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1、October 2022Brick-and-Mortar GrocerysOngoing ResilienceDespite the challenges the grocery sector faces three quartersinto 2022,the industry has shown impressive resilience.Thiswhite paper takes a closer look at some of the factors keepingthe space thriving through uncertain times.2022 Placer Labs,In
2、c.|More insights at placer.ai|1From Pandemic to InflationInflation has hit the grocery segment particularly hard,with some estimates finding ayear-over-year(YoY)increase of 13.1%in grocery prices in July 2022.Supply-chainissues,labor shortages,and growing competition have been further testing thesec
3、tors resilience.At the same time,many leading grocers have found ways to thriveand continue driving visit growth despite the challenges.Many leading grocers have found ways tothrive and continue driving visit growthdespite the challenges.This white paper takes a closer look at the grocery categorys
4、recent performance tounderstand how top brands are coping with the increased competition and tighterconsumer budgets.We dove into the foot traffic data to find out how the rise indiscount grocery channels is impacting grocery visits and see how the currentinflation is affecting consumers grocery hab
5、its.We also looked at some highlysuccessful chains to understand what is setting them apart from the competition.As another eventful year draws to a close,read on to find out where thebrick-and-mortar grocery sector stands heading into 2023.The State of GroceryThe grocery sector has seen a dramatic
6、few years from early pandemic visit surgesto the more recent price hikes,supply-chain issues,and labor shortages.But despitethese challenges,grocery stores are weathering the storm.In 2022,foot traffic tosupermarkets consistently outpaced 2019 levels for seven out of the past ninemonths,which sugges
7、ts that the industry has succeeded in holding on to itspandemic gains.And though year-over-year(YoY)foot traffic slowed toward the endof Q3,these declines are in comparison to impressively elevated visits in 2021.2022 Placer Labs,Inc.|More insights at placer.ai|2Fewer,But Longer VisitsIt is also cri
8、tical to note that,although visit growth has slowed down in recent months,median visit duration has increased which may mean that the decline in visitnumbers does not necessarily mean a drop in purchasing.Although visit growth has slowed down inrecent months,median visit duration hasincreased.Diving
9、 into the data reveals that the median visit duration across leading grocersnationwide began in June 2022 the same month that YoY visits dropped into thenegatives.The correlation between the increase in visit length and the decrease invisits suggests that some shoppers are visiting grocery stores le
10、ss frequently becausethey are spending more time in-store on each trip buying in bulk and filling largerbaskets.2022 Placer Labs,Inc.|More insights at placer.ai|3But even as the grocery category continues to prove its resilience in the face of retailchallenges,plenty of competitors most notably doll
11、ar&discount stores are stilllooking to take a slice of the grocery pie.Retained Strength in The Face of CompetitionDiscount&dollar stores have gained prominence over the past few years,withleading players such as Dollar General and Five Below undergoing massiveexpansions.And many major discount&doll
12、ar store chains have now begun carryingfresh produce,leading to concerns that dollar stores might cannibalize visits from thegrocery sector.But analyzing visit data tells a different story and indicates that there is enoughgrocery demand to support both categories.Despite the recent increase in disc
13、ount&dollar store locations,the visit distribution between supermarkets,superstores anddiscount&dollar stores has remained relatively stable over the past five quarters.2022 Placer Labs,Inc.|More insights at placer.ai|4Visit data indicates that there is enoughgrocery demand to support both tradition
14、algrocers and discount&dollar stores.In Q3 2019 visits to grocery stores accounted for 44.6%of all visits to the grocery,superstores,and discount&dollar store categories,while visits to discount&dollarstores made up 10.4%of all visits.Q3 2022 saw visit share numbers closely trackingwith Q3 2019 groc
15、ery stores made up 43.9%of all visits,while the discount&dollarsegment took 10.7%of visits.This indicates that the increase in grocery-carryingdiscount&dollar stores is not coming at the expense of grocery foot traffic at leastfor now.Theres a reason why grocery store visits have maintained their st
