GROCERY GAINS - STORE FORMATS OF THE FUTURE

GROCERY GAINS -
STORE FORMATS
OF THE FUTURE

WE ALL NEED TO EAT.

                   In 2020 the choices for how to do so both expand-
                   ed and retracted. From third-party food delivery,
                   pre-made meal kits, and subscription boxes to
                   restaurant closures, outdoor dining, and at-home
                   cooking, dinner looked different for many families
                   last year.

                   Through it all, the grocery store has remained
When life gives    constant – and by constant, I mean it has existed
                   and stayed open…for the most part. We all know
you lemons, make   how difficult it became to get our goods when

lemonade.          panic, precautions, and paranoia were at their
                   highest. Some of us even encountered shocking
                   situations where 24-hour stores were no longer
                   open 24 hours (!), and had to rightfully adjust our
                   habits to accommodate our elderly, at risk, and
                   essential community members as well.

                           And letʼs not forget those pesky one-way
                           aisle stickers either...

                           As consumers continue to embark on a new
                           year of challenges, rules, and a hopeful
                           return to normalcy, grocery stores will
                           evolve and rise to the occasion every step
                           of the way. The remainder of this piece
                           examines trends and shared lessons gro-
                           cery retailers and their CPG brands have
                           experienced in recent months. Through an
                           understanding of this data and an uncover-
                           ing of shared pain points, we offer a few
                           rendered examples of how convenience,
                           adaptability, and personalization can be
                           brought to life and made relevant in
                           grocery stores today.

Industry Insight:
Grocery sales went on a wild ride in 2020. In particular, spending in consumer pack-
aged goods closed out the year with a 19% sales increase that is expected to continue
well into 2021 (Supermarket News). According to advertising specialist NCSolutions,
pandemic-buying fell into three phases - preparedness, extreme, and home-confined -
each causing different demand situations that often resulted in inventory, supply chain,
logistic, safety, and operational issues.

This created a unique opportunity for both consumers and retailers to reimagine the
role of the grocery store. As with other industries, shopping behaviors adopted during
the pandemic, such as increased e-commerce and the utilization of curbside pickup,
are slated to continue even after the Covid-19 crisis wanes. “Digital commerce
advanced eight years in eight weeks” explains Keith Anderson, Senior VP of Strategy
at Profitero. “Digital grocery sales grew at 4x the rate of brick-and-mortar sales
during March and April.”

Additionally, industry experts have also noted the following:

Curiosity - a natural byproduct of necessity.
When life gives you lemons, make lemonade. And when the store is out of lemons, sub
a lime grab some vodka, and make a spiked limeade!

All kidding aside, as more people stay home and eat out less, many are growing
more adventurous in the kitchen. Carryout is expensive, children are picky, and letʼs
be honest, thereʼs only so much a frozen meal can really bring to the table. Plus,
weʼre at home more - itʼs not just dinner we have to worry about. Itʼs breakfast, lunch,
and 12 snack breaks in between, too.

The need to experiment is creating demand for new ingredients - especially in fresh
produce, meat, seafood, and dairy. However, bakery, deli, and butcher sections of
grocery stores were some of the hardest hit during the pandemic due to sanitization
concerns (i.e., highest-touch areas). As these sections of stores re-open for service, we
will likely see a greater assortment of pre-packaged meals alongside fresh offerings.

“Limited service/assortment and/or shutting down of bakery and deli counters across
many stores have had severe negative impact on sales, [however] as retailers learn to
adapt and consumers return to in-store shopping there is room for optimism...at the
end of the day it will come down to convenience and comfort” (Supermarket News).

Another issue consumers are facing is rising food costs. In particular, meat and sea-
food have experienced dramatic price increases from both the supply and demand
side.

To keep prices down,” notes Seattle-based meat and seafood merchandiser Dave
Sanz, “it is more efficient and attractive for supermarkets to source selections closest
to their areas.”

Adding more locally-sourced ingredients to grocery storesʼ product assortments may
help reduce the burden of costly supply-chain disruptions while also appealing to a
widely growing consumer preference to shop fresh and local.

On the dairy side of things, Supermarket News reports category management deci-
sions, line extensions, pack size varieties, and number of brands carried/other SKU
decisions will be important factors to keep up with fresh dairy product demand.

Whether fruit, vegetable, meat, or dairy product, the challenge will be
to reimagine these fresh ingredient spaces as “markets” that cohesively
cater to diverse shopping preferences, promote efficiency, and present
more intentional product messaging and education to service customers
who are looking for new ingredients, preparation methods, and/or
meal ideas.

Keeping this in mind, we developed two ideas grocery stores of any size can imple-
ment to better serve this growing population of shoppers.

The first sheds light on how to reimagine highly trafficked, in demand areas of stores
that may have previously been shutdown or repurposed due to safety and sanitation
concerns - such as deli, produce, and meat counters. The goal here is to simplify,
streamline attention, and provide intuitive support scenarios to customersʼ natural
questions, needs, or concerns.

