How grocery stores—from premium to value—can attract millennial + Gen Z customers

Paul Tiedt | Mar 12, 2020 Paul Tiedt 03/12/20

As shown in the first installment of our blog series on Gen Z and millennial food shopping trends, grocery scored second- and third-lowest in share of stomach for the age groups, respectively. But a low share of stomach is nothing to worry about—in fact, it only creates a greater opportunity for grocery brands to earn a portion of the $3 trillion combined spending power of the two generations.

But to earn their lucrative business and brand loyalty, the different grocery segments—standard, premium, and value—must know what attracts (or deters) the youngest generations from stocking their freezers and pantries with their products.


Standard: Don’t rely solely on convenience 

Standard grocery stores are the local, regional, and national chains almost everyone has access to—think your traditional bakery, dairy, produce, frozen, deli, and pantry sections. They’re the most popular segment of stores across all generations by far—dunnhumby, a global leader in customer data science, found that standard grocers are “winning with relevance and convenience.”  

  Visit-Share-By-Generation-Blog-Image
Standard grocery stores dominate visit share across all generations

While it might seem like standard grocery stores have nothing to worry about, they should still focus on improving the customer experience to build brand loyalists out of millennial and Gen Z shoppers—who make up almost 50% of the U.S. population. By focusing on trip motivators such as Quality of Products, Selection of Merchandise, and In-Store Assistance, standard brands can solidify their place in young shoppers’ food-purchasing habits.


Premium: Make your products accessible to more shoppers

Stores that offer organic, locally grown, and healthier products fall into the premium grocery category—like Whole Foods, Sprouts, and The Fresh Market. High-quality food generally comes at a higher price point, which may explain why younger generations are least likely to shop there. Less than 10% of their grocery visits are attributed to premium brands.

With dunnhumby reporting price and quality as the two most important customer needs to be met, premium grocers must find the delicate balance between the assortment and quality of food they offer and the price they charge for it. In-house brands, such as 365 by Whole Foods, provide a happy medium for younger generations hungry for organic or healthy foods at a more budget-friendly price. Loyalty programs and convenient, ready-to-eat offerings wouldn’t hurt the chances of attracting them, either.

 

Younger-Generation-Quality-Table
Quality can outweigh value for younger generations 


Value: Don’t think discounts make you the first choice

Value grocery stores are regional or national chains with lesser-known or generic-brand food offerings at a discounted price. With price being a deciding factor for so many shoppers, value brands are the obvious choice for younger generations with less money to spend, right?

Wrong—discounters aren’t faring as well as you’d expect. And it’s not location convenience that’s driving young shoppers away, either: SMG’s behavioral data shows value brands and standard brands are neck-and-neck in Average Distance from Home for shoppers, yet Average Days to Next Visit for value are double than that of standard in both age groups. So, what gives?  

Value grocers’ smaller product selection and perception of lower-quality food are most likely keeping millennial and Gen Z shoppers from visiting. However, they are a good fit for people on a budget or those interested in hunting for interesting products—value grocers stock unique items that standard and premium stores don’t typically carry—making them a great way to experiment with new foods at a low cost.


Know your current + potential customers for a brighter future

Most millennial and Gen Z shoppers haven’t identified grocery shopping as a top priority—but they are still searching for a grocery experience that meets their needs in terms of convenience, price, quality, and product offering. For more information on grocery shopping trends and competition amongst other offerings in the food landscape, download our report: How grocery can earn “share of stomach” with fresh-and-prepared food.


Paul Tiedt | SVP, Research

Customer Experience Update