Since the introduction of the supermarket format more than 80 years ago, its development has been a one-way tale of growing dominance to the point where Tesco boasted it accounted for one pound in every seven spent in the UK, writes Simon Hathaway, president and global head of retail experience at Cheil.
This week’s ousting of supermarket behemoth’s main man Philip Clarke is another indicator not just of the decline of Tesco, but the sector itself.
It’s a slide is evident not just in the UK, but globally.
In a recent report, retail association the IGD predicted that sales from the UK’s ‘big four’ supermarkets will decline by 4% over the next five years.
They will still account for 34.9% of spend, but they are losing their grip as the dominant destination for grocery shopping.
It is ironic that big-box retailers blamed for killing high streets are now being challenged as being no longer relevant to how shoppers want to live their lives.
Competition from discounters such as Aldi and Lidl, convenience offerings, and online shopping provide a triple whammy for beleaguered supermarket bosses.
Further research by Shoppercentric offers little assurance.
It found that 70% of UK shoppers had changed their behaviour.
They shop more frequently, are unashamed users of discounters and coupons, and frequent more stores, no longer believing that one supermarket is best at everything.
Around the globe, supermarkets are facing similar challenges as connected consumers make greater use of mobile technology in particular to sidestep pitches for their loyalty.
Companies that have spent years betting on ever bigger out of town superstores are having to draw breath and think of another plan.
Tesco famously opined that every little helps – a promise based mainly on price.
Now retailers have to redefine their value proposition for consumers who expect more.
Shoppers juggle with three budgets: financial, time and frustration, and armed with mobile technology will seek out the best fit among all available players.
Technology has fundamentally skewed the price/quality value equation.
Whereas once it was limited to price x quality, now it is (price x quality) ÷ convenience.
And every time we experience something new that makes our shopping experience more convenient or personal, it resets our expectations.
All around the world, retailers are looking at ways to revitalise their offering in line with the new demands of agile and connected consumers.
In South Korea, Emart already understand that mobile devices are not jut there for mCommerce, but also go in-store with their customers.
Understanding that you can’t push while holding a mobile, they added a phone holder to their shopping carts and introduced a mobile store navigation system that playfully directed shoppers to great deals.
It’s just the start of grocery retail getting personal again.
In the US, the epitome of big-box retail, Walmart, has also started to adapt with an ambitious approach in Walmart 2 Go, a shop and collect service.
Even Morrisons, the UK’s more traditional stalwart of supermarket retailing, is teaming up with home delivery network Ocado to offer online shopping for the first time.
Retailers are trying to decide between long term or short-term strategies.
Sainsbury’s has formed a joint venture with Netto to bring the discount brand back to the UK.
French group Auchan has hit the brakes on its online shopping developments pouring money into discounting in an effort to stem falling sales.
Carrefour’s price-plus strategy exemplifies how convenience is now one of the defining characteristics of success.
It is allying low prices with more non-branded items and a collection service for online shops.
Its UK counterpart, Tesco, is looking to build a retail experience with Harris + Hoole coffee shops, family-friendly Giraffe restaurants, and space given over the community groups and activities.
And then there is the spectre of new entrants.
Amazon is looking upmarket with its AmazonFresh trial, which delivers fruit and vegetables in urban areas.
The certainties that supermarkets built their businesses and reputation on are eroding.
Value is no longer just about price.
It’s a more complex equation for food retailers that now sees convenience rising up people’s agendas.
To survive and thrive supermarkets will have to assemble a basket of items that answers the demands of today’s agile consumer.
They will have to do all of the things they are currently doing and more.
Most importantly, they must show that they remain central and relevant to the lives of their customers.
