Despite inflation and rising uncertainty hampering consumer demand, the long-term profitability of supermarkets and hypermarkets still depends on their ability to differentiate from discounters and between themselves. An attractive serviced counter offering is a key factor allowing for such differentiation. To maintain and improve on this competitive advantage, retailers must work on the attractiveness of their counter offering while keeping costs under control.
Our publication investigates the current economic situation, what risks the resulting
changes in consumer behavior pose for traditional retailers, how fresh food counters can help mitigate revenue risks and how the cost of serviced counters can be managed. Finally, a way forward for serviced counter offerings is introduced.
In times of economic uncertainty, consumer confidence, especially in Germany, is relatively low. Across Europe and the UK, customers are trading down in what they buy and are increasingly switching to discounters from supermarkets and hypermarkets. As the outlook for 2024, particularly for Germany, heralds no substantial improvement, we are likely to see these changed consumer preferences persist into the foreseeable future.
These changes in customer preferences give rise to challenges for supermarkets and hypermarkets around footfall and basket size. Footfall is being impacted because, with their future income expectations lowered, more and more customers are forced to reconsider their spending and switch to discounters for part or even all of their grocery shopping. At the same time, we are seeing greater polarization in consumer preferences. More affluent customers, for example, are becoming more
health and environmentally conscious and choosing to shop at specialty stores instead of traditional supermarkets.
In the past, most supermarkets were able to compensate for the fall in store traffic with higher sales per shopping trip by increasing the average transaction value or number of items per purchase by offering a wide assortment and smart pricing strategies. However, offsetting the declining footfall is becoming increasingly difficult in the current market. Notably, mass-market customers are more cautious about their spending and are adjusting their behavior, driving down overall basket size.
Fresh food counters – a customer magnet
What makes a serviced counter such a powerful way for retailers to fight declining footfall?
Firstly, customer research confirms the importance of fresh food counters as a key factor in choosing a shopping destination.
Secondly, according to our experience, customer perception of "choice" not only depends on the depth and breadth of the assortment but is also strongly linked to visibility and service at the fresh food counter. Offering a wide variety of meat, fish, sausage, cheese or delicatessen products at serviced counters is more effective in improving customer satisfaction and driving store traffic than carrying a broader assortment on the refrigerated shelves.
What makes a serviced counter such a powerful way for retailers to fight decreasing basket size?
Firstly, a well-serviced fresh food counter drives traffic to a store, consequently having a halo effect across the entire store as many customers will then choose to shop there for different occasions.
Secondly, customers who choose the store because of an attractive serviced counter offering typically buy more products and have higher basket sizes.
Moreover, if the customers are satisfied with the range, freshness, quality, prices and other elements of the store's value proposition, they develop loyalty and more of them become return customers.
The fresh food categories allow retailers to significantly boost revenue by driving an increase both in the total number of transactions and in the average transaction value. However, running serviced counters in stores is complex and costly and the current economic situation, characterized by high energy prices and wage increases cancelling out consumer
price rises, only adds further pressure. Only with operational excellence, the optimization of counter presence, precise forward planning based on analytics, alongside close monitoring and quick decision-making can stores overcome these challenges and realize the advantages outlined above.
If fresh counters are set up in the right stores and operational excellence is established, striking a balance between availability and wastage, the incremental revenue gains will outweigh the additional costs. In our view, there are three key prerequisites for a successful counter strategy: focus on customer needs, meet best-in-class standards and strive for operational excellence. Executed properly, an approach based on these three requisites can deliver a considerable profitability boost.
To help supermarket and hypermarket retailers succeed in the current uncertain environment, we have put together this paper on the key role of serviced counter offerings. Read our report to find more details on how fresh food counters can help you mitigate revenue risks while managing cost challenges, and on the prerequisites of a successful serviced counter strategy.
Serviced counters as a profitability lever in grocery retail
Supermarkets and hypermarkets face challenges from inflation and uncertainty, yet their future success hinges on differentiating from discounters and each other, primarily through enhancing serviced counter offerings while managing costs effectively.