16、ability even thoughmore and more dollar&discount stores now sell fresh foods,stocking perishablefresh meat and produce is still a major logistical challenge.To simplify the transition,many dollar stores are focusing on stocking frozen meats and offering a smallervariety of fruits and vegetables than
17、 grocery stores.Shoppers looking to pick up 2022 Placer Labs,Inc.|More insights at placer.ai|5refrigerated meats or less common fruits and vegetables often still need to make thetrek to a designated grocery store.Dollar and Grocery Store Cross-ShoppingThese stable visit shares also highlight the gro
18、wth potential for both sectors.Dollarstores store fleet expansions mean that more people now reside within several milesof a low-cost shopping option.As a result,new customers(many of whom fall into ahigher income bracket as inflation increases)are visiting the newly opened dollarstores in their are
19、as,which is driving YoY and year-over-three-year(Yo3Y)foot trafficgains across the category.But the fact that YoY grocery visits have remained steady,while Yo3Y grocery foot traffic has increased as shown in the previous section indicates that the discount&dollar store visits are not replacing groce
20、ry visits.Instead,the overall pie is getting bigger,and many consumers now shop in bothcategories.Cross-shopping data looks at which additional stores or brands customers of a givenstore or brand visit in a given time frame.Diving into cross-shopping patterns for twovalue-priced grocery brands confi
21、rms that many consumers are still visiting grocerystores even as their discount&dollar store visits increase.Many consumers are still visiting grocerystores even as their discount&dollar storevisits increase.Food LionFood Lion,a regional grocery store operating in Mid-Atlantic and Southeastern state
22、s,has seen both YoY and Yo3Y visit growth every month of 2022 so far,with September2022 up 3.8%and 25.8%YoY and Yo3Y,respectively.At the same time,cross-shoppingwith Dollar General the share of Food Lion visitors who also visited a Dollar Generalstore in a given month also increased,from 18.1%in Feb
23、ruary 2022 to 25.0%in June2022.2022 Placer Labs,Inc.|More insights at placer.ai|6Walmart Neighborhood MarketSimilar trends were seen in an analysis of Walmart Neighborhood Market,whichfunctions less as a superstore and more as a neighborhood grocer.Between Februaryand June 2022,the percentage of Wal
24、mart Neighborhood Market visitors that alsovisited a Dollar General increased sharply from 10.9%to 16.4%.During that sameperiod,Walmart Neighborhood Market also saw its monthly visits increase both YoYand Yo3Y almost every month.So although more Walmart Neighborhood Marketshoppers visited Dollar Gen
25、eral,this increase in cross-shopping did not come at theexpense of Walmart Neighborhood Market visits,which continued to grow.This data seems to indicate that grocery consumers are indeed visiting discount&dollar stores more often but theyre also continuing to drive foot traffic increases attheir lo
26、cal grocery store.2022 Placer Labs,Inc.|More insights at placer.ai|7The fact that grocers are holding onto their foot traffic and visitors at a time whenshoppers value orientation is high indicates that there is sufficient demand tosupport robust growth in both categories.Space Maximization as Key t
27、o SuccessDiscount&dollar stores are not the only ones fuelling competition in the grocerysector.As the grocery visit pie grows,grocers are working to attract a larger share ofthe increasing visit numbers and one chain in particular has been spectacularlysuccessful in consistently drawing in customer
28、s.Trader Joes,a beloved food shoppingdestination,launched in California in 1967.The chain,with its strong focus oncustomer service and a constantly changing array of private-label products,is aconsistent customer favorite.There are even food influencers who focus solely onreviewing its value-priced
29、branded products.And the foot traffic reflects that strength,with YoY visits to Trader Joes remainingpositive and outperforming the wider grocery sector almost every month of 2022 sofar.In September,for example,Trader Joes visits were up 1.5%YoY while nationwidegrocery visits were down 3.7%relative
30、to 2021.2022 Placer Labs,Inc.|More insights at placer.ai|8Small Stores Have a Large ImpactTrader Joes also offers its shoppers a different grocery experience that is a far cryfrom a traditional,wide-aisled supermarket.On average,Trader Joes locations aremuch smaller than a typical grocery store but
31、the brand still succeeds in attractingcrowds to its stores.By operating smaller venues,Trader Joes can offer shoppers amore local,intimate shopping experience while lowering overhead costs andtransferring those savings into reduced prices a surefire way of attracting moreshoppers.On average,Trader J
