Retail Report: Smaller Stores Still Trending

Do Smaller Stores Equal Smaller Prices?

Despite Wal-Mart Stores Inc.’s decision to discontinue its Walmart Express brand, smaller-footprint stores are still flourishing. Dollar General recently announced a major expansion plan, and the media is buzzing with talk of a “German invasion” of the U.S. by Aldi and Lidl. Even Whole Foods Market has jumped on the smaller-store bandwagon, with plans to open its chain of “365” stores, offering everyday low pricing on organic and natural brands.

The proliferation of these smaller stores hasn’t gone unnoticed by retail experts. Another thing that hasn’t gone unnoticed is that these new and expanding brands not only offer convenience; they are also discounters. Dollar General sells common brand names, as well as some private label products, at low prices. Lidl and Aldi sell primarily private label brands, though often of very high quality, at ultra-low prices. 365 was developed as an alternative to the premium prices charged at Whole Foods stores.

Trader Joe’s, another smaller-footprint store that offers a pointed selection of private label foods, is clearly paying attention. In a recent report from Deutsche Bank, researchers noted that Trader Joe’s may well be lowering prices in anticipation of competition from 365.

“In a market basket comparison of 77 similar items, Trader Joe’s was 21 percent lower than Whole Foods, consistently offering greater savings on both perishables and non-perishables,” according to the report. “Trader Joe’s had the lower price of the two on 78 percent of items checked, while 13 percent were the same price. Whole Foods only had an edge on 9 percent of the SKUs [stock keeping units/inventory] checked.”

There are, however, other factors at play here. Several of the aforementioned store brands place a strong emphasis on product quality and specifically source and brand organics and products suited for special diets. In fact, Dollar General stands out because of its lack of emphasis on healthy eating, instead preferring to brand itself as a convenient way to buy household staples on the cheap. Time will show whether the trend toward providing healthy food for less is enough to keep the smaller store momentum going.

In-Store Cooking Classes Help Low-Income Families

Social welfare advocates, policymakers and health care professionals have long expressed concerns about the dietary habits of people living in low-income families. These concerns often center around the effects of diets high in processed food on the health of poor communities. A number of efforts have been spearheaded, including the development of community gardens, nutrition education for recipients of food assistance, and permitting the use of food stamps at farmers’ markets. Some retailers, such as Wal-Mart Stores Inc., have prioritized the sourcing of affordable organics and label products that meet established guidelines for good nutrition.

All of these efforts are important but do not address a key reason people eat diets high in processed food: a lack of cooking skills. The No Kid Hungry campaign sponsors Cooking Matters at the Store classes in supermarkets across the country. The Cooking Matters program provides six weeks of cooking and nutrition instruction. Participants learn how to shop for food and then how to prepare healthy meals from what they buy.

Billy Shore, founder and CEO of Share Our Strength said in a press release from the campaign: “Today, one in five children in the United States doesn’t have the food they need to grow and thrive. Cooking Matters is changing that statistic for families across the country. A recent long-term analysis of the program shows it has a powerful and sustainable impact, teaching families how to cook and shop for healthy food on a budget. This type of food resource management is an important component of reducing hunger and food insecurity.”

An independent research firm found that participating families increased the amount of fruits and vegetables they consumed. Eleven percent also stated that they were opting for lower sodium food products. Seventeen percent expressed increased confidence in their ability to afford food for their families now that they knew how to shop for ingredients and prepare food from scratch.

Food suppliers may want to take note of the program’s successes. Providing education to consumers about how to best use a product may encourage purchases. Consider creative labeling, in-store demonstration, and social media content such as videos and step-by-step recipes.

Wooing Millennials

Retailers and suppliers alike are after Millennial dollars and are putting together significant marketing that targets recent college grads and young thirtysomethings. The problem? According to a recent article in Bloomberg, Millennials aren’t buying it. In fact, it’s hard to get them to buy much of anything. Even worse, efforts at marketing to this generation tend to backfire.

The problem appears to be twofold. The first is that Millennials are entering a difficult job market in a difficult economy. The average student loan balance for students graduating in 2014 was $29,000. This is not an age group that has a lot of money to spend.

The second issue is the failure of marketers to convince Millennial consumers. This is a generation that values authenticity, and it’s a tall order to come off as authentic while trying to sell somebody something.

“They’re sort of doing stuff at the edges to try and look like they’re the kind of brand that Millennials might like, but really at the core they’re not making the changes they need to make to really appeal,” Brent Smart, CEO of marketing firm Saatchi & Saatchi of New York, said in the Bloomberg story. “All these brands are like, ‘We really need Millennials!’ It’s like, ‘OK, what are you going to do differently?’”

So far, major brands haven’t had a huge amount of luck, but that doesn’t stop them from trying. From trying to connect on social media to emphasizing social consciousness in ad campaigns, businesses keep trying. The question is, without money, will Millennials even be able to respond to efforts that do resonate?