Despite the recent slowdown in the overall grocery market in the U.S., there are certain retailers who seem to be thriving in the changing economy. The addition of new square footage in the grocery space and fewer new store openings are the rule of the day, while the stores that do open are going for a smaller footprint.
In 2017, there was a 28% decrease in grand openings. In the midst of this contraction, grocers that offer a deep discount and often have a smaller store are continuing to advance in the U.S. grocery market. These new leaders are leveraging a mix of low prices, limited SKUs, clean and updated stores and omnichannel communication to lure shoppers away from more traditional retailers. And to see similar success, grocery retailers should understand each leader’s approach and leverage their winning tactics in their own marketing strategies.
While not truly a new retailer, this German-born grocery chain is experiencing a rapid increase in popularity in the U.S., doubling in size in the previous decade. Shoppers of this discount chain are fiercely loyal, as the retailer ranked fourth on the list of America’s favorite grocery stores and has been named America’s grocery value leader for eight straight years by Market Force Information.
Not only are shoppers loyal to the brand, but ALDI is the only brand whose shoppers are becoming more loyal every year. That’s significant in a market where the majority of shoppers are willing to switch retailers for convenience or price. Courteous cashiers, speedy checkout and high customer satisfaction make ALDI a clear leader in the retail grocery space.
After a slow start, another German retailer is regrouping and reclaiming its dominance in the U.S. market. With 50 stores stretching from Georgia to New Jersey, Lidl has struggled to build a strong local presence within each territory, especially as competitors aggressively slashed prices upon their entry into the market.
The steps the retailer is taking to improve performance are in line with shifting trends in retail grocery: smaller store formats, highly curated product assortment and higher profitability. Even their marketing has been retooled – encouraging shoppers to “Rethink Grocery,” which includes an aggressive and direct appeal targeted to drive shopper loyalty to the new brand.
Sprouts Farmers Market
The Sprouts model is unique among the discount retailers, with the grocery retailer focusing on healthy, everyday foods in a friendly atmosphere that shoppers truly enjoy. The retailer’s move towards healthier holiday food options led to a successful 2017 holiday season and positioned them as a holiday destination for more shoppers. Increased grab-and-go options and growth in their private-label sales also helped boost the retailer’s 2017 sales.
Similar to many retailers, Sprouts expanded their staff investment to offer additional training and higher pay – encouraging better productivity, higher retention rates and an enhanced shopper experience overall. In addition, Sprouts is expanding home delivery through a partnership with Instacart, and leveraging fresh item management technology to manage stock and keep availability optimal.
If you’re looking for a great deal on CPG brands, Grocery Outlet has you covered. The non-traditional retailer has successfully operated 270 stores since 1946 by buying excess inventory from national consumer brands and selling them at a deep discount.
While they originally operated as a military surplus reseller, each of the independently-operated Grocery Outlet stores offers a broad mix of national brands in their 20,000-square foot locations. Their distinctive business model seems to be effective, as annual sales climbed to $2 billion in 2016. The retailer also has plans to expand to 300 stores, with 30 more scheduled to open this year and 40 to be added in 2019.
Hy-Vee is yet another grocery chain whose major advancements in the industry are causing other retailers to take notice. With nearly 250 locations and a recent partnership with Wahlburgers, Hy-Vee is poised to maintain their relevancy by also adjusting their growth strategy to focus on smaller-format stores, based on changing shopper needs.
The new concept, called Hy-Vee HealthMarket, opened in Des Moines, IA, earlier this year, and expands on their in-store HealthMarket shops located in Hy-Vee’s larger stores. The new HealthMarket stores will provide grocery, healthy lifestyle and personal care items, along with a full-service pharmacy, sports nutrition area, online pickup services and more. There are plans to open two more HealthMarket stores this year, with the potential for 50-60 locations in the future.
The forward-thinking retailer has also made an innovative move in terms of recruiting employees: they’re offering a benefits program for part-time employees that offers a variety of insurance options, including health, dental, vision, short-term disability and even pet insurance. The new benefits will not only aid in employee retention, but can also motivate employees to deliver high-quality service, which further differentiates them from other retailers.
Lessons Learned from New Leaders
While each of these new leaders in the retail grocery space has a different strategy, there are certainly consistent themes throughout their stories. In general, these small-format retailers are cutting back even further on store size and offerings. They’re creating a memorable shopper experience with highly-trained employees and best-in-class services and convenience. And these new leaders have made adjustments based on shopper’s preferences, and provide digital offerings and exceptional quality that differentiate their business and continue to drive growth.
Each of these retailers is considered an emerging leader in their own right, and they are blazing a trail that shoppers will continue to follow in the grocery space. Applying these tactics to your own growth strategy can help solidify your place as a front-runner in the retail grocery industry.