The global food & grocery market is set to hit $12.2 trillion by 2020; the current U.S. grocery market is worth $655 billion. According to McKinsey, even though U.S. grocers have seen a steady 4.5% growth in revenue in the last 10 years in the U.S., many traditional grocery retailers are seeing their sales and margins fall.
Technology, the advent of e-commerce (commonly referred to as The Amazon Effect), shifts in consumer shopping, and eating preferences, have lead grocers to see a sale profit margin loss of 54%. This leaves grocers in a challenging spot as they attempt to meet consumer demands for convenience, rich experiences, and digital fluidity -– while not passing those costs on to their customers. Since only 4.3% of U.S. shoppers buy groceries online, most grocers are continuing to focus their financial investments in brick-and-mortar locations in order to drive growth, stabilize profitability, and maintain relevance.
Market 5-ONE-5 Focuses On Core Values of Urban Shoppers
One of the largest shifts in grocery in the last five years has been the physical size of a store and the number of products it carries. Larger grocers have begun testing smaller, more curated formats in urban cities. Of the best examples of this is Raley’s concept store, Market 5-ONE-5. Located in Sacramento. Market 5-ONE-5 is 11,000 square feet built on three core values that they’ve identified as critically important to their customers (ONE stands for Organic, Nutrition, and Education).
The store has a butcher shop (which only sells grass-fed meat and wild-caught fish), a deli and a great hot bar. It also offers a tailored selection of extremely high-quality produce, local products, and well-known natural brands. Kevin Wright, the store’s general manager, shared, “When we launched Market 5-ONE-5, the focus was to provide our customers with a curated assortment of natural and organic products that they could trust. We want our customers to know, “It’s all good”.”
According to Kevin, the store is on track with what they are hoping to see in terms of growth and the company is happy with the community response. “Our daily happy hours, weekend events and community health fair are customer favorites,” he shared.
More accessible price points, food supply transparency, and convenience; Market 5-ONE-5 has become an easy go-to for local residents’ grocery needs for what they can purchase beyond what’s typically found at weekly Farmers’ Markets. I hope we’ll see more in up and coming neighborhoods like Hollywood Park and beyond.
The Grocery Store Comes To You & It Could Pop-Up Anywhere
Leave it to innovative New Yorkers to get rid of the permanent brick-and-mortar grocery store altogether. This year, Emily Schildt, a brand market, founded Pop Up Grocer, a traveling pop-up grocery store showcasing hundreds of products from the most innovative and exciting natural food brands today. According to Schildt, she created Pop Up Grocer because the discovery space that she was craving didn’t exist. “I was utilizing mass and boutique retail stores to learn about new brands and products, but they weren’t built for this experience. What I wanted was somewhere that existed specifically for the purpose of presenting only the best and the newest, all in one place.”
In April, Pop Up Grocer opened in Soho for 10 days, Emily chose the high traffic neighborhood in order to fit the concept into an area that is well known for being cutting-edge and creative. The approach to design was her main objective, she had to make the space friendly and inviting and to encourage exploration. “We paid attention to every detail from the fun branded shopping baskets and t-shirts to the way in which we categorized and named the shelves,” shared Emily. Marketed through social media (Instagram was the main channel), influencers and co-promotion across featured brand channels, the store saw twice as many shoppers as she’d originally predicted.
In doing her post-event research, she found that people were really excited about the concept. They were thrilled to learn about brands they’d never heard of before, and they gravitated towards the ability to touch and feel products they’d only seen on Instagram. She even received requests to stay longer, open more locations in other parts of New York and to open in more cities.
The next Pop Up Grocer will open on September 20th in the Soho neighborhood at 208 Bowery in NYC. September’s store will feature 150+ brands, only about 25 of those returning from the last. “Our aim, given our community’s enthusiasm for newness, is to bring an entirely new showcase of brands each time we return to the same city,” said Emily. This time, the store will be open daily from 9-7 for 30 days.
Food Co-Ops Could Become “The Local Grocer” Model For America
From Davis, California to Chicago, Illinois, food co-ops continue have steadily continued to gain new members. In the last 10 years, food co-ops have seen a resurgence of growth (something they hadn’t seen since the 1970s) and the way the model is used is becoming more diverse. Historically, co-ops have catered to more affluent consumers who wanted to support local farms and eat organic; now they are being created by rural and low-income communities.
