This article first appeared in Retail Focus
News that the combined sales of Lidl and Aldi now equal those of Morrison’s exemplify how tough the market still is for the UK’s Big Four. Those supermarkets that continue to be successful are either discounters or premium grocers focused on prestige and high-quality food credentials. For the mid-market it’s more important than ever to keep a laser-sharp focus on customer needs and key trends.
Here are the pointers that we at Kinnersley Kent Design believe are key:
Convenience is both a huge challenge and a massive opportunity. Millennials in particular expect and demand convenience. They want it now – online or offline – but they don’t want to pay extra or sacrifice quality. Same-day delivery obviously creates operational complexity, whilst another key challenge is how to answer the transactional drive for convenience without losing the opportunity to connect with customers emotionally. With new challengers like Amazon Fresh joining the market, the Big Four in particular need to convey value beyond cost and convenience to foster customer loyalty – especially where they can’t win on a functional agenda.
Amazon Fresh – for ultra-functional convenience
Same day grocery delivery, or 1-hour timed slots the following day. Fantastic convenience, but far from free (£79 per year for Prime membership plus £6.99 a month for Fresh). Interesting to see whether the up-front registration cost will be a barrier for customers?
Bloombox – for emotive convenience
This street-food start-up delivers organic salads across Edinburgh in the UK by bicycle direct from local farmers. It’s convenient, with an added feel-good factor appealing to customers who prioritise ethical issues such as local supply chains and sustainability.
39% of customers would like to see self-serve checkouts replaced by manned tills in stores (Shop4pop.com survey, 2016). Self-scan apps and mobile payments could be the answer to convenience without the annoyance, Waitrose’s ‘Quick Check’ app lets customers scan as they shop, adding items straight to their bags. The app produces a barcode to scan at the self checkout to pay – avoiding the dreaded ‘unexpected item in bagging area’.
Providing inspiration helps build a stronger relationship with customers. This opportunity is particularly key for The Big Four, as Waitrose and M&S are already considered leaders in quality and Aldi and Lidl ‘own’ extreme value. Mid-market grocers could develop a clearer value proposition to the customer by becoming more of a lifestyle choice. A key opportunity is the huge trend towards nutritional health and wellbeing as social currency. People also increasingly want memorable food experiences, especially ones they can share on social media. These are great opportunities for curating ranges, encouraging customers to try new (and healthier) things within their budget and time constraints, discovering and learning as they go.
This new store encourages dwell time through a range of experiences including a bar and a sushi island, which both create theatre and demonstrate staff expertise. Shopping is thereby less of a chore, inspiring customers to return more frequently.
Click & Collect
Even when it works well, it remains very functional. If Click & Collect is purely about convenience, there’s no need for customers to go in-store. Amazon-style lockers could simply be provided on the store’s exterior. But there’s a missed opportunity then to inspire customers while they wait through content, cross-merchandising and hospitality provision.
55% of global customers believe “transparent and open business practices” are important to building trust in a company (Edelman Trust Barometer 2016). Tesco in particular is still rebuilding damaged trust, but, in general, all supermarkets need to work much harder to win trust from customers disillusioned with big business. UK customers are increasingly socially-conscious and brands must foster a sense of integrity to reach them, not only by communicating praiseworthy values but by behaving accordingly, with transparency at every level of the business, from supply chain to shop floor. Of course, the larger the organisation, the bigger the challenge, but grocers who take the lead on combatting issues such as food waste and excess packaging have a real opportunity to build long-lasting customer relationships.
Scandinavia’s first zero-packaging supermarket is set to open in September. Following packaging-free grocers Unpackaged in the UK and Unverpackt in Germany, customers at the crowd-funded supermarket will bring their own containers to stock up from a range of over 400 organic products.
UGLY (BUT GOOD) EXAMPLE:
Following in the footsteps of French supermarket Intermarche’s “Inglorious Fruits and Vegetables” food campaign, the grocer has just signed up to a scheme to sell ‘ugly’ fruit and vegetables that wouldn’t normally make it on to supermarket shelves, in a bid to tackle food waste.
Related: See our food hall and supermarkets experience.