; that’s the trend.”

It’s one of them, during a transformative time for the grocery sector.

In January, for instance, Sobeys announced a deal with Ocado to build a new digital shopping platform, which the grocery chain claims will be the best in the world.

Loblaw has a click-and-collect model (order online and pick up in over 200 stores) and has partnered with Instacart on home deliveries in select cities. In February, Loblaw announced a service where people can order online and get their groceries during their commute at GO Transit stations in the Greater Toronto Area.

Meanwhile, there are reports that Costco might introduce grocery delivery in Canada, after the warehouse retailer did so in the U.S. last fall.

With all that change, what will grocery stores look like, and how can they pique interest and satisfaction in the consumer’s shopping trip?

With the move towards e-commerce, grocers still have a lot invested in bricks-and-mortar. A 2017 survey by Microsoft, Retail Council of Canada and WisePlum found that physical stores capture most of the retail sales in every major vertical. For grocery, discount and department stores, over 90 per cent of sales occur in-store.

For years, grocers have pushed selection, quality and price. Is that still enough to compete? The industry is exploring ways to provide a more immersive, enjoyable and entertaining visit, everything from dining options, to apps featuring special offers, to in-store cooking classes. The question is: where might grocery stores go next?

“WE’RE MOVING IN GROCERY FROM A PRODUCT FOCUS TO A SOLUTION FOCUS. IT CHALLENGES TRADITIONAL WAYS OF GROCERY RETAILING BUT OFFERS ENORMOUS OPPORTUNITIES.”

KATHY PERROTTA
Ipsos

Smaller households, more spontaneity

Consider some trends that drive food choices. Kathy Perrotta, VP of Marketing at Ipsos, leads their Ipsos FIVE database. It captures the eating and drinking behaviour of Canadians at and away from home. Any reimagined shopping trip needs to align with changing consumer beliefs, practices and demographics.

For instance, household sizes are shrinking. Perrotta reports that 47 per cent of Canadians live in a one- or two-person household. Instead of stocking up on groceries, many buy smaller amounts as needed. That avoids food waste and allows for more spontaneous shopping and eating; Perrotta says 56 per cent of dinner decisions are day-of events.

Consumers are increasingly interested in waste from a quantity and environmental standpoints, observes Perrotta. That means a focus on packaging, transportation footprints and local offerings. Healthier eating is another priority.

“We’re moving in grocery from a product focus to a solution focus,” says Perrotta. “It challenges traditional ways of grocery retailing but offers enormous opportunities.”

New rivals can take a bit, like meal kit delivery services. But trends also shape what we want in the physical store.

Think of the prevalence of lastminute meal decisions, combined with a desire for no fuss, and openness to new tastes. Factor in that the average household spends 30 per cent of their food budget in food service, the highest level ever according to the latest Canada’s Food Price Report from Dalhousie University. It’s no surprise to see the rise in “grocerants”, offering fresh, fast, healthy and increasingly varied prepared meals. V

iews on waste and efficiency affect how people shop in other ways. In an Amsterdam store, the Dutch chain Ekoplaza recently unveiled what they call the world’s first plastic-free supermarket aisle: it includes 700-plus products, from meat to yogurt, all with biodegradable packaging. They’ll roll out plastic-free aisles across their branches by the end of 2018.

There’s less waste, and then there’s none. In Ottawa, Valerie Leloup opened Nu Grocery in 2017 as part of the zero-waste movement. At the store, people bring in their own containers and fill them up with any of 350 products and counting. That includes things like condiments, jam and cleaning products, which you don’t normally find in bulk.

Shoppers buy only the quantity they need. Nu products are also all-natural and, whenever possible, organic and local.

Leloup says that besides food and packaging waste, shoppers are mindful of time waste. Her assortment meets every daily grocery need except for meat and fish, but is focused. With strawberry jam, for instance, Nu doesn’t sell ten varieties but one that’s locally produced. With less (but quality) selection, customers can shop much quicker.

“THROUGH THOUGHTFUL PLANNING, YOU CAN HIT SCENT SENSORY NERVES IMMEDIATELY BY HAVING YOUR HOT FOOD OFFERING AT THE FRONT OF THE STORE. A QUICK WALK AROUND THE PERIMETER AND YOU’LL BE HIT WITH OTHER SCENTS AND THE BEAUTIFUL BAKERY, PRODUCE, MEAT AND DELI DEPARTMENTS.”

KEN KEELOR
Calgary Co-op

E-commerce is part of broader digital strategy

A Nielsen study on the future of grocery found that most global respondents (61%) believe grocery shopping is an enjoyable experience.

