The lines between grocery store and restaurant have been blurring for some time now as retailers offer more takeout options for busy shoppers, but the concept can go beyond grabbing dinner while picking up groceries. In-store restaurants can provide a reason for shoppers to dwell and provide a profit-forward differentiator that can help stores stand out as they fight for market share in a tricky economy, particularly during certain parts of the week.
“Right now, the biggest challenge grocers are facing is retaining customer loyalty,” said Michael Della Penna, Chief Strategy Officer at InMarket. “With economic factors like rising food costs playing a significant role in shoppers’ habits, we’re seeing long-time leading grocery chains lose market share and critical customers to lower-cost options like discount and dollar stores. Enhancing the shopping experience with a variety of in-store restaurants offers grocers an opportunity to broaden their audience appeal and dial up the convenience factor which can drive repeat visitation, purchases, and loyalty.”
For instance, H-E-B has opened a 10,000-sq.-ft. location in Austin with multiple restaurant concepts inside. R.J. Hottovy, Head of Analytical Research at Placer.ai, noted that this has resulted in more interest from customers during the weekends and could help the brand reach out to new customers.
“Something we’ve seen from HyVee (and) something we’ve seen from a couple other chains as well: the idea of kind of blurring the lines between grocery and restaurant,” said Hottovy. “We’ve actually looked at the percentage of weekend visits for that particular location earlier in the year, and they get a lot more weekend visits. I think that this could be a new source of competition across the board — some of the things that we’re seeing in terms of large format grocery that is going after a larger target audience, and some stuff that we’re seeing there.”
H-E-B’s restaurant offerings also stand out by offering both quality and convenience. InMarket found that H-E-B earned the highest fidelity score in Q2 2023, beating out companies like Kroger and Trader Joe’s. Della Penna noted that this highlights the grocer’s “efficiency and love from customers,” and that the restaurants play a significant role in the brand’s ability to create an engaging shopping experience.
Supplement In-store Dining with Intra-store Trends and Value
Grocers that hope to enhance their own foodservice offerings, whether with full restaurants or simple prepared foods, should keep an eye on the trends that are resonating across the rest of the store, according to Della Penna.
“For example, we’re all seeing the swirl of news in the grocery space as cereal is on its decline because shoppers are looking for more substantial breakfast alternatives,” said Della Penna. “For a grocer who is frequented by parents with young children on the weekends, can you launch a breakfast menu in your in-store restaurants that meets these demands while promoting key products? Pay attention to trends and create an in-store dining experience that enables you to adapt accordingly. Not only will enhanced customer experiences provide the seasonal drops that folks love, like Pumpkin Spice Lattes, they can also empower you to drive sales across key product categories and keep consumers engaged and interested in coming back.”
Additionally, they need to monitor the success of in-store foodservice and adjust their actions accordingly. This is particularly true for grocers that choose to make their own food rather than partner with a name brand, according to Della Penna.
“When introducing a new concept like an in-store restaurant, grocers must constantly keep a pulse on how the restaurant is performing, whether it’s monitoring the sales of particular menu items, understanding the key demographics or the busiest days and times for business. In doing so, you’ll be able to ensure that it’s drawing in new customers, retaining loyal diners, and driving profitability. You’ll also have the advantage of staying ahead of any potential dips in business as well as more effectively and efficiently meeting customer demands.”