As people venture into stores looking for quick,   This versatile branded basket rack features the
easy, and safe dinner options, fresh food          option to showcase a weekly meal idea, sale or
sections will need more options for pre -pack-     promotional item, featured brand or product line,
aged and prepared food. The cooler shown           or perhaps educational signage on a specific
features a “weekly” meal idea - correspondent      preparation method, such as “Grilled to Perfec-
with a weekly circular. Meal accompaniments        tion: Time Your Steak Right.” Depending on how
as well as a complete take -and-go option are      the store’s digital operations are setup, a QR
both available. Either as a new standalone         code further draws shoppers into an ecosystem of
merchandising element or as inspiration for a      additional content - from videos, promotions,
reinvention of pre -existing cooler space,         opportunities to earn rewards or loyalty points,
attention to how fresh, pre -packaged food is      and more.
handled is ripe for improvement.

The second idea is founded on the growing demand for a more integrated product
selection. As consumers focus on becoming more self-sufficient, environmentally-con-
scious, and sustainable while also desiring to support local business, itʼs only natural
that local producers of fruit, vegetables, eggs, milk, honey, baked goods, beer, wine,
meat, fish, and other “farmerʼs market” items find their way into grocery store lineups
on a more consistent basis.

An option to address this scenario is pictured below as an environmental design. In
this concept, vacant or unoptimized spaces within a bakery, deli, or produce depart-
ment could be transformed into a pop-up market that provides local offerings along-
side traditional. This “shop-in-shop” family of adaptable display units can be scaled to
fit into preexisting environments or used to create a completely new and unique
space. Product, messaging, and vendors can rotate with seasons, ensuring consumers
keep coming back for the freshest ingredients and the best ideas for what to do with
them.

To further carry the idea of localization throughout the store, complementary displays,
fixtures, and merchandising elements can be setup throughout that feature items
shown in the market in their associated departments. For example, the DʼGuy-O home-
made salsa brand may make an appearance in center store alongside Frontera, Pace,
and Tostitos salsas. As with all proposed units in these ideas, the graphics are easily
changed and the displays are easily assembled and scaled. Grocers have max control
on what goes where and when.

Notes: if installing and maintaining a local “farmerʼs market” still feels a bit like a
pipe dream, this type of environmental “market” could simply be used to section out
an organic section within a store, creating the feeling of an elevated shopping experi-
ence for shoppers.

It also could be used as a pop-up concept at the front of a store to create a sort of
“in-and-out-just-the-essentials” area where in demand products (i.e. milk, eggs, bread,
toilet paper, seasonal/holiday items, etc.) are readily stocked (pictured below as
“5-Minute Market”). To further promote customer convenience, self-check or contact-
less scan and go can be implemented as well.

Ultimately, the options are endless. Dedicated, streamlined spaces sometimes make
cumbersome and overwhelming trips to the grocery store more manageable and
enjoyable to shoppers - sentiments we need to protect in this growing age of digital
commerce!

Adventuring to the Unknown,
and Sometimes Sticking To It
Our preferred brands werenʼt always the ones that made it home with us last year.
Whether toilet paper or frozen pizza, can of beans or box of cereal, many consumers
were pushed to purchase products that werenʼt necessarily their preference. For some
brands this was a great scenario. For others, namely legacy brands in high demand,
this was a less than ideal situation, as some customers who strayed have not come
back.

Why does this matter? Because at times, uncertainty leads to an open-mind. Brands of
all shapes, sizes, and stories have an opportunity to reconsider how they market,
merchandise, and stand out in a highly competitive environment. Brand loyalty is no
longer a given, especially with younger shoppers who have grown up with more
exposure to more options, substitutions, and alternatives than in generations before.
Likewise, grocery stores must also find new ways to capture and keep their customersʼ
loyalty.

Luckily, we have technology on our side. The blending of
physical and digital may have taken longer to take off in
grocery stores than in some industries, but all bets are
pointing to 2021 being the year omnichannel grocery
retail strategies truly take hold.

One area technology greatly assists both brands and
retailers is in product selection. By incorporating touch,
voice, or QR code-activated kiosks throughout stores,
shoppers gain access to all the information needed to
make a confident purchasing decision with or without the
assistance of a store associate.

These kiosks can utilize remotely updated software and content programs that
mirror information found on the retailerʼs website or weekly circular, including
information about sales and promotions, coupons and discounts, or meal planning,
recipe, and/or diet and lifestyle ideas. Pricing, inventory levels, similar suggested
products, customer reviews, and shopping lists - with aisle wayfinding - can all be
generated sight on scene, eliminating the need for shoppers to pull out their smart
phones and try to find the information when an employee is not available. Further,
these kiosks can also be outfitted with scan and go technology eliminating the need
to stand in lengthy check out lines.

