Differentiation Critical to Winning in Crowded Market

Tim Denman
February 1, 2023
Differentiation Critical to Winning in Crowded Market

At A Glance

  • Grocers are facing increased digital competition.
  • A clear point of differentiation in the market is more vital than ever.
  • Grocers must provide a unique cross-channel experience that the competition cannot easily match.
  • Discover Kroger, Whole Foods, and Sprouts Farmers Market differentiation strategies.

In today's digitally powered marketplace, grocers face competition at every turn. They must create differentiated experiences designed to build meaningful, long-term shopper loyalty to succeed.

Having the products consumers crave in stock at an affordable price is table stakes. Grocers must provide a unique cross-channel experience that the competition cannot easily match to win shoppers' hearts, minds, and wallets.

This modern business reality is sparking new levels of innovation as grocers embed unique offerings and functionality into the path to purchase. At NRF 2023, grocers took to the stage to discuss some of their current loyalty-building tactics and inspire their peers to think outside the box when designing the grocery organization of the future.

Kroger's VP and head of e-commerce Bill Bennett explored this topic during the 'Winning Over Your Customer at Every Touchpoint of the Shopping Journey' panel discussion. "The biggest shift is how customers are responding to inflation," Bennett said. "Customers are looking for savings like never before. We must examine the end-to-end journey as they look for those savings."

The shopper journey has quickly evolved into a blended model, where a consumer might shop online one day and head to the physical store the next. Grocers must prepare to meet this new-school shopper whenever and wherever they choose.

"If you look at the industry today, we call it seamless, but what we find is the customer likes to engage with us because they like to make it easy on themselves," Kroger CEO Rodney McMullen said in the 'Feeding the Human Spirit: A Conversation with Kroger CEO Rodney McMullen' keynote. "All they talk about is being inspired and getting the food they want. They don't ever talk about it the way we talk about it, in terms of online or a store. They talk about what is easy for them at that point in time."

But providing this seamless experience is increasingly challenging in today's inflationary environment. Grocers must find a way to keep price increases to a minimum while simultaneously building the differentiated experiences that customers crave. However, if the brand proposition and the user experience are substantial, shoppers might be willing to overlook minor price increases.

Sprouts Farmers Market, for example, is not concerned about being everything to everyone but is laser-focused on providing a curated selection of products only available from Sprouts. In the 'North American Grocery Retailing Trends for 2023' session, Sprouts Farmers Market CEO Jack Sinclair discussed many macroeconomic trends shaping the industry today and how Sprouts is responding.

"We are seeing a lot of dynamic change," Sinclair said. "Inflation has been unprecedented, digital has grown faster, and consumers are eating more at home. With the extreme growth of e-com, it is easy for shoppers to go to competitors.

"People are always going to buy food. The question is, how do you differentiate? For us, differentiation comes from our curation. We aspire to be a great curated organization."

Fellow healthy-living grocer Whole Foods Market has a similar approach to creating consumer loyalty and stickiness. While inflation is a crucial consideration for shoppers up and down the market, Whole Foods did not build its reputation on having the lowest prices but on having healthy food. Its shoppers have always been willing to pay a little more for quality, and that continued commitment to quality despite inflationary headwinds is critical to retaining shopper loyalty.

"One of our strengths is that our core customer cares about quality standards and the differentiation that we bring to market," CEO Jason Buechel said in the 'Nourishing People and the Planet: A conversation with Whole Foods Market CEO Jason Buechel' session. "We do the homework for them, so they know what's in the food we offer. We feel that regardless of what may be happening on the economic front, they will try to find ways to stay true to that."

Whether it is affordability, assortment, or ease of use, grocers must possess a clear point of differentiation in the market and continue to grow within those parameters. Separating themselves from the field while building a channel-less and differentiated path to purchase allows grocers to nurture shopper loyalty and weather the inflationary storm.