May, 2017

Research Perspective and Comments & Analysis

The Voice Of The Customer: Meeting And Beating Expectations 

By Anne-Marie Roerink, Principal, 210 Analytics

In a tough retailing environment, produce is winning. In 2016, produce dollar gains exceeded those of meat, deli, bakery and other perimeter departments, and certainly center store. Enjoying the benefits of shoppers’ focus on health and wellness, produce sales are poised for further growth. But while a consumer favorite, competition is tough with many channels and banners vying for trips, dollars and volume. So what can we do to optimize the shopper experience? After all, with the bulk of the purchase clustered in traditional food retail, the entire industry benefits from an optimized in-store experience. The Food Marketing Institute’s Power of Produce 2016 looked at retailers’ report cards, and where they can improve.

VARIETY, PRICE AND QUALITY

Shopper satisfaction with the primary produce department is good, with room to improve, at 4.0 on a five-point scale, where five is highest. Channels exceeding that average include club stores and specialty/organic stores, whereas supercenters fall below average. But while produce departments are performing well overall, it is important to remember that with abundant choice in most areas of the country, people will often simply change channels if their expectations aren’t met — as evidenced by the 24 percent of shoppers who change stores. To prevent channel shifting, or to become a destination of choice, shoppers advise retailers to offer better variety of items, followed by better everyday prices, better quality/freshness and improved in-stock availability of the items.

While shoppers will always expect and demand lower prices, other high-scoring areas may be ways to strengthen satisfaction and loyalty. In particular, out-of-stocks is a common issue that affects spending and satisfaction.

BETTER VARIETY, PRICES

Across channels, shoppers call for a greater variety of produce items. Given the current SKU level, in reality, it’s likely a call to carry the right variety of items tailored to the store audience, rather than more.  An additional quarter of shoppers recommend more specialty items, be it organic, local, ethnic, non-GMO or a particular brand. This call for more specialty items is particularly strong among Millennials and Hispanic shoppers.

Unsurprisingly, shoppers also bring up better every day and promotional prices. In a way, the industry will never be able to win on price. Regardless of the price points driven by the market supply and demand, shoppers will always seek hotter deals. But retailers who are able to make price a secondary consideration behind other attributes such as quality, freshness, organic, local, service, etc., are in a much better position to drive produce department satisfaction, spending and loyalty.

IMPROVED OPERATIONS

Between two and three in 10 shoppers see room for improvement in various operational areas, starting with better quality/freshness and better in-stock. The latter, in particular, drew a lot of open-ended comments, pointing to the frustration associated with out-of-stocks, not to mention potentially lost sales. Good quality/freshness is particularly important, as it is the No. 1 item on the purchasing decision tree for both fruit and vegetables. Other items include improved cleanliness and having all prices clearly marked.

More sampling, a greater variety of recipes, available and knowledgeable produce associates, and more cooking demonstrations drew agreement as areas of improvement as well. While marked by fewer shoppers than areas such as variety and price, many can be great ways for retailers to differentiate, if done well.  Interestingly, Millennials, with their well-documented lack of cooking knowledge, have a much greater desire for more recipes, sampling and cooking demonstrations. These can be excellent areas to foster a growing integration of fresh produce into the diet and meal line-up.

The Power of Produce 2016 — Shopper research by the Food Marketing Institute, made possible by Yerecic Label and Hill Phoenix and conducted by 210 Analytics in close cooperation with the FMI Fresh Leadership Council.

 

You Can’t Please Everyone

What can it possibly mean when 68 percent of Baby Boomers, 66 percent of Millennials and 62 percent of all shoppers say they want produce departments to offer a “better variety of produce items”?

Surely it can’t mean they want to see more items? Not when a typical produce department carries hundreds of SKUs. Anne-Marie Roerink, principal at 210 Analytics, suggests it must mean consumers want stores to carry the right items. This is surely true, but, of course, leaves open the question of what, exactly, are the right items?

Is it a reference to brands — people want Dole bananas and the store only carries Chiquita or Del Monte? Maybe it refers to packaging – people want Clementines but want a different size? Could it be a reflection of the ignorance of consumers about seasons — they don’t know when some products are unavailable or that retailers sometimes don’t carry items because they don’t taste good? Or could it mean consumers are now super-sophisticated and they know that simply offering black grapes is not enough; they want specific varieties that stores don’t all carry?

Or could it mean nothing at all — just that when you stick a microphone in front of consumers and ask them questions, they feel obliged to say something? And asking for more choice of produce, in a generic sense, is an easy thing to do. I would love to see the next generation of this research focus on asking consumers to elaborate, so if consumers says they want “better variety,” let us see what they say when asked “what items would you like to see that your produce department does not sell now?”

The truth is this type of research must be reviewed by retailers shrewdly. For decades, consumers have reported their priority is such things as assortment, price and cleanliness when selecting grocery stores. But precisely because these traits are so consistently and overwhelmingly referenced as important by consumers, retailers have mostly focused on this consumer demand. So the number of supermarket chains that offer dirty stores, poor assortment and uncompetitive prices is few indeed. Satisfying these types of consumer demands has become the cost of entry for being in the business.

This implies that additional investments in these areas may have reached a level of diminishing returns. A large upscale store might carry as many as 600 produce SKUs; it seems unlikely that handling an additional 50 will really increase appeal. If the store is clean, hiring 50 more sweepers will probably have no impact, and if the store is priced competitively, there is probably not much margin available to further entice the consumer.

So if a store wants to attract more customers, it very often must do so by focusing on things that are priorities for a small percentage of consumers, but are critical priorities for those particular consumers. In a dramatic sense we see this with religious requirements. Stores in areas with large numbers of Orthodox Jewish customers will offer a substantial variety of kosher foods, or they will not get this business.

A demand for more assortment is most profitably viewed as a request to serve the needs of specific groups as opposed to a generic request to carry more items. For example, Latino shoppers may want specific chili peppers. The idea is not a broader assortment; it is a more specifically relevant assortment that allows the retailer to capture specific shoppers – defined by ethnic group, household size, age, etc.

Many of these things need to be tested. Are consumers who are asking for cooking demos really asking for help learning how to cook? Or are they reflecting their personal enjoyment of a more experiential shopping environment?

As shopping channels proliferate, specific retailers may want to double down on certain traits. Aldi or Lidl will be tough to beat on price and thus tough to beat in attracting consumers focused on price. But the consumer yearning for experience – chefs cooking in the stores, a cornucopia of assortment, loads of recipes and samples – these consumers may offer an alternative target.

It is hard to keep any shopper 100 percent of the time. Issues of convenience – say shopping near work as opposed to at home – and lifecycle – the same person cooking a fancy dinner party or a single meal for a hot date one week and scrimping pennies the next – all lead to the same people wanting different alternatives at different moments in their lives.

Still, if there is a lesson in this research, it is probably that you really can’t please everyone. When a store with hundreds of produce SKUs is counseled to increase the number, it tells you the store’s planning is too broad. The store would profit by being comprehensive in its offer to specific shopper types, whether it be senior citizens, Guatemalans, Philippinos or single-occupant households. But an intense focus on distinct shoppers is likely to turn a store into the preferred outlet to certain customer types. This specific path leads to customer satisfaction and prosperity for the store.    pb