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By Nate Rose

CONSUMERS ARE SHIFTING MORE FLUIDLY BETWEEN VALUE AND SPENDY FOOD AND BEVERAGE PURCHASES, LEAVING GROCERS TO STRATEGIZE HOW THE MODERN GROCERY STORE CAN SATISFY THE MOVING TARGET THAT IS CONSUMER PREFERENCE.

Suzy Monford was out for her Sunday bike ride when the weather had other plans. Dodging the rain, she pulled into a nearby H-E-B in Austin where she scored a breakfast taco, will coin this and say it’s not the everything store, the modern grocery store is the essential and experience store,” she explains. “We have 100 percent of your essentials covered and your experiences covered. We aren’t just selling merchandise; we are providing experiences. That’s the big unlock and differentiator. The modern grocery store suits your lifestyle 24/7.”

Monford, a grocery veteran with leadership stints at Kroger and Andronico’s Community Markets who is CEO and Founder of the retail consultancy Food Sport International, believes every grocer must work to shape themselves into an essential-experience store if they are to meet the desires of shifting shopper lifestyles.

“I love this topic, and I don’t think there’s anything more relevant in the zeitgeist right now when it pertains to grocery retailing,” she says. “The best grocers will wake up every day and start with that question. If we ask ourselves as leaders and operators what’s the modern store, we can make sure we’re hyper focused, which is honestly what it takes to survive and thrive today.”

Ethan Chernofsky, Sr. VP of Marketing at Placer.AI, agrees, but with his own spin honed from years of working in leadership at the location intelligence company.

The New York Times, and a coffee. Sunday morning saved. This experience illuminated for her the answer to the question that is on the minds of grocers everywhere:

What is the modern grocery store?

“The ideal modern grocery store really comes down to answering who am I serving,” he says. “Very often it’s asking what’s the store’s identity. Top grocers really understand that. And the biggest thing in grocery is the modern store doesn’t look the same for each chain. There are broad strokes, sure, but it’s not supposed to be the same. It’s supposed to be different, and that’s why so many of these chains can thrive. It’s not like consumer electronics or home improvement where there’s a winner. Grocery has a much more diverse mix because each brand can communicate and associate with unique things.”

The Consumer Mindset

As Chernofsky and Monford explain, the successful modern grocery store must clearly and intentionally define its target audience, then seek to fulfill the audience’s lifestyle needs around the clock. This reality leaves grocers to grapple with how to best serve a 21st century shopper who often toggles between seeking essentials or experiences seemingly on a whim. Restaurants again account for a greater share of food spending than food at home. Lifestyles have been reshaped by cemented trends, such as working from home and the urban exodus. Economic conditions continue to play a major role in shaping shopping habits.

On top of these headwinds, consumers increasingly think about how each purchase says something about themselves and their values. Gone are the days of one type of yellow mustard satisfying every shopper. Barry Schwartz wrote the national bestseller The Paradox of Choice in 2004 to explore the psychology of consumer choice, identity, and how American abundance affects satisfaction. The subtext of his book is “why more is less,” and he has spent his career studying decisionmaking as Professor Emeritus at Swarthmore University in Pennsylvania.

“When there are only two kinds of jeans: Lee’s and Levi’s, the jeans you choose says very little to the world about who you are,” Schwartz explains. “When there are 2,000 kinds of jeans, the jeans you buy make a statement of identity. What that means is that even mundane choices make the stakes go up. You’re the kind of person that buys x rather than y. When there are infinite number of options, it’s easy for what you choose to be attached to who you are.”

This facet of life for modern consumers is no less true at the grocery store. In the pandemic many brands and grocers reduced the number of SKUs to account for supply chain issues and to prioritize the most essential and popular goods.

However, as life falls into the familiar patterns of before, grocers are again working to differentiate themselves through their own retailing identity. For a brand-focused consumer, a grocer’s identity is largely defined by the brands they carry. Especially as social and environmental causes remain top-of-mind, consumers are looking for brands that reflect their values.

“I do think that grocery shopping has become much more of a moral and therefore fraught enterprise in comparison to what it used to be,” Schwartz elaborates. “Is this good for the planet. Will this laundry detergent take more water. Is this a healthy choice. With a concern not simply about yourself being healthier, but also of what impression you make. It’s very hard to just buy cereal.”

