The food retail industry is seeing double-digit growth in both e-commerce and fresh formats, with less than half of all groceries sold in the U.S. coming from traditional supermarket channels.
During The Food Institute’s Future of Food Retail webinar on May 18, presenters Jim Hertel and Craig Rosenblum of Willard Bishop outlined changes happening in the food landscape, from the growth of online grocery to the competitive landscape with the addition of German discounter Lidl next year.
Overall, traditional grocery increased sales 1.7% in 2015, and market share declined by 0.5%, with the supermarket format responsible for the channel’s decline.
Non-traditional grocery, which includes small formats, limited assortment and premium natural and organic formats, grew by 3.6%, with market share growing 0.1%. Dollar stores are included in non-traditional grocery, and grew by 6.8% and Wholesale Club and Supercenters were up 4.6% and 4.2% respectively.
E-commerce drove nearly 21% of the growth in retail formats, followed by fresh formats at 9.8%.
Traditional grocery made up 45.8% of all grocery sales, which is a drastic shift from the late 1980s, Hertel said.
“Non-traditional formats are really what’s driving growth today,” he said. “Traditional grocery is now less than half of overall market share.”
As the consumer population shifts to a majority in the millennial age group, Rosenblum said retailers have new opportunities with data.
Millennials, in particular, are data-friendly.
“Consumers aren’t as worried about sharing information because they’ve learned the value,” he said. “They’re willing to share their personal data in return for making their lives and their shopping experiences more enjoyable.”
Retailers can especially take advantage of that attitude through e-commerce, as long as they don’t just replicate their aisle-by-aisle in-store experience.
“The more convenient the shopping experience, the more consumers are going to spend,” Rosenblum said. “Nearly 90% of online baskets are stock-up type trips.”
The non-traditional grocery channel also no longer is a one-name game, Hertel said.
“This category was almost completely owned by Whole Foods,” he said. “We’re seeing the democratization of natural and organic.”
Look for Lidl to grow rapidly, the pair said. The Germany-based discounter is aiming at the Mid Atlantic and Northeast for growth.
Rosenblum said he expects Lidl stores to enter the Philadelphia market within 18 months of a U.S. launch, and head-to-head competition with Aldi.
“What we’ve seen, so far, is a slightly larger footprint, through they’re still limited assortment, with more branded products,” he said.
In that discount limited assortment channel, Hertel said the chain is getting savvy in fresh.
“We’re seeing an evolution in the more enhanced fresh,” he said. “They’re starting to embellish their fresh more, and that suggests a little insight that they recognize what Lidl will focus on as well.
A replay of the webinar is available from The Food Institute.