21st Century Has Not Been

¶ … 21st century has not been particularly easy for the supermarket industry. Consumer pressures to drive value, quality, taste, nutrition and price have made the competitive environment even more cut-throat than ever. There seems to be six major trends that are impacting the industry that directly relate to organizations like Amazon Grocery and Aldi's, to name but a few:

Value -- private labels grow, lower quality brands with expected high quality offerings are the growth mode as consumers realize many times they are purchasing exactly the same product. Consumer increase shipping at warehouse clubs because price is King.

Advertising -- goes digital and moves from 15 to 25% on average; meaning the only way for brands to survive is efficiency.

Health -- Products that offer health benefits or appear lower in sodium and sugar are growing.

Pricing -- commodity pricing is stable, but margins are down due to advertising and competition for shelf space.

Mergers -- Many companies will be forced to merge with larger conglomerates due to heavy competition.

Home Cooking Perception -- Offerings that appear home cooked or can be "home" warmed or seasoned (meals in a bag, etc.) are a growth opportunity (Top 6 Supermarket Industry, 2010).

These trends bring special consideration to stores like Aldi's, which operates in 10 EU countries, the U.S. And Australia. The stores stock only 700 key items that consumers seem to want to meet their everyday needs, causing Aldi's to receive revenues 20-100 times greater than even those of Wal-Mart (Brandes, 2004). Amazon, however, picking up on consumer trends of still wanting high quality and convenience, rolled out its offering of grocery deliveries with Amazon Fresh. Consumers shop online, and in targeted urban areas that grow monthly, Amazon will delivery fresh product, groceries and sundries directly to the consumer's door, usually very early in the morning before the consumer leaves for work (Amazon to Roll, 2011).

Analysis:

1. Demographic and psychographic trends have changed in the developed world, particularly over the last decade. Aldi's interprets these changes as consumers needing less choice, but more value for essential products -- the 80/20 rule. They do not seem to be concerned about the ancillary product needs as long as they convince the consumer to shop for the basics. Amazon, however, believes that consumers, increasingly busy with work, events, commuting, etc., will opt for convenience over strict price. They have taken great pains to convince the consumer that produce, for instance, will be handpicked and fresh -- the downfall of many previous attempts at home grocery delivery.

2. Amazon has a large audience and sophisticated algorithm to help match consumer needs and drive sales. Aldi's spends less on advertising, basing their success on their presence in the market over time, word of mouth, and location. For Aldi's, dollars spent mean less of an ability to retain their model and give consumers the best price.

3. The two organizations are positioned for different areas. From a global fiscal perspective, Aldi's is the clear success based on ROI, number of stores, and daily sales. Many more suburban or rural consumers will drive to an Aldi's to stock up on essentials. Amazon has a more limited market. First due to its own limitations on delivery area; second on consumer habits of ordering groceries online (and perhaps paying more for some items); and third for breaking the habit of "running to the grocery story." However, the Amazon model is new, and in several larger urban areas is quite successful, although we are not yet certain of the fiscal viability of the model.

4. From a positioning perspective, the key is analysis of the individual market. An in-depth analysis of demographics, psychographics, geo-politics and shopping patterns is necessary to determine where our theoretical chain fits. Several questions must be answered: Where are our stores? How many do we have? What are our strengths and weaknesses (SWOT analysis)? Who are our competitors? Do the majority of our clients live near? Travel far for work? Do we service a client who expects a higher quality organic or natural market, or one that is primarily concerned with price? Depending on these answers, the key is not to try to be everything for everyone in this market; because that would require too much fiscal investment for too little ROI. Rather, analyze the market (s); stock the stores appropriately while partnering with certain featured brands that are appropriate for that particular area.