32、oes locations aremuch smaller than a typical grocery store but the brand still succeeds in attractingcrowds to its stores.A comparison of top-performing Trader Joes in three different cities with neighboringgrocery store locations shows that the brands visits per square foot numbers typicallyreach i
33、nto the double digits,while neighboring stores see far fewer.By maximizing all 2022 Placer Labs,Inc.|More insights at placer.ai|9the available store space,Trader Joes is attracting more shoppers to each storedespite its smaller store size.Staten Island,Ann Arbor,and San DiegoA Staten Island,NY,Trade
34、r Joes had 23.2 visits per square foot in Q3 2022,whilenearby grocery chains Stop&Shop and Costco had 4.0 and 7.4 visits per square foot,respectively,in the same period.These trends also persisted in other cities during Q3 2022.The Trader Joes location inAnn Arbor,MI,saw a whopping 39.3 visits per s
35、quare foot in its store,while aneighboring Whole Foods and Kroger had 3.9 and 2.4 visits per square foot,respectively.2022 Placer Labs,Inc.|More insights at placer.ai|10And the same pattern repeated in California.A San Diego location saw 23.6 visits persquare foot in Q3 2022,while the neighboring Sp
36、routs Farmers Market and VONS had4.4 and 6.4 visits per square foot,respectively.2022 Placer Labs,Inc.|More insights at placer.ai|11Higher Quality,Fewer ItemsTrader Joes has succeeded in turning its stores into not just a place to grocery shop,but into an attractive destination in its own right.And
37、with the country grappling withsupply chain shortages,labor shortages,and inflation,a smaller space can be a hugeadvantage.By offering fewer products than a typical grocery store,Trader Joescustomers can avoid decision fatigue in the aisles,and the company can hire fewerworkers and reduce supply cha
38、in concerns.Opposite Ends of The Pricing Spectrum AttractProviding a unique shopping experience like Trader Joes isnt the only way grocerystores can boost their visits in financially trying times.Our most recent grocery whitepaper dove into the increased popularity of low-price grocers in the face o
39、f risinginflation.And recent YoY foot traffic trends suggest that rising food prices are stillcreating an opportunity for value-priced grocers to grow even further.Value-Priced Grocers Positioned for SuccessWhile the wider grocery category saw a moderate visit drop in Q3 2022 relative to Q32021,visi
40、ts to lower-cost Aldi and Grocery Outlet grew by 11.6%and 9.7%,respectively,in the same period.Price Rite,WinCo Foods,and Food 4 Less,all ofwhich fall into the low-cost grocery segment,also outperformed the grocery industry.The strength of value-priced grocers along in the face of the small YoY nati
41、onwidegrocery visit decline suggests that some shoppers are choosing to trade down fromtheir usual supermarkets to value grocers as part of cost-saving efforts.Some shoppers are choosing to trade downfrom their usual supermarkets to valuegrocers as part of cost-saving efforts.2022 Placer Labs,Inc.|M
42、ore insights at placer.ai|12But even as lower-cost grocery chains are seeing more shoppers heading throughtheir doors,some high-end chains are also seeing elevated visits indicating that thetrend towards bifurcated consumer behavior is impacting the grocery category aswell.Los Angeles Shoppers Disco
43、ver Luxury GroceryErewhon Market,the celebrity-popular grocery destination,was recently dubbedAmericas most expensive grocery store.The chain started as a macrobiotic healthstore in the 60s in Boston and currently has eight locations in the Los Angeles area.And as the health and wellness segment con
44、tinues its impressive growth,the chain,with its reputation as a mecca for healthy smoothies,foods,and products,has alsoexploded in popularity.The chain saw strong growth in monthly visits,both YoY and Yo3Y in September2022,visits to the chain were 58.0%higher than in 2021 and 49.4%higher than 2019.A
45、nd while some of the increased foot traffic is likely a result of the chains recentexpansion,each existing location also saw higher foot traffic in 2022 compared toboth 2021 and 2019.This increase suggests that,while low-and middle-income 2022 Placer Labs,Inc.|More insights at placer.ai|13consumers
46、may be seeking out cheaper grocery alternatives,high-income shoppersare still fueling demand for expensive grocery products.And recognizing the risinginterest in high-end grocery,Erewhon hopes to expand further in the area next year.While some consumers may be seeking outcheaper grocery alternatives
47、,high-incomeshoppers are still fueling demand forpremium grocery products.Part of Erewhons growing popularity might also be linked to its positioning as asustainable market that focuses on organic and eco-friendly products.While asignificant majority of consumers consider sustainability when shoppin
