Food Retailing 2013: Tomorrow’s Trends Delivered Today Executive Summary

Food Retailing 2013: Tomorrow’s Trends Delivered Today Executive Summary 1
This executive summary was developed by FMI based on research and analysis conducted by Booz
& Co. in partnership with key industry data providers, Catalina, CROSSMARK, and Nielsen.
Thank you to our research and data partners
Copyright © 2013
Food Marketing Institute
All rights reserved. This publication may not be reproduced, stored in any information or retrieval system or
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otherwise — without the express written permission of the Food Marketing Institute.
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nearly 40,000 retail food stores and 25,000 pharmacies, representing a combined annual sales volume of almost
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resources and provides valuable benefits to more than 1,225 food retail and wholesale member companies in
the United States and around the world. FMI membership covers the spectrum of diverse venues where food is
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For questions or comments, please contact:
Vickie Brown, Manager of Research, Food Marketing Institute
Email: research@fmi.org or call 202.220.0729
For additional copies visit www.fmi.org/research

Introduction
This 2013 forward-looking analysis of the trends that are expected to drive food retail over the next decade
is a follow-up to and extension of a 2012 analysis conducted by Booz & Co. and several industry partners
on behalf of FMI. That 2012 research identified four key trends, a long-term shift in consumer behavior to
value-seeking, the advent of technology-enhanced shopping, the growing impact of e-commerce, and
a new emphasis on small formats. For this 2013 extension, FMI has again worked with Booz & Co. and
industry data providers, Catalina, CROSSMARK, and Nielsen to dig more deeply into some of the trends
identified previously and to explore additional forces that will shape our industry as we look out toward
2025. The ultimate goal of the research and this executive summary is to provide industry leaders with
facts and insights to help address the challenges they face today and in the near future.
For this analysis Booz & Co. analyzed data and perspectives from multiple sources:
■■ Industry data collected by Catalina, CROSSMARK and Nielsen.
■■ A custom online survey of over 1500 shoppers with a deep dive into consumer attitudes
and preferences
■■ Interviews with 15 C-level industry executives and with Booz & Co. retail experts across
several geographies.

Key Trends
This report discusses five trends that are expected to take on increased meaning and shape the future of
food retailing through 2025:
■■ Consumer Trends: Shifting demographics, attitudes/behaviors
■■ Overall Grocery Demand/Capacity: Traditional supermarket growth patterns, growth
of alternative food formats
■■ Driving the Consumer Shopping Decision: Price/value, followed by quality,
assortment, convenience and overall experience, influences purchasing.
■■ Display strategies: Channel, department and occasion
■■ Tomorrow’s Merchandising and Marketing Trends: Including demand-driven
marketing (e.g., local assortments, target marketing), use/value of loyalty programs
■■ Technology: Growing roles of ecommerce, mobile, personalized pricing/promotions,
harnessing Big Data, multi-channel retailing
Data presented in this study are designed to help retailers better understand changes in the retail and
consumer market place, enabling them to adjust shopper strategies to maintain and grow their competitive
positions. Additional perspectives are presented as the “View from the C-Suite” comments shared by
executives during interviews conducted for this analysis.

I. Consumer Trends:
Shifting Demographics and
Ethnic Store Implications
In today’s world of competitive food retailing, consumers, more than ever, are calling the shots; they, not
retailers, are deciding what they want, what they will pay and where they want to buy it. Retailers need to
undo decades of thinking about how to get shoppers to step inside stores and begin thinking about how
to get stores into the lives (and hands) of customers,
Compounding this challenge is that when it comes to likes and dislikes, this consumer-centric universe is
more fragmented than ever. It is also in a state of constant orbit that is moving faster and faster.
One of the most significant factors driving fragmentation and diversity is changing demographics. Fifty
years ago, America was all about the traditional nuclear family. They ate meatloaf, watched “Father Knows
Best” and shopped the same supermarket every week. Most of the population was Caucasian. Today, a
wider range of ethnicities (and lifestyles) is creating a demand for retail formats and product offerings that
serve much more diverse needs.
+31%+14%
+37%
+15%
+41%
+1%
Native Hawaiian
(Non-Hispanic)
0.60.5
American Indian
(Non-Hispanic)
2.62.3
Asian
(Non-Hispanic)
20.1
14.7
African American
(Non-Hispanic)
Hispanic
71.0
37.9
50.5
Caucasian (Non-
Hispanic)
199.6197.3
43.7 20252010
Projected U.S. Population Growth
2010 vs. 2025, in Millions
Note: Hispanic origin is considered an ethnicity, not a race. Hispanics may be of any race.
Source: U.S. Census data; Booz & Company analysis
Growth in U.S. ethnic populations offer retailers an opportunity to better serve
these increasingly sizeable segments

