With new products and better-trained personnel, in this edition of PLMALive! Roy White reports on how retailers are using perishables to showcase their growing commitment to fresh, healthy fare.
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Retailers Get Fresh
Fresh is hot and getting hotter. As more and more Americans firmly embrace the health benefits of fresh products, retailers across all channels are powerfully responding with redesigned departments, new services, and more products.
Walmart is in the lead as the giant retailer attempts to shore up the potency of its supercenters with new ideas. A better, more exciting and more updated produce department is an integral and important part of this upgrade. Termed the New Angle on Fresh, it features better sight lines and angled aisles. The intent is to create a visually appealing department while improving its perception and credibility by shoppers. Fixtures are low profile; the price messages are now big and bold; and the floor is designed to evoke a farmers’ market.
Sister company Sam’s Club is also upgrading perishables, but in a more extensive way and as part of a general reorganization of how products are acquired. While organic products are being added, the big move is to create regional buying staffs that can find local branded, organic and fresh products that will cater to local tastes and better attract customers. Perishables are a key to Sam’s Club recovery. The big box retailer is up against Costco and is lagging in developing comparable store growth. Costco already has an extensive network of regional buyers, and the result has been that, according to a Kantar survey, a third of Costco membership renewals are driven by high quality perishables. At Sam’s Club, the ratio was under 25%, and the new plan looks to remedy this.
Within the fresh format segment itself, Sprout’s is surging ahead. Revenues soared 20% last year. Net income rose 21%. Comparable store sales gained 5.8%. One reason for this: Sprouts is dedicated to fresh like few other retailers, and the chain’s mantra is “Healthy Eating for Less.” Perishables account for over 50% of sales. Produce takes up 15% of store selling space and all other departments surround it.
Even convenience stores are adding fresh items. The trend is driven partly by Americans’ continually growing interest in healthy foods and partly by lower gas prices that have apparently resulted in consumers spending more inside the store as they spend less at the pump. Indeed, a NACS survey indicates that 65% of operators interviewed said that sales of better-for-you items increased during 2015. The survey also found that the embrace of better-for-your foods will be one of four major influences on convenience store sales development during 2016. In another NACS survey from 2015, 77% of operators responding said that they sell fruits and vegetables, and 50% said sales of these items had increased in the previous six months. There’s even a term for this trend: “foodvenience,” a fresh and convenient food offering or the merging of convenience and foodservice.
Online retailers are also trying to figure out how to cash in on the trend towards fresh. Google Express has launched what it terms a cold grocery program in Los Angeles and San Francisco, which makes available fresh produce, and chilled and frozen foods in addition to packaged goods. Go to Amazon Fresh’s website, and you can select from 77 different fresh fruit offerings, and nearly 300 fresh vegetable offerings. Fresh Direct has just launched FoodKick, a program that lets customers have delivered within the hour fresh produce products.
The emphasis on fresh is a plus for retailers because the produce shopper is a very valuable one. Last year, this shopper made 45 trips, bought over $325 in produce, and sailed through the checkout with a typical basket of $56, compared to the average basket of $35. Net-net, fresh means business.