48、g,the higherprice point on eco-friendly products acts as a barrier to entry for many of thesewould-be shoppers.Erewhons high-income customer base may see sustainability asparamount,which could be leading to higher foot traffic,sales,and store fleet growth.The foot traffic trends point to accelerated
49、 growth for the bottom and top ends of the 2022 Placer Labs,Inc.|More insights at placer.ai|14pricing spectrum,with both specialty grocers like Erewhon and value chains like Aldiseeing foot traffic gains in recent months.The recent success of both types of grocerybrands suggests that there is room i
50、n the grocery space for both high-end andcost-conscious options to thrive.Driving the Extra Mile for QualityThe high demand for healthful or specialty grocery products is not just reflected inErewhons visit increase.National specialty and high-end grocers,such as WholeFoods,Wegmans,and Trader Joes a
51、re all seeing larger average trade area sizes whencompared to other leading general grocery brands.Earlier in the year,as the shock of rising gas and food prices hit the country,manyshoppers chose to stick with the closest grocery store to reduce driving time and fuelexpenditures,as discussed in thi
52、s white paper.But with gas prices down from theirQ2 highs,some shoppers are now driving the extra mile or 10,or 20 to findspecialty food products.In particular,consumer segments who are willing to spendmore on organic or premium products also seem willing to spend more on gas anddrive longer distanc
53、es to grocers who carry these specialty foods.Consumer segments who are willing tospend more on premium products alsoseem willing to drive longer distances togrocers who carry these specialty foods.In Q3 2022,Trader Joes and Wegmans,both featured on a ranking of the 10 bestgrocery chains in the coun
54、try,had the largest trade areas on average at 83.4 squaremiles for Trader Joes and 78.8 for Wegmans.Whole Foods,a high-end market thatbrought organic products to the mainstream and also puts a focus on sustainability,boasted a trade area size of 65.9 square miles.And value-priced grocers are also be
55、nefiting from the drop in fuel costs grocerybrands known for their low-prices such as Aldi and WinCo are also seeinglarger-than-average trade areas.2022 Placer Labs,Inc.|More insights at placer.ai|15Grocery Stores:Still StandingInflation has undoubtedly created a unique set of challenges for the gro
56、cery sector.Yet,many grocery retailers are successfully attracting shoppers and increasing theirfoot traffic despite the tightening of consumer budgets.Whether by offering ashopping experience unmatched by other grocers or providing a low-cost option tothose looking to travel to save on their grocer
57、y bill,the sector has plenty of room forgrowth.As inflation eases and with the holiday season around the corner,we canhope to see visits to the segment increasing once again.2022 Placer Labs,Inc.|More insights at placer.ai|16Key Takeaways1.Grocery is still holding on to its pandemic gains.In the ear
58、ly stagesof the pandemic,grocery was uniquely positioned for relative success.The sector and many of its top chains,have managed to turn that shortterm opportunity into longer-term success.2.Grocery stores will not be taken over by discount&dollar stores for now.While some discount&dollar stores are
59、 now offering freshproduce,the rise of discount&dollar stores is not coming at theexpense of the grocery category.Foot traffic shows that the visitdistribution between the categories has remained relatively stable overthe past three years,and cross-shopping trends indicate that manyconsumers who sho
60、p at discount&dollar stores still continue visitinggrocery stores.3.Bigger isnt necessarily better.Trader Joes locations are smaller thanthe industry average but the brand is still seeing its YoY and Yo3Y foottraffic skyrocket while attracting significantly more visits per square footthan its compet
61、itors.The smaller venues also allow Trader Joes to offershoppers a more local,intimate shopping experience while loweringoverhead costs and transferring those savings into reduced prices.4.The bifurcation of consumer behavior has reached the groceryspace.Foot traffic data point to accelerated growth
62、 for the low andpremium ends of the grocery pricing spectrum,with both specialtygrocers like Erewhon and value chains like Aldi seeing foot traffic gainsin recent months.The recent success of both types of grocery brandssuggests that there is room in the grocery space for both high-end andcost-conscious options to thrive.2022 Placer Labs,Inc.|More insights at placer.ai|17