Probably the most noticeable change is the growth of Hispanics and other minorities. While this has
been happening for some time, recent announcements by the U.S. Census Bureau have made retailers
pay stricter attention. According to the Bureau’s December 2012 projections, minorities now account for
more than half of babies born in the U.S. Within 30 years demographers forecast that the U.S. will have a
majority-minority population.
A Booz & Co. analysis of the Census Bureau projections indicates that from 2012 to 2025, non-Hispanic
Caucasians, the largest but slowest growing group, should increase by just 1 percent and will begin
decreasing in subsequent decades. Hispanics, the most rapidly growing ethnicity and the largest one
following Caucasians, are expected to grow 41 percent. The growth rate of Asians, currently one of the
smallest groups, should be close behind at 37 percent. Projected growth of African-Americans, the third
largest group is 15 percent.
Caucasians represented 65 percent of the U.S. population in 2010. By 2025, they should comprise 57
percent—a smaller but still dominant segment. Hispanics should grow from a current 17 percent to 20
percent. The Asian population is expected to climb from 5 percent to 6 percent. But the percentage of
African-Americans should remain flat at 13 percent.
View from the C-Suite
“We will see more diversity. These customers will
become more vocal and challenge the industry to
carry both key and customary products.”
—CHIEF MERCHANT, REGIONAL RETAILER
Subsequent demand for ethnic products should
increase gradually but significantly. This is due to
both growth of other cultures and the increasing
affinity for ethnic flavors and cuisines (e.g.,
spicy foods, mango flavors) among Caucasian
shoppers.
Retailers will need to reflect population changes
more in assortments and merchandising. This means understanding the unmet needs, tastes and
preferences of these groups in detail, including those of native-born Latinos versus increasing numbers of
second and third generation Hispanics. Retailers should also be aware of the individual needs of different
Hispanic groups.

Age-wise, 65+ year old consumers will present the greatest growth segment as
Baby Boomers enter the cohort
27%
23%
25-44 yrs
65+ yrs
2025
18-24 yrs
45-64 yrs
Under 18 yrs
9%
23%
2010
26%
27%
10%
24%
Total US
Population
(in Thousands)
346,407308,745
19%
Projected US Population by Age1
2010–2025, % of Population
Note: (1) US Census Bureau attempts to count all persons in the U.S. including citizens, legal immigrants, non-citizen long-term visitors and illegal (or undocumented) immigrants.
Source: US Census data; Booz & Company analysis
13%
The face of America is also being impacted by the changing sizes of various age groups. Between 2010
and 2025, the percentage of people ages 65 and up will have increased 6 percent. They will constitute 19
percent of the population compared to just 13 percent in 2010. The younger portion of this group
represents the tail end of the Baby Boomer generation.
As they always have, Boomers, known for their free spending, should continue to influence the consumer
market. But their shopping habits and needs will change as they grow older. While younger generations
are growing in importance, Boomers remain a sizable and viable market that retailers should continue
paying attention to.

