While the average private company (regardless of market sector) achieves profit margins of roughly 7 percent, the grocery industry pulls in a meager 2.2 percent profit margin.
Competition is fierce, as evidenced by the annual Market Force information study of grocery stores. Wegmans, Publix, and Trader Joe’s ranked as the top 3 grocery stores in a composite loyalty index, each separated by a mere 1 percent.
In addition, grocery store chains operating on slim margins face a changing consumer profile. Millennials now make up the biggest generation-based population group in the U.S. More than three-quarters of millennials pick experiences over things when making purchase decisions.
Many have transformed their business models such that they are barely recognizable when compared to grocery stores of the past.
Here are a few ways grocery store chains are making the shift to serve consumers in the experience economy:
The other five customer experience attributes in Market Force’s study relate to a customer’s experience while shopping. Item availability, finding wanted items, store cleanliness, cashier courtesy, and checkout speed are all critical factors in making or breaking the shopping experience.
Grocers are using these levers to their full advantage. Top-performing Publix and Wegmans stock an average of 40,000 and 42,000 products per store, respectively, making it less likely that shoppers will have to either (a) choose an alternate product if one is not available; (b) visit another grocery store; or, (c) refrain from making a purchase. And when shoppers have access to that wide variety of products, competitive grocers are making sure shoppers can find what they want with intuitive floor plans and displays.
The way employees treat customers also impacts their perception of the brand and the likelihood that they’ll come back. Employees at many high-performing grocery stores are notoriously friendly and helpful. Many grocery chains grant store staff a high level of autonomy, which empowers them to give customers a superior experience.
Wegmans employees are empowered to do whatever they feel necessary to make sure the customer leaves happy. Trader Joe's crew members can open any product a customer wishes to sample, and they’re free to be honest about their likes and dislikes when it comes to store products.
And last (but certainly not least) is the checkout line. The faster customers can get through it, the better. Trader Joe’s places first in this category, with Publix and recent entrant Aldi not far behind. Trader Joe’s attributes their checkout speed partially to selling produce by unit, rather than weight.
Grocers have made shopping easier and added a layer of fun. They’ve become an advisor of sorts around all things food-related. HEB’s higher-end Central Market grocery stores feature food festivals (like the August Hatch Chile festival) that get customers excited to visit stores.
Trader Joe’s Fearless Flyer provides humorously-written descriptions of featured products. Central Market’s Weekly Savor showcases items based on a geographical theme, like September 2018’s “The British Are Coming: Central Market Presents Passport United Kingdom.” HEB’s Cooking Connection offers in-store cooking demonstrations that allow customers to sample new recipes and access all associated products in one location.
And today, shopping is fun for not-yet-customers: kids. Rather than dreading the trip to the grocery store with mom or dad, kids look forward to experiences tailored to them. Trader Joe’s keeps a limited number of child-sized grocery carts so kids can actively engage in the shopping process. HEB has even created a character called HEBuddy, with an associated HEBuddy machine placed after checkout for kids to enter HEBuddy Bucks and collect points for free prizes.