To keep customers coming back, Nielsen suggested, grocery retailers must ensure that the experience they ofer is pleasant, efcient and relevant. What might that store look like?

As Nielsen notes, e-commerce is only part of a complete digital strategy that includes in-store. The right technology can reduce shoppers’ big frustrations: making lists, finding and researching products, checking prices and completing the purchase. It can also increase dwell time, basket size and engagement levels, says Nielsen.

Technology can assume many forms and alter the look and feel of the store. MIT’s Senseable City Lab designed a grocery of the future for Coop Italia. Products are on interactive tables. Move your hand and you see augmented product information on a monitor (where it’s from, nutritional facts, disposal instructions, related products, etc.).

A touch application at the shelves lets customers navigate product categories and discover promotions. Customers can also view a large screen with real-time information, like daily specials, cooking suggestions and top-selling products for each category.

In their Future of Retail Grocery in a Digital World report, McKinsey discussed one way to deal with pressure from online retailers and price comparison apps: stretch your analytical capabilities to change prices same day. For example, offer discounts for a defined period, or use real-time dynamic pricing to goose sales in slower hours. “The growing adoption of electronic shelf pricing displays will dramatically increase the ease of doing so,” the report stated.

But, it’s not all about the tech. Alibaba calls Hema “the future of new retail…a harmonious integration of online and offline”. Hema also features a huge section where customers can pick seafood to take home uncooked or have in-store chefs cook it on the spot. The first Hema opened in 2016, there were 22 at the end of 2017, and 2,000 might open in the next 3-5 years.

Earlier this year, Symphony Retail Ai (they offer artificial Intelligence-enabled platforms, solutions and insights for retailers and CPG manufacturers) released their Supermarket 2020 findings. They examined trends driving disruption in grocery, and ways to keep people coming in the door. Some ideas:

• Go to fewer than ten aisles, with an average product range of no more than than ten highly-curated SKUs per category. That will meet the need for convenience, while the SKUs available online offer the variety as part of a multichannel strategy.
• Eliminate the centre aisles to make room for prepared items and a food court.
• Add a special products aisle to offer a “surprise and delight” section with offerings that change twice weekly.
• Recreate a farmer’s market in every store, supplied by local and regional farms.
• Give shoppers tools like click-and-collect, 3-D navigation that allows them to link their shopping list to the store layout on phones, and AI-enabled real-time offers.

Across retail, says Perrotta, there’s a question of what bricks-and-mortar must do to continue the relationship with consumers. In the grocery space, maybe that means quicker trips (because of layout, selection and technology) and also more of a social experience (because of opportunities to dine with others).

She speculates that we may end up ordering more of the grocery staples online, devoting shopping in-store for local, fresh and customized offerings, including those that meet the demands for cultural diversity.

In B.C. and Alberta, Fruiticana specializes in serving the Indo-Canadian market. Owner Tony Singh says he’s capable of bringing produce from a market in India to his shelves in 18 hours. He sees his store as a neighbourhood shopping experience, where you’re not overwhelmed by the selection of a big box, the food soothes, and staff are helpful. In a fast-paced and endless choice world, that can be comforting.

Back to the future

To some extent, everything old can be new again. Before the grocery store as we know it, shoppers gave their list to a clerk, who collected items from the back. Sometimes, the store brought it to your home. You know, like online ordering and delivery.

Then came Piggly Wiggly in the U.S. in 1916. It was the first modern supermarket. Customers were free to shop the aisles and select goods themselves. An early ad for the store touted the choice foods, colourful fruits and vegetables, ease and low prices (“savings that will astonish your husband”, the ad said).

That seems like a bit of a throwback. However, in Europe, the research firm Cosaris surveyed over 500 food retailers, manufacturers and service providers last year. They wanted to look at how the industry is rethinking the current business models to engage with customers. Strip away the technology opportunities, and so many of the survey insights have a back-to-basics flavour. The buzzwords are convenience, local, social, friendly, education and health.

Grocery stores still have an advantage when it comes to in-store experiences. Food caters to all our senses and to a desire to explore.

“We immerse our members in a sensory experience the minute they walk through our doors,” says Ken Keelor, CEO of Calgary Co-op. “Through thoughtful planning, you can hit scent sensory nerves immediately by having your hot food ofering at the front of the store. A quick walk around the perimeter and you’ll be hit with other scents and the beautiful bakery, produce, meat and deli departments. You’re surrounded by the intoxicating smell and display. Recently, we’ve piloted live music in our stores to capitalize on sound sensory.”

To Gus Battaglia, the appeal is obvious. Technology can help to improve the customer experience. But there’s something elemental about food and dining. The smells, tastes, freshness, social interactions—“You can’t get that from your computer,” says Battaglia.