Each consumer is therefore choosing their own adventure whenever they make a consumptive decision. But despite what consumers say—that they appreciate all the optionality presented to them—Schwartz believes his research shows all this choice ultimately, and perhaps ironically, leaves consumers unhappy. After all his years of research, he believes it’s unsurprising Trader Joe’s continually succeeds at making its shoppers happy through its tight curation of products.

“Anything that imposes constraints is a blessing,” he says. “It’s not a blessing in Russia, but it’s a blessing here. Having no choice is terrible and having too much choice is also terrible. Creating that sweet spot is the secret. But it’s a moving target, and it’s really hard to try to find a formula that satisfies everybody and I think it’s a huge mistake to try.”

The Purpose of Audience

Even as grocers know they must seek to differentiate their retail operations through brand and experience, every grocer also seeks growth. This is akin to going as wide as you can within given constraints. Whether that’s the constraints you give consumers or the constraints you place upon your own brand through audience definition.

Adam Salgado, Chief Marketing Officer at Cardenas Markets and CGA Board Member, says that his goal is to strive to offer the most fresh and authentic variety of items that reach the broadest audience possible.

“At times, this becomes challenging, given the different needs our multigenerational Hispanic customer base is looking for,” he adds.

“Where we win is when we connect our customers with the authenticity and nostalgia of a variety of brands that help them remain true to who they are, while maintaining their heritage intact. Beyond brands, it’s more about the cultural connection the experience of such brands provides.”

You can think of audience definition as plotting your brand on a graph where the x-axis covers the essential-experiential dichotomy and the y-axis includes good, better, and best brands, according to Monford. “The basic structure for this choose your own adventure consumer is using brands,” she explains.

“Typically, the good-better-best brand strata. You can use that strategy if your’e looking to appeal to a little bit of everyone. If you’re bicfurcating some of that demographic… Let’s say you’re somewhere you don’t need to think about a value consumer, then you lean into better-best. And potentially, if you’re not serving value and also not interested in mainstream, you’re highlycurated and dialed in—like natural and organic. In that scenario, you are just targeting the best brands.”

When Monford was CEO of Andronico’s Community Markets, she deployed such a best-in-class strategy by determining their target customer base. She then used brands and store design to curate an experience that spoke to her customers.

For Chernofsky the fragmented consumer that uses brands to shape their identity offers a tremendous opportunity to retailers. It’s not a zero-sum game where one grocer will win out.

“You have to ask yourself where do these products fit in a consumers matrix?” he says. “But the cool thing is, if you’re someone who’s succeeding in getting visits, what’s the likelihood if you’re in my four walls that you’re leaving with nothing. And then if I can get you to come back in a repeated way, I want to be part of your mix. I might not own your entire basket, but if I can be a part of your mix, I think I’m really succeeding as a grocer.”

This thought-process is intuitive for the Placer.ai marketing leader as the company’s data intimately tracks datapoints like foot traffic and in-store dwell time.

“They all have Heinz ketchup, and they all have cereal,” he points out. “Maybe not the exact version, but that means you choose your grocer based on where you like shopping. The proximity is good, and it’s easy to get in and out; they have all the things I want in one place.”

“At Cardenas we think of our audience as ‘ever-changing,’ Salgado, the chief marketer at Cardenas Market, says. “We understand there is a constant evolution to how and where customers gather the information they need to make their shopping decision every week. We also get that they expect a simpler shopping experience that we are able to offer through the use of technology, digital platforms and an assortment of items that are based on today’s trends. We must adapt and adjust in order to accommodate their needs to ensure a stronger brand loyalty.”

Technology’s Role to Play

In the face of today’s consumer specificity and the essential-experience driven mindset that many believe is key to success, every grocer must continue to sharpen its go-tomarket strategy. This necessarily means moving away from the middle approach and cobbling together a broader audience out of smaller ones.

“What happens to good enough?” Monford posits. “You have to move out further into the fringes. If I’m playing the middle ground, then generally speaking, I’m probably far over-indexed in national brands and maybe not enough in local and owned brand. So, what that means is I’m playing price and item, and I’m competing against everyone who sells Campbell Soup and Cheerios. There’s no differentiator. It’s literally the race to the bottom on price and item.”

