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Sarasin: Don’t Overlook the Magnitude of Current Trends

Last updated on August 16th, 2012 at 12:19 pm

by Terrie Ellerbee

associate editor


Just as it takes two separate eyes looking at an object from their distinct angles to achieve perspective and a sense of depth, the U.S. Grocery Shopper Trends and FMI Speaks: The State of the Food Retail Industry reports each have individual focuses, but put together they create a picture of the current state of the industry, said Leslie Sarasin, CEO of the Food Marketing Institute (FMI).

She made those remarks while giving the annual presentation on May 1 in Dallas at FMI 2012 The Food Retailing Show.

One sobering statistic she offered was that primary stores received the lowest percentage share of grocery trips they have received in recent years: 64 percent. She explored some of the reasons that has happened.

She wasn’t there to present new ideas, necessarily, but said that even when ideas or trends are familiar, people can overlook the magnitude of what is happening in front of them.

She discussed four movements in detail: the value-seeking American consumer; technology as a fact of shopping life; online shopping eating away at center store; and format innovation pointing to new differentiators.

“Every single one of these movements that I’m going to talk about, you’ve seen them before. You’re read about them,” she said. “In what I’m going to tell you about now not only are there trees, but there’s also a forest out there.”

Sarasin began with the economy, and its “amoeba-ish ooze toward recovery.” A new normal is emerging.

“The center of shopper buying patterns has shifted in the decided direction of value-seeking behaviors and a continued search for the biggest bang for the buck at the checkout stand,” Sarasin said. “And there’s every indication that this movement has staying power. We’re going to be living with this for a while. We saw the immediate results of the economic downturn. The whirlwind we’re now reaping is the lasting effect it’s had on the spending psyche of the American shopper.”

In one survey, shoppers were asked to respond to this statement: “I seek discounts often.” Sixty-one percent said they always do; 28 percent said they’d made some changes; and a few said they would likely revert to pre-recessionary style shopping. Sarasin said that a few years ago, 60 percent of shoppers were “driving for discounts.” Today that figure is 80 percent, representing some 19 million more American households on “the discount safari—and they’re becoming smarter and more systemized in the way they are doing it,” she said.

Another statement that 32 percent of respondents agreed with: “I accept living with less.” Thirteen percent identify their new way of life as a lasting change.

“So where once 42 percent felt this way, an increase of some 15 million families means that now well over half, or 55 percent, of the families we’re feeding feel the pinch of living with less,” Sarasin said.

In the new normal, 14 percent more shoppers said they are comfortable buying private label brands. About half of those who have made the move to private label believe it will be an enduring conversion.

“That’s a bump of about 16 million more families planning to continue buying private brands—even if the economic reason for doing so is no longer a compelling factor,” Sarasin said.

Seventy percent said store brands are a great value, and 68 percent said they would keep buying them.

“The staying power of private brands, the willingness to accept living with less and the planned continuation of looking for discounts all point to a new normal shopping behavior,” Sarasin said.

She said that as with the Great Depression-era generations, today’s consumers are being shaped by their economic experience, and it cuts across all levels of wealth, she said.

“And while we in food retail see it every single day, we simply cannot afford to let our familiarity with it result in a failure to register the culture-changing significance of it,” she said.

In the new customer culture, shoppers are using every resource at their disposal to lower their grocery bills. Digital technology is one of the most effective tools.

“Now I know most of you, like me, who are over 40, probably all just inwardly cringed or even uttered an expletive when I said the words ‘digital technology,’” Sarasin said. “But it’s time for all of us to overcome our reticence, so repeat after me: technology is my friend; technology is my friend.”

She compared the new tech world to “the old Wild West, where new gadgets, software, apps and programs are emerging quicker than we can get our arms around the one that came before, resulting in what I call a true sense of lawlessness out there.”

There are many fields on which to play now, and retailers and consumer package goods (CPG) companies must find the opportunities that suit them best.

More than half of customers go online before they make at least one out of every four trips to the grocery store, and they’re using their smart phones to access digital technology once they are in the store to find coupons, research products and check prices. Younger, upper income shoppers are now the most likely to use these tools, but the use of this technology in these ways is growing across all demographics.

“So think of it this way,” Sarasin said. “At any given time, one-eighth of the customers in your store have either before they arrived or while they’re in the store, encountered you online.”

That means retailers have to expand the way they think about customer service. It is no longer limited to face-to-face interaction.

“It also embraces the virtual encounter—the way you greet, serve and address the needs of your customers in your online presence,” Sarasin said. “In a multi-channel world, we have to broaden our customer service thinking so that we’re giving shoppers a rich and comprehensive online experience as well as a unique and fulfilling in-store experience.”

The days of just “throwing up a website” and getting back to “normal business” are gone, she said.

