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For Supermarkets, Bigger May No Longer Be Better

Retail has long been beholden to a simple rule regarding economies of scale: bigger is better. However, with advancing technology over the past 10 to 15 years, the retail landscape has changed. Improvements in the supply chain make it possible to provide the necessary support to smaller stores. According to Steve Matthesen, president of the Nielsen Retail Vertical:

“Perhaps the new retail mantra should be ‘Go small or go home,’ as the ‘Bigger is better’ paradigm has been challenged virtually everywhere… Hyper-localization and specialization are fueling today’s retail growth. As lifestyle and consumption habits change, we’re seeing a structural shift in where consumers shop and what they buy, and some small formats are driving big growth. Mass-market strategies are also losing relevance as consumers look for unique experiences that meet their personal demands.”

Nielsen further reports that nearly half of respondents (46%) reported grocery shopping is a chore that they’d like to spend as little time on as possible. These respondents argue that their grocery chains communicate in a relevant way, understand their grocery requirements and provide items they enjoy. So what exactly are grocers missing?

According to the report, shoppers rate high quality produce, convenient locations and product availability as more influential for store-selection decisions than finding the location with the lowest prices. Sure, price remains a factor, but it seems it is overstated. Customers are looking for other things to entice them through the doors.

Grocery operators can leverage stand-alone or integrated services into their stores to also draw customers in. The most widely used in-store services at grocers are banking, used by 42% of customers, fast food, used by 40% of customers, and pharmacy, used by 39% of customers. It makes sense: for customers who feel shopping is a chore that must be completed, adding places to bank, eat and grab medicine can reduce the amount of time completing one’s daily errands.