JLL: ‘Convenience’ Changing Grocery Retail

‘Convenience’ trends are changing both the way people shop for food and the way grocery stores are designed, reported JLL, Chicago.

“Grocers are trying to keep up with shifting demand by making it easier for people to get what they want,” JLL Retail Research Director James Cook said in the firm’s Grocery Tracker report.

Pre-prepared ‘meal kit’ delivery services such as Blue Apron and HelloFresh that allow people grocery shop less are steadily becoming more popular. “While these concepts may not put the traditional grocer out of business, it should signal a shift in how we the consumers want to interact with our food and how we prioritize food shopping,” Cook said. “The convenience and time savings they provide are extremely appealing to shoppers and the grocers that respond with grocerant-style prepared foods will be the best equipped to compete with the meal delivery concepts.”

Cook defined ‘grocerants’ as a restaurant-grocery store hybrid–essentially a prepared food section of grocery store. “The idea that you can stop into the grocery store on the way home from work and grab something that is already made is increasingly appealing to time-crunched individuals,” he said, noting that conventional grocers including H-E-B, Hy-Vee and Kroger are all investing more in prepared foods. “Kroger recently invested in Lucky’s Market, a specialty grocery chain with a strong prepared foods department in order to stay relevant in the face of these food delivery services,” he said.

In addition, 365 by Whole Foods is capitalizing on its already successful salad bar and prepared foods section by making it a focus at more locations. “Not only does 365 offer a less expensive alternative [to a traditional Whole Foods store], but provides fresh and healthy options at that lower prices,” Cook said. “Shoppers can use iPads to order sandwiches, pizza and rice bowls to go.”

Non-traditional grocers also see the benefit of this convenience trend, Cook said. “In recent years, dollar stores have strengthened their mix of consumables by improving merchandising by stocking more convenience food like prepared sandwiches and salads, frozen meals and even fresh produce,” he said, noting that Dollar General recently announced a plan to open a new smaller-format store called DGX aimed at the millennial shopper. “Along with other consumables, DGX will have a coffee station and grab-and-go sandwiches in addition to grocery items.”

Cook called DGX an example of retailers focusing on the urban core rather than suburban locations. “Retailers will continue to focus on cities with new store concepts experimenting with smaller footprints and vertical layouts to be more amenable to mixed used projects in urban cores,” he said.

But grocery stores are not ignoring suburban locations entirely. A Washington Post article last week noted that many grocery retailers have started to replace department stores as shopping mall anchors. In January Macy’s announced it would close 100 U.S. stores this year and in February J.C. Penney said it plans to close 138 stores this year–many of them shopping mall anchors. Grocers including Kroger, Wegman’s and 365 by Whole Foods have announced plans to occupy mall space that department stores are abandoning, the Post reported.

“Losing a mall anchor and replacing it with a grocery store adds a ton of value to a mall,” JLL Managing Director Margaret Caldwell told the Post. “Some of these malls, the anchors aren’t generating a lot of foot traffic. If you put a grocer in there, people will be there doing their weekly grocery shopping versus shopping once a month at Macy’s.”