According to Jacqueline Hannah, Associate Director of Food Co-op Initiative, the diversification in the model is being driven by three simple desires: the ability to have a place to meet as a community, to put money back into their community, and to simply have the ability to purchase food. She shared:
In rural communities that are economically disenfranchised, grocers were and are closing, residents need a source of food. In low-income areas, they need access to fresher and healthier food. In a world where food serves as a center for so many things, food co-ops are becoming their most viable solution to meet these needs.
There are many great examples in the diversification of the co-ops. In Durham, North Carolina, The Durham Co-Op sells a whole plate of food for $3.00. Durham, a place facing the gentrification challenges that many other cities are, finds that the co-op events encourage new and old residents to talk to one another and make community-driven decisions. In Moran, Kansas, The Marmaton Market was bought from the store’s original owner by the town when he could no longer afford to operate it. People visit the store on a daily basis to get their morning coffee and buy groceries. “For them, it makes a world of difference,” said Jacqueline.
While these new structures are appearing in the model, the original premise of co-ops is still in place as being sources of local, organic and non-GMO foods. In Seattle, PCC Community Markets, founded in 1953, now has over 58,000 members and 12 locations, making it the largest consumer-owned food co-op in the United States. It’s extremely progressive in its commitment to food; they are the first LEED-certified, carbon-neutral grocer in the U.S., they actively work with farmers to further increase the standards of animal welfare as it relates to meat we eat, and to date, their land trust has donated $18.5 million to supporting 23 sustainable and organic farms and preserving 2,553 acres of Washington farmland.
“Overall, the use of the food co-op model is an economic model of empowerment,” Jacqueline shared. The challenge for food co-ops is access to fairly priced food as the consolidation of the grocery industry causes further challenges in how food is distributed.
Artisan Butcher Shops Are Regaining Popularity
The average American is now eating 222 pounds of meat per year, and wanting better quality meat. “Americans are also getting fussier about their meat,” says Matt Lally, who analyzes fresh food trends at Nielsen. “They are increasingly looking for antibiotic and hormone-free options when it comes to lunch meat, as well as labels that say ‘no artificial preservatives’ and ‘all-natural.’” So it’s of little surprise that butcher shops are experiencing a renaissance even as the plant-based alternatives are hitting the market in force.
According to Danny Johnson, the co-owner of Taylor’s Market and board member of the Butcher’s Guild, butcher shops and local market have survived in the era of mass grocers because there has always been and always will be customers who want a level of expertise, customer service and personal connection that they can’t find at large chains.
The consumer trend of understanding and of wanting to know where their meat is coming from has carried over into shopping at local butchers nationwide. “People are extremely interested in sustainability and animal welfare,” said Danny. “A good butcher can answer any questions they have about these topics and educate them on anything they want to know.” By providing his customers with access to this information, they are becoming more conscientious about the meat they purchase and are willing to pay a higher price for it.
Because of the consumer demand for greater supply chain transparency, larger grocers are now working with local butchers to educate their sales professionals on meat. “There’s been a disconnect in the last 30 years that have brought them full circle in being able to understand and educate themselves to what they’re selling,” shared Danny. “We’re now working with larger organizations to teach them how an animal is broken down, how cuts can be prepared, and of course, educate them to better meat standards.” In an era where people can fact check something in a simple Google search, it’s important that food professionals have factual, honest answers when it comes to animal welfare.
“A good butcher is a salesman, lightly-trained chef and educator.”Danny Johnson, Co-Owner, Taylor’s Market
Finding Future Profitability in Meeting Customer Needs
These five examples all share several common threads when it comes to meeting the needs of customers; whether they live in a large city or a small town, it’s evident that consumers want:
- Access to fresh, local food.
- To be able to get daily food needs met in an easy way.
- Places to meet and connect with other people.
- To know more about their food and want to be better educated on what they’re purchasing.
It’s safe to say that grocers who build and design stores that allow shoppers to satisfy their shopping quickly, will continue to see their customer bases grow. Education, access, and community are going to play a pivotal role in maintaining store profitability. Think about it, what are you willing to pay for, as a consumer? Could declining margins be partially resolved by simply meeting needs and exceeding customer expectations?