How grocers can lay the foundation for specialization

Grocers create advantages for themselves when they develop distinctive products, programs and services, particularly ones that respond to existing consumer trends or spark new ones. Most companies understand this concept, but few make it core to their strategy.

True differentiation drives trips, grows share of wallet, elicits word-of-mouth marketing, and much more. Hy-Vee, Wegmans and Trader Joe’s, with unique business models and die-hard fans, serve as examples of this reality.

Given the spectrum of competition in the industry today, the grocers that have the best shot at long-term success will be those that create their own lane. Companies will find that a struggle, however, unless they deviate from standard industry practices in three key ways:

Rethink traditional timelines

The grocers missing out on the benefits of specialization aren’t just those with deficiencies in data, creativity or bandwidth. Even solid grocers with the ambition to establish a distinct identity through signature offerings may find themselves facing a major structural hindrance: a lack of operational flexibility.

Consider the typical cadences of the legacy grocery industry: annual category reviews, promotion calendars planned months in advance, long lead times for pilots. These timelines might have worked well enough when supermarkets were only competing with one another rather than with mass merchandisers, discounters, clubs, dollar stores, specialty grocers and other formats, but at this point, change is long overdue.

The typical rate of evolution in grocery doesn’t allow companies to keep up with the changing interests and demands of the consumers they aim to serve. That’s a problem, especially since the ability to move faster than industry behemoths is one of the few advantages traditional grocers have – or could have.

Compelling new items shouldn’t have to wait six months for space on the shelves. Innovative programs shouldn’t take a year from idea to execution. If grocers move at this pace, at the very least they lose a significant chunk of the window of opportunity – and they most certainly lose the chance to be ahead of the curve.

When decisions about what to buy, promote, market and merchandise are made apart from what’s happening in real time with the consumer, whether well in advance or far behind, a grocer will struggle to set itself apart from competitors because it will find that it defaults to more or less the same activities it’s undertaken year after year after year.

The first step to more flexible timelines is to identify which constraints are real and which are constructs that in previous years facilitated progress, but which now hinder it.

Support unique offerings with time, space and money

Local, niche and specialty suppliers don’t have the bank accounts to offer the vendor funding that national brands do. The same goes for even established suppliers in traffic-driving departments like fresh produce. Private brands certainly don’t come with trade funding attached, either. Grocers need to champion all of them anyway.

To establish a unique identity that gives customers a reason to make a separate trip — since most households now split their grocery spend across stores and channels — grocers must devote resources to highlighting products, programs and services that stand on their own merits.

As they make decisions on allocating marketing spend, shelf space, labor hours and more, grocers should seek to understand at a granular level both the contribution of vendor funding to profitability and the costs that go with the accompanying commitments – for example, supply chain inefficiencies from large pulses of volume for big promotions, or extra hours at the store level to move product and build special displays.

National brands have their place, but many consumers judge selection and quality on other areas, from fresh and local to private brands. Grocers can’t neglect to nurture these aspects of the store on which people base their decision of where to shop.

Take on the role of trendsetter

Responding to existing trends in a timely manner is one opportunity, but ambitious grocers can go much further. There’s a reason that advertisers have lined up to spend money in retail media networks; grocers have the data to know their customers better than anyone. With this information – and the will to use it – they can be proactive rather than reactive.

Between their data and their store-level personnel, who talk with and observe customers at the point of sale every day, grocers should have a strong understanding of the problems their shoppers need to solve. Instead of expecting shoppers to find their own solutions, grocers can embrace an opportunity of more purposefully guiding that consumer journey.

Perhaps a grocer identifies a category that’s primed for flavor innovation; or products that are never marketed in relation to meal occasions but easily could be; or a service that gets customers talking and posting on social media — say a “discovery box” program where new products are pre-packaged for curious consumers.

The improvement of technology capabilities, including AI, will make it easier for grocers to know where to start as they look for these kinds of opportunities. Instead of category managers having to synthesize multiple data sources and review them manually, AI will find patterns and bring them to the team’s attention.

It might sound like science fiction, but it’s not farfetched to imagine AI providing real-time recommendations on assortment adjustments or suggesting categories for which private brand would be a profitable venture.

Whether the inspiration for how to go to market differently comes from people or technology, the result is the same: The grocer gives its customers highly relevant products, programs and services they can’t get anywhere else.

Time to stretch

Greater operational flexibility, commitment to champion what’s unique, and a trendsetter mindset — these aren’t present in every grocer. Those that adopt them should expect some growing pains, but the payoff over the coming years will be significant.

Grocers can ease the transition with transparency about the stakes: In an industry growing more competitive by the day, failure to innovate and respond quickly to the needs and interests of customers will eventually translate to failure overall.

Time is the enemy. When companies delay, opportunities evaporate, and chances to create separation from competitors are lost forever. Standing pat might feel like the safe choice, but it’s actually a much riskier decision to maintain the status quo rather than sacrifice short-term comfort and make the changes needed for long-term success.

The (enormous) Private Brand Opportunity — and how manufacturers help grocers realize it

Don’t miss out: Unite your merchants, your marketers, and your stores for fresh food success

Three ways grocery retailers can promote more profitably in fresh