“Just as you give attention to your store appearance and staff interaction with your customers, you must also give continual attention to the way you come across to your customers online,” Sarasin said. “Are you giving them the information, the personalized attention they expect and want? In fact, I would be so bold as to suggest that the right question is not, ‘Does your website match the store experience?’ The right question is, ‘Does your store provide the same access to information and convenience that your customers can get from their on-site experiences?’”

FMI offered an entire technology track at the show with workshops specifically focused on the use of digital tools to help personalize the customer shopping experience.

Coupons were the next topic Sarasin tackled. It wasn’t just the show “Extreme Couponing” that got consumers clipping. Digital technology was a big contributor, she said. Almost 10 percent of shoppers say they use online coupons most every time they shop, 9 percent said they use them about every other time and 15 percent said it was about once in three or four trips.

“It means that a third—one-third of your shoppers—make use of online coupons, even if it’s spread over several trips, and this is going to keep growing,” Sarasin said.

Providing customers with the digital support to be able to make full use of electronic devices is good customer service, she said. Research shows that customers use their devices in-store to track the shopping list, check recipes, seek coupons, track their spending and search out nutritional information.

The third piece of the puzzle behind value-seeking consumers and their empowerment by way of digital technology is e-commerce. She polled the room to see how many had purchased something online and how many had done so more in the past year than the year before. Nearly everyone in the room raised a hand.

More than half of the shoppers surveyed said they’d make a purchase in an online grocery category. Today, the majority of online shopping is in non-grocery categories like electronics, books, music, clothing or software.

“But we’d better be paying attention or we risk having our company names included with the likes of Circuit City, Borders, Tower Records, and you know the list as well as I do,” Sarasin said.

In 2010, online shopping accounted for $12 billion in sales (2 percent of sales) of consumer package goods. That will double by 2014, and it will only increase as digital “natives—that’s what we call the first generation wet-nursed on technology—form their own households and become shoppers rather than shopped-fors,” Sarasin said. “The list of product areas experiencing growth as online purchases could almost be a list of your center store aisle markers … personal and beauty care, home essentials, dry groceries, beverages, pet care.”

She shared what the data reveals about online vs. offline basket sizes in a couple of categories: food and beverage, $80 online/$30 offline; health and beauty, $30 online/$10 offline.

She described the changes in the way people shop as analogous to raising the base paths two feet in baseball or making a football field 120 yards long vs. 100 yards. There would be “an uproar,” she said. “A competitive event would just be made tougher because the dimensions of the playing field changed.”

She asked attendees to think about how sports teams would adjust. There would be initial grousing, yes, but then they would look for ways to make the larger playing field work for them. They would up their game.

“Well, that’s what we have to do, too,” Sarasin said. “This is our new reality.”

An executive interviewed for the annual reports said, “We would best describe the online experience as simpler with better prices and a broader, more relevant assortment.”

The consumer need for convenience is driving shoppers online. It offers the benefits of home shopping and home delivery. In addition, not only is it easier to find items online, but it also is easier to explore information, reviews and comparisons.

Sarasin invited attendees to study the data because there are online benefits that can be replicated in-store and online weaknesses than can be exploited. FMI will offer more information on this topic by way of seminars and webinars that will dive deeper into the research she presented. Sarasin encouraged FMI members to visit the newly overhauled FMI website (fmi.org) to review abstracts, research and more on food retail e-commerce and other topics.

Store format innovation is the final piece of the puzzle Sarasin spoke about.

“In pre-recession years, growth was accomplished by adding more square footage, adhering to the notion that bigger was better,” she said. “But since 2005, traditional grocery stores haven’t been growing in terms of square footage, and importantly, this stagnation has occurred while other formats have added roughly 150 million s.f. of grocery category space to their facilities.”

She repeated the 150 million s.f. statistic.

Meanwhile, she said, “the grocery store format wisdom seems to be saying that smaller is smarter.”

Sarasin said the industry moved from the mom-and-pop format of the 1940s to the supermarket of the 1960s, to the hypermarket of the 1990s, and now, “with a hi-tech twist, we’re back to the values, at least of the mom-and-pop program: personalized service, customized assortments and a ‘served,’ not ‘sold to’ mentality.”

The clincher is that “the smaller format must fit into a larger hi-tech picture driven by a value-seeking and digitally-informed customer,” she said. “Small formats provide the promise of a more simplified shopping experience and … they are receiving renewed interest, especially for the stock-up trip.”

She said only one in 10 shoppers use small formats as their primary store, but about one-third use them for a quick trip, fill-in function. The allure of the small format becomes more significant as a blurring between the stock-up and fill-in functions begins to occur.

The more successful small formats are hitting two of three areas: finding a niche like fresh food in an underserved area, quick and easy shopping with a focus on a faster checkout and simple store navigation.

“This provides a new look to future formats, and it’s not just food for thought,” Sarasin said. “It’s a whole shopping cart full of food for thought for the journey into the future.”


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Donald E. Stephens Convention Center
Chicago, Illinois
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