Companies & Industries

Redefining the Local Grocer


Redefining the Local Grocer

Courtesy Titan/Peapod

From the bankruptcy at Borders to the further downgrading of J. C. Penney’s stock despite its high-profile re-branding efforts, retailers have been in the news a lot lately—most of it bad. But there’s some good news from one of the unlikeliest parts of the retail sector—groceries, which is known for its razor-thin profit margins. This year alone, three of the largest food retailers in the U.S. have made some unexpected moves.

Long referred to as “Whole Paycheck” and considered a haven for yuppies and aging hippies, Whole Foods is the epitome of upscale grocery fare. Many observers were stunned by the announcement that the 310-store chain will open a 20,000-square-foot store in Detroit’s Midtown. Opening a new store isn’t usually considered innovative, but the new location has been called a “food desert” for its lack of choices. One definition of innovation is something that creates a new market, and this somewhat rundown neighborhood—populated by longtime downtown Detroit residents, students from Wayne State University and the Detroit Institute of Arts, and staff from the Detroit Medical Center—will become a new market for organic and natural foods.

Stop & Shop has been named one of the 10 most innovative companies in food. That’s pretty heady for a 375-location supermarket chain that, if you ask most people, is largely indistinguishable from its competitors. But the accolade comes from its use of technology to transform the shopping experience. In June 2011, Stop & Shop became the first grocery chain with an in-store payment system. Using Scan It!, shoppers can scan and bag groceries while they shop, get exclusive customized offers, and slow down just a bit at dedicated checkout aisles to pay for their groceries.

In February, Peapod, which fulfills and delivers online supermarket orders for more than 350,000 customers, extended grocery shopping to a new location by partnering with Coca-Cola and Procter & Gamble to create a smartphone app that works with virtual storefronts at select mass transit stations in Philadelphia. The “storefronts” are actually billboards on the train platform, with images and barcodes of everything from eggs to paper towels. Customers can shop, purchase, and schedule delivery of groceries while waiting for the train. By leveraging existing relationships, technology, and a captive audience of customers, Peapod’s experiment may redefine what it means to be an online grocer.

There’s no question the retail landscape is changing and that retailers of all types will need to keep pace and stay relevant. The surprise is that some of the new business models required to succeed in this landscape may be found in a physical or virtual grocery aisle near you.

Robyn Bolton is a partner at the innovation and strategy consulting firm Innosight.

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