To see additional examples of how technology can be used in smart displays and
shelves to promote in-aisle visual storytelling + gain more inspiration on how to use
form and function as disruption, be sure to check out our Deep Dive into Off-Prem-
ise Alcohol Retailing.

Power to the People
Itʼs no secret that consumer trends drive inventory. One year olive oil is in, the next
itʼs out - cue an onslaught of associated promotional displays. Thatʼs never going to
go away, but now consumer preference seems to be dictating more than product
assortment - itʼs steering store design and development. Little by little, weʼve seen
human-operated cash registers be replaced by self-check or scan and go opera-
tions. Weʼve watched boring, basic personal care sections become transformed to
meet niche needs (think Target and its recently redesigned menʼs personal care
section or Whole Foodsʼ Beauty & Body Care layout). Throughout the pandemic,
weʼve witnessed entire sections of grocery stores get repurposed to accommodate
high demand product categories and have noticed how many seasonal sections
transformed into sanitizing stations or curbside delivery processing areas. The
average grocery store has a lot of space to work with - itʼs time to optimize it for
the modern shopper.

While not practical for all formats, one concept worth mentioning is what Hy-Vee
did in 2018 with its HealthMarket store of the future. Choosing to view its customers
as “patients,” this space melded health, beauty, nutrition, and fitness, and was built
to be an extension of its traditional in-store “HealthMarket” section first designed in
2001. According to Grocery Dive, this lifestyle store “offers a pharmacy, medical

clinic, sports nutrition center and access to a next-door gym in addition to a lineup
of grocery staples, including natural and organic foods, meats and beauty prod-
ucts. There is also a hydration station that offers consumers infused water, kombu-
cha, and nitro coffee.”

Beyond the obvious multi-faceted appeal to a very specific health-conscious custom-
er, this concept made brand partnerships possible in a creative and relevant way.
Orange Theory was the gym of choice connected to the space, Capsure hearing
aid sponsored a hearing station, and indie-label organic foods, beverages, and
supplements could be better promoted in a more succinct and meaningful way - just
to name a few.

On a smaller scale, the “store-of-the-future” concept could simply be applied to one
department, one section, or even just one aisle of a grocery store to create new
drivers for customer interest, attention, and loyalty through display, smart merchan-
dising, product assortments, and elevated service. Diversification breeds relevance.

An example of this can be seen in an update to a traditional personal care and
cosmetic section of a grocery store. Though likely not the primary reason for a
shopping trip, we know that more people are attempting to consolidate
their trips out of the house and adopt a one-and-done approach to
shopping. If both bananas and mascara are on a shopping list, letʼs do what we
can to give both product-types the merchandising attention they deserve and raise
customer sentiment, comfort, and overall impression while at it.

For grocery retailers that also have a pharmacy or other health and wellness area,
including a Covid-19 vaccine operation, simple changes to aisles, endcaps, and
waiting areas can make all the difference. Be sure to check out a family of solutions
we created for vaccines in retail distribution. Many of the displays within can easily
be repurposed to build out departments focused on customer health, wellness, and
personal care needs. For reference, two options are pictured below.

In Conclusion:
As we all continue to grow more accustomed to getting what we want, how we
want, when we want, with as little as effort as possible (thanks, internet), if thereʼs
anything a grocery store cannot afford to be itʼs cumbersome and irrelevant. From
both an operational standpoint and a customer sentiment viewpoint, 2020 has given
grocery retailers and CPG brands an opportunity to reimagine how they educate,
inform, serve, interact with, entertain, delight, and connect to their customers.

Letʼs harness the opportunities we have and reimagine grocery store formats as
drivers of customer loyalty and satisfaction like weʼve never seen.

READY?
If something sparked your interest or if youʼd like to discuss a past, present, or future
grocery or CPG retail need, get in touch today.

                 CHICAGO | LOS ANGELES | SEATTLE | SHANGHAI

                                  https://www.facebook.com/AxisDisplayGroup   https://www.instagram.com/axisdisplaygroup/ https://www.linkedin.com/company/axis-display-group

                        www.axisdisplaygroup.com/contact
                                                   312.470.2288

                                                                                             ABOUT AXIS DISPLAY GROUP:
                                                                                             Axis Display Group is an award-winning retail design,
                                                                                             display, and store fixture company offering a unique
                                                                                             approach to retail marketing. We pair decades of display
                                                                                             company experience with the strategic know-how and
                                                                                             creative capacities of a full-service advertising agency,
                                                                                             resulting in big-picture solutions that are practical, scalable,
                                                                                             and mass-customizable. From concept to implementation,
                                                                                             product merchandising to associate training, our hybrid
                                                                                             business model enables us to build, elevate, and manage
                                                                                             retail programs far beyond the physical fixture.