Beyond the Perimeter
Is the natural/organic category the key to curbing center store leakage?
No one would argue the fact that the natural/organic grocery landscape looks much different today than it did at the turn of the century. Back then, retailers like Whole Foods and Trader Joe’s were niche stores, and often some of the only mainstream retailers where shoppers could find natural and organic foods beyond specialty stores or local farmers markets. Today, according to our latest research and insights report at Acosta, Back to Our Roots: The Rise of the Natural/Organic Shopper, health-conscious consumers in search of these products are shopping across channels—from traditional grocery stores to mass merchandisers to club stores—creating a highly competitive market where purchasing decisions are influenced by price, convenience and other factors. In fact, high consumer demand is driving traditional grocery retailers to offer more natural/organic items, adding to greater product availability and affordability across the category as a whole.
This industry transformation is especially beneficial for natural/organic shoppers, but it is not surprising when grocery trends over the past few years have also shown growth in the store perimeter, signaling expanding interest in produce and other fresh items. This is the very root of the natural/organic movement. In fact, our research found 66 percent of traditional retail shoppers said produce was the “gateway” category that led them to further explore other natural/organic products—such as cereal/oatmeal, snacks, pasta/grains and soup—showing that this category could be the key to curbing center store leakage for traditional retailers.
To effectively leverage natural/organics to lift center store sales, retailers must first understand the shoppers driving the trend: who they are, where they are shopping and how they make purchasing decisions. There are two key groups to focus on—Millennials, who now are entering their prime spending years, and Gen Xers. We have found that Millennials purchase natural/organic food most frequently, with 60 percent of their food baskets containing half or more natural/organic products; Gen Xers are close behind with 34 percent of their food baskets containing at least that amount.
Fortunately, GenXers and older Millennials also shop for natural/organics most frequently at traditional grocery retailers, albeit for different reasons. GenXers, who are already at the store for their everyday needs, are driven by convenience, while Millennials are motivated by better pricing and “shopability”—the ease of finding products on shelves.
Due to the strength of these two demographics in the natural/organic category, grocery retailers should focus on enhancing these key drivers at their stores—convenience, price and shopability—to further increase their appeal. How? Start by ensuring that you are offering a wide variety of high indexing products among GenXers to make your store a one-stop shop. Revisit your pricing strategy and run promotions, keeping in mind that price is still the biggest barrier for consumers in making natural/organic purchases. Emphasize aisles that are easy to navigate and use directional in-store signage to move shoppers throughout the store.
Of course, the placement of shelf-stable natural/organic products is key. If these items remain solely in the perimeter near the gateway foods—or in their own concentrated section—retailers miss the opportunity to draw shoppers who are in search of natural/organic foods into the center of their stores. Instead, create exclusive endcaps for natural/organic items and position them on center-store aisles that would be of interest to these shoppers.
Within the aisles themselves, our research shows shoppers prefer a separate natural/organic section within traditional grocery stores; however, it is important to note that the top natural/organic purchaser demographic—Millennials—continue to defy the norm. In fact, 60 percent of younger Millennials prefer to have natural/organic items integrated with conventional products. Therefore, avoid only concentrating natural/organic items in a single location. Mix these products into other aisles, especially throughout the center store, which will encourage consumers to pick up other shelf-stable items en route, whether they are organic or not.
Overall, grocery retailers should look at the natural/organic category as a strategic growth engine. By capitalizing on this highly popular trend that is forecasted for even further growth, and focusing beyond gateway items on the store perimeter—such as produce, dairy and meat—traditional retailers can naturally expand center store interest among these shoppers.