Heading into 2023, consumer spending seems to be shifting. With rising prices and the threat of a recession looming over our heads, overall retail sales are shrinking — but FOOD sales are increasing. What gives?
While restaurants in general have recouped some of the share they lost during the pandemic — with total spend trending back to pre-covid levels (almost 50/50 split between restaurant and retail) — there is still opportunity for growth in retail food service.
- Restaurant sticker shock is making people rethink the value of dining out, opting to reserve restaurant meals for special occasions.
- Many people developed their cooking skills during the pandemic. Now that inflation has made food more expensive overall, cooking at home is seen as a great way to stretch their food dollars.
- Concern about health continues to send people flocking to the perimeter of the store, especially the produce section.
Grocery and e-commerce
There’s no question that e-commerce is here to stay. It offers consumers a convenient and easy way to shop for groceries… at a price.
With inflation diminishing the buying power of the dollar, value trumps convenience and people are returning to the grocery store in search of bargains… but you still need an online presence to be competitive.
E-commerce for food retailers is a bit of a double-edged sword. On the one hand, it’s vital to have an online presence and strategies in place to maximize online spending. But on the other hand, you don’t want to be so aggressive online that people don’t come to your store!
The problem with online shopping is that people tend to stick to their lists. There’s little opportunity to discover new products or be inspired online… and they can’t smell the cinnamon buns so they’re much easier to resist!
So, continue to entice people to shop with you online… but give them even more reasons to visit your store.
Put the emphasis on value
As a food retailer, you have to be vigilant about looking for ways to add value to your customer’s experience.
- Emphasize local products when possible. They are seen as fresher and healthier options and help support the community.
- Invest in technology that provides a return for the store and value for the customer, like self-checkout lanes and digital coupons.
- Let customers know that you care about the environment by focusing on sustainability and a desire to reduce food waste. An example of this is offering “ugly” fruit and vegetables at discounted rates.
- Manage shrink and add value by preparing ready-to-eat meals from products nearing their expiration date. Don’t throw away that broccoli… turn it into broccoli soup and put it front and center in your self-service display case!
- Another way to manage shrink is to embrace the concept of “Flashfood” which is a free app that connects shoppers to discounted food items.
- Promote private labels as great alternatives to national brands. President’s Choice (Loblaws) is a good example of a store brand that provides quality and value.
- If you offer foodservice of any kind, be sure to offer quality products and great service — see The Future of Foodservice in Supermarkets for ideas and information.
- Introduce loyalty programs as a means to reward shoppers, track shopping preferences and deliver targeted offers to consumers.
Opportunities exist for indulgent items
There’s no question that the past two years have been pretty rough for a lot of people, and there doesn’t seem to be an end in sight. People are stressed out, so they seek comfort wherever they can find it… which is why we’re likely to see an increase in the number of indulgent items people buy.
People may not be able to afford to take the family to Disney, but they do have the ability to splurge on some treats now and then. The bakery department is a perfect example of this.
- It’s hard for people to resist the incredible aroma of freshly baked bread, cookies and other bakery items. According to FMI, 95% of consumers said that they purchase baked goods at least occasionally, and 63% do so weekly.
- According to shoppers, single-serve desserts, cupcakes, donuts, cookies and muffins are often purchased on impulse.
- In the same survey, it was found that 78% of respondents said they bought bread, buns, bagels and other functional bakery items at the supermarket, but only half said the grocery store was their first choice when looking to buy bakery items. This is a great opportunity for grocers — very few people will go to the supermarket for bread without buying something else too.
- Knowing an item is fresh increases the likelihood they will buy it, so make sure the date it was prepared is prominently displayed.
One of the best investments you can make for your in-store bakery is a proper display case to show off the delightful array of beautiful goodies created by your bakery department.
Bakery displays evoke a feeling of comfort and convey freshness while extending the life of baked goods. And seeing these mouth-watering creations increases the likelihood that shoppers will add them to their carts.
Allocate resources to foodservice
The concept of attaching a restaurant to a retail environment is nothing new — lunch counters were built into dime stores in the fifties, with some retailers (Zellers) even having a cafeteria-style restaurant.
There’s a real opportunity for grocers when it comes to retail foodservice. It’s a great way to differentiate your business from your competitors’ while increasing your bottom line.
The approach you take is up to you — self-service, full-service, packaged grab-n-go or some type of hybrid solution — but having the proper people and equipment is the key to success.
We can’t control the world… but we can control what we eat.
Food has always been associated with good times and prosperity, so it’s not surprising that grocery purchases are up despite high inflation. In a world that seems to be spiraling out of control, the consumer still has the power to choose what they put into their grocery cart.
It’s your job as a grocer to turn them into loyal shoppers by making that experience as delightful and meaningful as possible.
At Cayuga we’re always thinking of how we can best serve our clients, which means we’re constantly creating and perfecting new products that respond to larger consumer trends.
We get excited thinking of new ways to display food — so if you want to pick our brains about how to use the displays you have to their best advantage or which displays to add to your floorplan, reach out to us. We’re always happy to help!