II. Overall Grocery Demand/
Capacity
Meeting the needs of a changing population involves creating more varied store formats and
assortments—not necessarily more square footage. But for years, retailers have continually added stores,
making them larger and larger. This has caused capacity to outpace sales growth. Between 1995 and
2012, capacity grew 77 percent across all food channels. Since consumer demand has not increased at
the same pace, sales increased just 38 percent.
Despite capacity additions, total supermarket sales have remained ﬂat
since 1995 in real terms
Source: Nielsen Retail 2016, Annual Reports, MVI, AC Nielsen, US Retail Census, NACS, Booz Company analysis
U.S. Grocery Sales By Channel
$2010, 1995 –2012
$500
$900
$100
$300
$700
$0
$800
$600
$400
$200
$2010 Sales (B)
Traditional
Supermarkets
Small Specialty
Drug Stores
Super Center
Mass Merch
Club
Dollar Stores
Conv/Gas
Other
2012
878
336
62
45
129
45
87
24
111
39
2011
861
337
62
44
124
45
83
22
110
35
2005
779
341
63
34
95
47
62
14
103
20
2000
686
329
68
30
42
49
41
8
105
13
1995
613
339
76
18 18
41
275
83
6
The term “food channel” refers to chain and independent retailers of various types that devote significant
amounts of space to fresh and/or shelf stable food as well as beverages. Channels reviewed for this
analysis include supermarkets, supercenters, dollar stores, warehouse clubs, drug stores, mass retailers
and gas/convenience outlets.
Almost all the growth in food retailing over the past 17 years has come from non-supermarket channels.
Dollar stores, for one, saw sales per square foot climb from $272 per square foot in 2000 to $337 in 2010.
Since 1995, the dollar channel has built an additional 58 million square feet.
Supercenters’ sales per square foot are more than twice those of supermarkets, even though performance
has fluctuated. Sales per square foot went from $470 in 2000 to $552 in 2005, falling to $439 in 2011,

but escalating to $443 the following year, according to analysis by Booz and Co. The channel added 262
million square feet since 1995
Other channels have also added significant capacity since 1995. Warehouse clubs built an additional 42
million square feet, while drug stores added 75 million square feet. Historically, drug stores have not had
a huge presence in food. But in recent years, they have increased offerings of shelf stable products and,
more recently, prepared lunch items and fresh produce.
Convenience stores have also expanded food offerings, particularly in food service, baked goods and, in
some cases, meat, produce and grocery. Limited assortments of top selling meat and produce items have
also been added to some mass retail stores over the past few years.
“Fragmentation of market behavior will generate
more variety with fewer traditional outlets.”
—PRESIDENT, CPG MANUFACTURER
“Value and newer channels like dollar and club
will continue to gain strength and win trips while
online retailing will dramatically take hold.”
—CEO, CPG MANUFACTURER
But even as the industry has added additional
capacity, per capita grocery purchasing has
changed little over the years. Even economic
factors have caused just small fluctuations.
According to data compiled by the U.S.
Department of Agriculture and the U.S. Census
Bureau and analyzed by Booz Co., per capita
spending currently averages $2,795. Total annual
grocery spending is currently $663 billion. While
the annual grocery spend should hit between
$900 billion to $1 trillion by 2025, per capita
spending will likely remain relatively flat, between
$2,672 and $2,919. This will mean that the opportunity for increases in overall demand will depend
primarily on population growth, a factor that the U.S. Census Bureau has projected will grow more slowly
over the next five decades than in the recent past.

III. Driving the Consumer
Shopping Decision
The competitive conditions caused by today’s over-capacitated, mature food market mandate that retailers
work harder to get shoppers’ attention. This involves focusing on one or more of five key traffic drivers:
price/value, followed by quality, assortment, convenience and overall experience. The significance of
elements embodied in each driver, however, can vary tremendously, according to the results of a Booz
Co. consumer survey conducted for this analysis.
■■ Price/value: 15.6 percent of shoppers seek low prices, while 13.7 percent want sales
and coupons. Only 4.2 percent head for a store because it has a loyalty program.
■■ Quality: 15.5 percent demand freshness in produce and other foods.
■■ Assortment: a varied selection of grocery products is sought by 12.6 percent of
shoppers. But fewer want organics (5.8 percent), locally sourced products (4.2 percent)
and wide private label selections (3.9 percent).
■■ Convenience, 10.1 percent appreciate a store’s location; but just 3.9 percent decide
where to shop based on layout.
■■ Overall experience: service (7.4 percent) is most important. But self-checkout, product
information and ancillary services make or break purchasing decisions for less than 2
percent of store visitors.
These elements’ importance can fluctuate by ethnic group. A deeper understanding of customers’
ethnicities and related value preferences can better equip retailers to focus on ways to differentiate their
brands. Consumer behaviors, ethnic or otherwise, can also change over time. This further underscores the
need for understanding grocery shoppers at a granular level.

