March 14, 2018
Grocery openings decreased 28.8 percent from 2016 to 2017 as some grocers reined in expansion plans – a trend echoed loudly in Texas.
While Texas remains one of the hottest states for grocery expansion, the amount of new supermarkets in the state decreased to 1.2 million square feet last year, down from 3 million square feet in 2016.
Increasing competition, shifting consumer habits and the pervasive nature of technology, had several brands taking a step back in 2017 to examine existing footprints and reevaluate company strategies. Grocers that saw success in 2017 focused on the following three areas.
Fresh, healthy and affordable
Consumer tastes for gluten-free, healthy choices and locally sourced ingredients aren’t going anywhere any time soon. Grocers like Aldi, Lidl and Grocery Outlet are proving quality doesn’t have to come with a high price tag. In particular, the Aldi price point has generated significant interest from consumers and the brand is expanding its market share by offering more healthy options to attract an even broader audience.
A strong private label cultivates store loyalty and allows brands to quickly respond to market changes while eliminating third party costs. Grocers are debuting private labels and adding items to existing product lines to build brand allegiance and improve margins.
Albertsons will have grown its private label, O Organics by 50% as it recently hit $1 billion in sales and saw a 15 percent increase after adding 200 products to the line in 2017.
In 2016, private label goods accounted for 17 percent of U.S. sales, but expect that percentage to grow rapidly considering expansion plans of private label concepts like both Aldi and Lidl.
Online and mobile integration
Grocers are investing in online shopping, grocery delivery, and click and collect digital platforms. Technology is being employed to improve, rather than replace, the customer experience. The push for an omnichannel strategy speaks to shoppers’ needs for convenience and flexibility, especially for commodity items.
Kroger has shown serious digital commitment in recent years and recently announced Kroger Edge, which communicates with smartphones’ shopping lists to help guide customers to desired products.
Several brands are also investing in scan and go and checkout free technologies to make the customer experience all the more streamlined.
Digital integration will be a tenet of success in our growing digital world, however it is not a prediction of the fall of physical grocers.
For more on what’s to come in grocery, download JLL’s 2018 Grocery Tracker.