Third parties "disrupting" retail business model
A new wave of companies is successfully taking a market share away from retailers by addressing the needs of the millennial generation, and a consumer insight strategist says supermarkets will need to think 'out of the box' to keep up.
At the recent PMA Fresh Connections: Brazil, founder of Dutch organization Fresh Insight, Elena Ozeritskaya, spoke about ways fresh produce companies could get closer to their customers, highlighting some fundamental differences with the most recent generation that must be taken into account.
She said the millennial generation - generally regarded as those born since 1980 - were more 'adventurous, diverse and educated' than the Baby Boomers and Generation X, and also held a very different set of beliefs, values and needs.
"The millennials will make up 34% of the world's population by 2020, so they will matter for companies' innovation and marketing," Ozeritskaya said.
"And of course each country's millennials are different, but because of globalization, the exportation of western culture, social media, and the speed of change, people of this generation are more similar to one another globally than any other generation in history."
Alongside this generation's desire to be adventurous in their home cooking is a lack of time to plan meals or to go out to supermarkets and buy all the ingredients.
Addressing this are new subscription service companies, which delivery fresh ingredients to homes on a weekly basis in refrigerated boxes containing everything needed to cook the provided recipes.
One such company is called Hello Fresh, which has become successful since it was founded in Germany several years ago, now sending thousands of boxes per week to families in Europe, the U.S. and Australia.
Ozeritskaya highlighted that companies like this, which have been taking business away from online grocery shops and retail in general, had come from outside of the fresh produce industry.
"This is going to happen more and more often - people from outside of the produce industry will start disrupting your industry," she said.
The Fresh Insight representative said these companies had a 'powerful concept', as they ticked a lot of consumers' boxes and are built around the common question, 'What's for dinner?'
"These millennials want to spend extra money on services that can help them make their lives easier, more comfortable or more convenient," she told www.freshfruitportal.com after her talk.
"Subscription services are becoming very relevant. Hello Fresh is already in different countries in the west, and I'm sure companies like this will go all over the world.
"Everyone's always struggling to work out what to eat. It's a hassle, and people want a convenient solution for that. And so I think these companies tapped very well into that."
In addition to the convenience, it can also save adventurous consumers money as when trying something new they won't need to spend a lot on whole bottles or packets of certain ingredients when not everything is needed.
"If, for example, you want to cook a recipe for a Thai soup, sometimes the ingredients cost you about 20 euros (US$22), and so the soup is really expensive, because you buy all these ingredients you need only once," she said.
Ozeritskaya also believes organizations like Hello Fresh will continue to segment their products and offer a larger selection of packages to appeal to a broader range of people.
"Hello Fresh is disrupting the market, everybody knows it, because actually it’s taking a part of the retailer, as the consumers now shop less and just get the food sent to their home," she said.
"In the future there will be a lot of concepts that will be competing with traditional retailers, and they’re going to need to think out of the box and tap into the needs of consumers."
One limitation of Hello Fresh at the moment is that it is relatively high-priced, especially for larger families, but Ozeritskaya said over time the introduction of more competitors onto the market could lead them to provide the service at a lower cost and reach a wider audience.
"If they can do that I think they have an advantage for the future, but if not I think retailers will be disrupted again by other parties from outside the produce industry," she said.
"You need to go where the consumer goes, not the other way around. The millennial consumer may not go to your shop anymore.
"So if companies can come up with concept where they combine different trends like nutritious food, snacking, convenience, adventurous eating, and delivering that where the consumers are, I think that is the future."