Fierce competition, fragmentation, and format challenges

“Some of the largest supermarket chains are expanding by getting smaller.”

Grocery retail continues to move rapidly away from a one-size-fits-all approach to a vigorous search for the store of the future. While brands are experimenting with new formats, the success of today’s grocery leaders seems to be less about format and more about a brand’s style of doing business.

In pursuit of the smartphone-savvy, city-dwelling consumer who is grappling with inflation and valuing price and convenience ahead of quality, some of the largest chains are expanding by getting smaller. France-based Carrefour, for example, is now opening more small-format grocery concepts than hypermarkets. In the U.K., Sainsbury’s convenience stores will outnumber its grocery stores by the end of the year. In France, there are now over 2,500 drive-through supermarket units for consumers who shop online and prefer pickup to home delivery.

German-based Aldi, the world’s top discount grocery chain, may have to update its business model from a single channel, single format grocer to one that is more dynamic, modern, and multichannel. Already, Aldi has lost ground to competitor Lidl, which has a trendier image and a thriving online marketplace.

At the other end of the spectrum, for those who can afford to pay more, there are still small regional players offering more upscale grocery experiences that emphasize service, selection, quality, organics, fair trade, and locally grown foods. Epitomizing this kind of shopping experience in Britain, Waitrose opened the U.K.’s first supermarket farm shop, which offers produce grown on its 4,000-acre farm estate, as well as goods from vendors within a 30-mile radius. In Brazil, premium grocer Pão de Açúcar has found another way to stand out in an undifferentiated function-driven landscape by positioning itself at “the place of happy people.” Rather than priding itself on value or quality alone, the brand brings an added emotional dimension to grocery shopping.

In North America, competition from nontraditional food retailers—such as warehouse clubs, supercenters, drugstores, and discount retailers—is blurring the grocery segment’s retail boundaries. In the U.S., price-conscious consumers buy more food from these nontraditional retailers than traditional supermarkets. Further, the average U.S. supermarket shopper buys only 260 different products per year, ignoring 99.3 percent of the in-store options. If selection is not a real draw and value is still top priority, subscription shopping starts to make more sense. Amazon Fresh and long-time online players like FreshDirect and Peapod are filling that niche—and as they find ways to deliver preferred products profitably on a larger scale, they will further challenge brick and mortar supermarkets.

As the segment that most closely reflects economy and society, grocery will continue to evolve as time passes and conditions shift. Based on the macro trends that are redefining the game, however, the next few years promise some very dramatic changes.


Grocery retailers are reinventing themselves according to how consumers want to shop. Trends driving change include mobile technology, home delivery, consumer income disparity, and the strategic necessity of e-commerce.

Grocery Innovations and Opportunities

Food as a lifestyle destination

Québec-based Provigo Le Marché, owned by Canada’s Loblaw Cos., wants to nourish shoppers’ joie de vivre through a full-service grocery store with a distinctive market style layout. It’s an expansive showcase for products grown and made in Québec and supports healthy eating through its proprietary nutrition-labeling program and on-staff dietician.

Better experience with mobile technology

Natural Market Food Group, a fast-growing chain of natural/specialty stores in Canada and the U.S., seeks to educate and inspire communities to eat and live well. At the company’s Richtree Natural Market venue in Toronto, which features 11 different foodservice stations, customers can shop from any of the stations by scanning QR codes with their smartphones. This allows customers to pay for as many other members of their group or their family as they like—even if they are separated within the store.

A full suite of digital shopping platforms

Showcasing its leadership in both digital and brick and mortar, Big C, with multiple formats in Laos, Thailand, and Vietnam, sells its wares via e-commerce, mobile app, QR code-based virtual stores, and call centers. As a result of its strong omnichannel engagement strategies,
Big C is enjoying a massive increase in sales.

Reinvent the center store

Giant Eagle is experimenting with an in-store greenhouse, using the center of its store to grow fresh products hydroponically. The coming shift of merchandise from in-store to online will open up opportunities to offer new services, experiences, and features that will enhance the in-store experience.

Making service more personal

The tailored recommendations consumers can find so easily online are still missing from supermarkets. Grocers that use technology to inspire ideas around food, personal preferences, and occasions—and help shoppers manage their pantry replenishment with mobile data—will be the brands that matter most in the lives of customers.