The future of grocery shopping: Faster, cheaper, smaller

January 10, 2018

Walmart was once considered the future of grocery shopping, offering consumers a slew of discounted choices, compared to the competition.

Yet, market trends point toward a faster, cheaper, smaller and more streamlined experience. The result: One of the most common shopping experiences in American life is fundamentally changing, according to a new study in the journal Strategy and Leadership.

"It's all about limiting choice," said Sayan Chatterjee, a professor of strategy at the Case Western Reserve University's Weatherhead School of Management and co-author of the research.

The main driver of this market disruption, European grocer Aldi, has rooted its recent success in finding a single supplier for most products--and targeting Walmart's customers, he said.

Making quality-control easier, this strategy has allowed its goods to earn a reputation for meeting a high-enough standard acceptable for middle-class shoppers. The company also targets price-conscious consumers who tend to buy a limited range of products anyway.

While full-service supermarkets stock around 30,000 products of varying degrees of quality, an Aldi location offers about 1,400 single-sourced products--90 percent of which are in-house labels that also allow the grocer to directly capture more of a consumer's spending.

This streamlined approach has allowed Aldi to undercut Walmart on staple products like milk and eggs to lure customers into its doors. Aldi's sales grew 15 percent in 2016; Walmart just 2 percent.

"Aldi has invented a new business model that provides similar quality groceries at a price point well below others," Chatterjee said. "They have taken enough of Walmart's customers to have forced the retail giant to lower its prices in response and refocus its strategy."

Other Aldi strategies influencing its competition, as detailed in the study:

Aldi has also opened many stores close to locations of large retailers, such as Walmart, to piggyback on their existing and concentrated customer bases.

"Price is increasingly winning over brand loyalty," Chatterjee said, "and Aldi is winning on price."

It's a battle that Walmart used to win, thanks to a proprietary system that used sales data to create shipping efficiencies and predict what customers wanted, when they wanted it, according to Chatterjee.

Walmart also lost its way in the early 2000's, said the study, by pursuing more affluent customers who favored fellow retailer Target. By reducing and upgrading its offerings, Walmart lost efficiency built into relationships with suppliers, creating a domino effect that undermined their core strengths of low prices and high predictability.

The future of food-buying

Now re-tooling, Walmart has introduced a new smaller market-style of store that mimics some aspects of Aldi. Meanwhile, Lidl, another European grocer with a business model similar to Aldi, entered the U.S. market in 2017.

Aldi is also trying to reach more upscale customers: starting to accept credit cards and offering more organic products, the study noted.

"This competition is good for consumers and beneficial for the economy," said Chatterjee.
-end-


Case Western Reserve University

Related Consumers Articles from Brightsurf:

When consumers trust AI recommendations--or resist them
The key factor in deciding how to incorporate AI recommenders is whether consumers are focused on the functional and practical aspects of a product (its utilitarian value) or on the experiential and sensory aspects of a product (its hedonic value).

Do consumers enjoy events more when commenting on them?
Generating content increases people's enjoyment of positive experiences.

Why consumers think pretty food is healthier
People tend to think that pretty-looking food is healthier (e.g., more nutrients, less fat) and more natural (e.g., purer, less processed) than ugly-looking versions of the same food.

How consumers responded to COVID-19
The coronavirus pandemic has been a catalyst for laying out the different threats that consumers face, and that consumers must prepare themselves for a constantly shifting landscape moving forward.

Is less more? How consumers view sustainability claims
Communicating a product's reduced negative attribute might have unintended consequences if consumers approach it with the wrong mindset.

In the sharing economy, consumers see themselves as helpers
Whether you use a taxi or a rideshare app like Uber, you're still going to get a driver who will take you to your destination.

Helping consumers in a crisis
A new study shows that the central bank tool known as quantitative easing helped consumers substantially during the last big economic downturn -- a finding with clear relevance for today's pandemic-hit economy.

'Locally grown' broccoli looks, tastes better to consumers
In tests, consumers in upstate New York were willing to pay more for broccoli grown in New York when they knew where it came from, Cornell University researchers found.

Should patients be considered consumers?
No, and doing so can undermine efforts to promote patient-centered health care, write three Hastings Center scholars in the March issue of Health Affairs.

Consumers choose smartphones mostly because of their appearance
The more attractive the image and design of the telephone, the stronger the emotional relationship that consumers are going to have with the product, which is a clear influence on their purchasing decision.

Read More: Consumers News and Consumers Current Events
Brightsurf.com is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.