Executing against this schema requires greater granularity for which technology is the most likely answer.

Chernofsky sees the footprints of technology’s ability to impact how grocers build the modern grocery store in his company’s proprietary location data.“What’s changing about grocery is the ability to think much more granularly on a location-by-location basis about how to have the right products and right experiences to those audiences.”

Placer.ai closely follows the data closely on these geographic trends, and Chernofsky believes we don’t yet know what stage of the post-pandemic cycle society is in.

“There’s this lovely conversation around the new normal and virtual work,” he explains. “Would it shock you if in a year from now it’s this 60 percent of where it was pre-pandemic and that’s the standard. That’s what I would bet, but we have no idea where we are in this longer-term cycle.”

Monford extends the real estate conversation into a metaphor for the inside of the store, where technology becomes the lynchpin to a more efficient and less wasteful operations model.

“As a grocer, we are at all times kind of a real estate developer.,” she details. “We have this little village we are running. How do we get sales and gross margins per square foot, and how do we create a flywheel that runs all day long. I have to be able to bring my goods to market.

“Gone are paper tags, here are electronic shelf labels,” she says. “We are so far behind even Europe. Electronic shelf labels enable dynamic price and promotion. It’s money, but also reduces shrink and carbon footprint. I want to order better, procure better, I want JIT so I have less waste. Less waste lowers cogs, when I lower cogs, I can lower price which attracts customers. When I do all of that, I can reinvest savings into wages and pay people better. Then you add the AI computer vision camera so that I know exactly what’s on shelf or not on shelf at any time and from there I can reverse engineer my entire go to market model. I can prioritize replenishment; I can surprise and delight customers. I can make that person’s job easier, faster, better, more fun, and more profitable. That’s the great unlock.”

Shiny Happy Customers

When Schwartz wrote The Paradox of Choice in 2004, the internet was only just beginning its ascent and social media had not yet come to dominate the digital landscape and the consumer zeitgeist as it does today. The Professor Emeritus thinks, if anything, it has proved his theory correct. Social media has accelerated and exposed consumers to trends and what’s considered best-in-class by their peers at a more rapid rate. They then try to maximize every decision lest a choice reflect poorly on their constructed identity.

“Most of what we buy is the same stuff we bought last week,” says Schwartz. “And we really only go through this excruciating decisionmaking process on a few of the items in the basket for the most part. Is this the best toilet paper? I have no idea, but it’s good enough. So that’s what saves us. But people don’t like to admit that they are being thoughtless. When you are doing things out of habit that means you are doing things thoughtlessly.”

How many happy faces out of 10 would your average customer circle after their visit? If Schwartz is right, and consumers are rendered dissatisfied by abundance and overwhelming choice, the modern grocery store that is the best curated and most adept at intentionally serving a distinct customer wins. Salgado, the Cardenas CMO, sees a similar dynamic in his company’s approach. “I would define the ‘modern grocery store’ as one that has understood their customers, simplified the experience for them and evolved over time to adjust to their needs and expectations,” he shares, building on Schwartz’s thesis. “Some examples of such adjustments which grocers should be paying attention to include expanding beyond the four-walls of the stores into e-commerce; providing a quick and easy check-out process via self-checkout ordering; improving the omnichannel marketing approach to make sure customers are seeing a consistent message across all vehicles.”

“Everything depends on what you’re trying to achieve,” adds Chernofsky. “At the end of the day it’s a challenge to get people into stores. You’re competing with so many things. So, the question is who the right audience for you is and how do you incentivize that visit. In some cases, it’s about location, and location if it’s the most important thing then could mean figuring out a different format than your classic format…it’s that balance. One of the things we see across retail is this ability to be multi-format and have different locations which is centered around the idea that I understand how to get the right products into the right places.”

While creating the modern grocery store that satisfies consumers is a big challenge, Monford believes California’s grocery community continues to be on the vanguard.

“I think there are some of the best grocers in the world in California,” she concludes. “You have the big banners like Kroger and SafewayAlbertsons. Incredible regionals like Nugget Markets. Category and mind-bending ‘groceraunts’ like Erewhon. I see highly-curated concepts up and down the chain. There are some terrific Hispanic markets. I think in California, we do a very good job of defining the concept and playing within those guardrails.” ■