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Finding the white space

Two U.S. grocery retailers, Haggen and Fresh & Easy, recently spoke about developing their propositions to target the “white space” in the sector. This is defined as an area of potential opportunity and growth, where shopper needs are not currently being met.

The need to differentiate

Haggen, which had been a small grocery chain with 18 stores based in the Pacific North West until it recently acquired 146 stores from Albertsons and Safeway, identified that it needed to develop a differentiated experience as it found itself up against a wider group of competitors.

Creating an offer to limit “shopping around”

Having already built a strong business with ranges skewed towards fresh foods, organic and locally sourced products, Haggen is now seeking to bridge the gap between conventional retailers and speciality retailers such as Whole Foods Market and Sprouts Farmers Market. The aim is to limit the need for shoppers to visit multiple outlets.

Targeting modern convenience

Having been acquired by private equity investors from Tesco in 2013, Fresh & Easy has been testing a range of new models. It sees its future as a small format, fresh food focused convenience retailer and has recently announced a series of store closures that do not meet its criteria of modern convenience.

Similar opportunities in Canada?

As I was reading about these retailers’ plans, it struck me that the areas which these they are targeting in the U.S. are also relative white spaces here in Canada. While many of the leading supermarket chains have been expanding their speciality and locally sourced ranges, this has often been done within the confines of their existing store environments.

Who could be the new Trader Joe’s?

There aren’t many examples of format innovation in Canada to create unique concepts such as Trader Joe’s or Fresh Thyme Farmers Market, which aim to cater for shoppers’ mainstream and more premium product needs. In contrast, retailers here have a done a great job with ethnic formats. Overwaitea’s Price Smart International concept is a great example of how a retailer has identified a very specific gap in the market, and developed a format in response.

Retailers alert to fresh-focused convenience

With convenience, most stores in Canada less than 5,000 square feet are typically attached to gas stations. Food ranges are mainly focused on impulse and immediate consumption needs, with hot food-to-go and coffee often being key elements. Broad fresh food ranges and take-home meal solutions are less common. However, developments such as Sobeys’ IGA Express format in Quebec, and the new fresh food offer that is being tested in several Shoppers Drug Mart stores suggest that this is an area of potential growth that a number of retailers are alert too.

Changing shopper preferences drive format developments

It is often said that too much space already exists in the Canadian grocery sector, potentially limiting the need for new formats. However, there will continually be opportunities for new concepts to emerge as shopper preferences change.  The recent push towards ecommerce and click and collect solutions is a good example of this in action.  Globally, retailers are continually launching new propositions, whether it’s wellness focused formats or price orientated formats. New thinking is driving this evolution.  The challenge is often to create a concept that is scalable, and profitable over the long term.

At IGD we’re continually visiting new concept grocery stores around the world, providing retailers with inspiration.  E-mail me at Stewart.Samuel@igd.com to receive a free copy of one of our latest store visit reports.

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