Quality
Assortment
Convenience
Overall
Experience
Price Value
Low Prices
Additional In-Store Services (i.e., Banks, Cleaners, etc.)
Store Loyalty Program
High Quality Fresh Produce and Other Fresh Food
Varied Selection of the Grocery Products
Strong Selection of Special Items Such as Organic Foods
Locally Sourced Products
Wide Variety of Private Brand Items
Convenient Location
Store Layout That Makes It Easy to Shop
Friendly Personnel / Good Customer Service
Self-Checkout
Product Samples and Educational Information
Grocery retailers must address these consumer choices and
tradeoffs to remain relevant
15131197531 Most ImportantLeast Important
Note: (1) Q16: Below are some things people say are most important to them when selecting a store to purchase groceries. Please indicate what is the most and least important to you.
(Based on MaxDiff scaling)
Source: Booz Company 2013 Trends Consumer Survey; Booz Company analysis
1
2
3
4
5
Consumer Choices and Tradeoffs – Overall Importance Index1
15.6
13.7
0.7
0.9
1.5
10.1
3.9
7.4
5.8
4.2
3.9
15.5
12.6
4.2
Items on Sale or Money-Saving Specials / Coupons
“Success comes down to one component:
differentiation. Hence, the quality and value of
one’s product raises the value proposition.”
—PRESIDENT, CPG MANUFACTURER
While saving money has always been important
to shoppers, the economic downturn warrants
a deeper look at price/value, the primary driver
behind store choice. For starters, 48 percent of
U.S. households have accepted living with less;
by 2025, this number is expected to climb to 53
percent, according to Booz Co. research. These
consumers are reducing their pantry size and
making more frequent shopping trips to procure only what they need.
Interest in other thrifty behaviors is also expected to increase. Today, 70 percent of households say they
frequently seek discounts; this is projected to hit 78 percent in 2025. And 73 percent are comfortable
buying private brands; this should escalate to 81 percent in 2025.

48
53
“Value seeking” behaviors are exhibited across a vast majority of U.S. households
and are poised to increase by 2025
+8M
+8M
Projected 2025
+5M
Today Projected 2025Today Projected 2025Today
70
78
73
81
Note: (1) Exhibited behavior for “Today” is based on number of respondents who chose ‘I have always shopped this way and still do’ as response to the following survey question:
Which of the following statements best describes how the uncertain economic environment of the last few years has affected how you shop? 2025 data is projection is based on
assuming 11.3% growth in population from 2010 to 2025 and assuming same % of population as 2010 will exhibit the behavior under consideration.
Source: U.S. Census Bureau number of U.S. households in 2010; 2012 Booz Trends Study; Booz Company analysis
I accept living with less1
Millions of U.S. Households
I seek discounts often1
I am comfortable buying
store (private) brands1
Value seeking—along with four slightly less important factors—is also part of the overall consumer behavior
profile, according to Booz Co. The other elements are health and wellness, cooking habits, in-store
support and store selection, and digital interaction. By understanding these factors and their dimensions,
which can vary by age and ethnic group, retailers can fine-tune merchandising.
Convenience and quality are most important to those seeking value. Health and wellness shoppers are
concerned about food being safe to eat and frequently read labels. They are also interested in locally
sourced products and believe organics taste better.
A third group embraces cooking, including cooking from scratch and preparing ethnic dishes. These
shoppers stock the pantry to feed the household for two weeks. But they are not as interested in stores
providing ideas on how they can save time in the kitchen. The fourth group emphasizes in-store support
and seeks convenience and value. For these reasons, these consumers shop multiple stores and focus
largely on perimeter departments.
Among those interested in digital interaction, shopping for perishables, non-perishables and non-food
online are of equal importance, as is using a smart phone to aid in-store shopping.

Red: Very important,
represents highest
agreement
Blue: Not quite as important
By understanding the dimensions of these behavior sets (in order of importance),
retailers can ﬁne-tune merchandising platforms
1. Value-seeking
Convenience, quality
Lowest cost, selection of store brands, store brands same as national ones, store brands
provide greater value, switch brands, compare prices, live with less
2. Health Wellness
Read nutrition labels, safer for my health
Willing to pay more, locally sourced, organics taste better, considers store’s environmental
impact before purchasing, sustainable packaging inﬂuences purchasing decision
3. Cooking habits, my pantry
Cooking from scratch, pantry feeds household for two weeks, cooking ethnic meals
Store provides time-saving ideas/solutions
4. In-store support, store selection
Shop multiple stores based on deals, convenience, value
More likely to shop perimeter than center store
5. Digital interaction
Non-perishable online shopping, non-grocery online shopping, online perishable
shopping, use smartphone to aid in-store shopping
Note: Q17: Do you agree with the following statements? Rank your preference on a scale of “1-Strongly Disagree” to “7-Strongly Agree”. % Agree represents “Top 3 Box” scores.
Source: Booz Company 2013 Trends Consumer Survey; Booz Company analysis

IV. Display-Based
Merchandising Strategies
Once retailers get shoppers into the store, they want them to shop as many aisles and categories as
possible. This makes point-of-purchase displays crucial. A CROSSMARK study of 27,035 displays in 510
stores across five channels conducted for this analysis found the average store has 43 individual food
displays. Mass (68 displays per store) and supermarkets (73 per store) use displays most frequently. Drug,
26, and dollar stores, 21, make the least use of displays.
End caps (31 percent) are the most prevalent display vehicle across all channels, according to Booz Co.
These are followed by temporary shippers (22.5 percent), semi-permanent displays (11.3 percent), stand
alones (9.5 percent), pallets (7.1 percent), case packs (5.2 percent) and power wings (4.1 percent).
When it comes to physical placement, compared to other outlets, supermarkets establish displays in
perimeter areas most often. They also use lobby and checkout areas. Other retailers emphasize the more
profitable center store.
“We will continue to develop our private brands
as a strategy to continue to improve our
margins. We believe a powerful differentiator
will be how we capitalize on private brands
with our shoppers and markets.”
—CEO, REGIONAL RETAILER
“We are increasingly promoting private
brands with national brands. We’re finding that
these multi-brand promotions are working.
Recently, we began offering private brand only
promotions and they have been very successful –
we expect to do more.”
—CHIEF MERCHANT, REGIONAL RETAILER
In terms of product segments, private label
is receiving more display attention across all
channels. But despite success stories, just 15
percent of retailers devote displays to this growing
merchandise area according to research compiled
by Booz Co. and CROSSMARK. The majority
continue to emphasize national brands.
Many private brand displays highlight center
store products. At the perimeter, they are most
prevalent in bakery (28 percent of stores) and
meat, seafood and poultry departments (25
percent). These are followed by dairy, pharmacy
and frozen. These fresh areas often have less
national brand presence than shelf stable ones.

% stores
Increase in Private Brands Promotions
28%
22%
Bakery Meat, Seafood, Poultry Dairy Pharmacy Frozen
Source: 2013 CROSSMARK In-Store Marketing and Merchandising Assessment; Booz Company analysis
20%
19%
25%
For both national and private brands, two-thirds of displays across all channels revolve around the core
value propositions (23 percent) and convenience/themes (43 percent). Core value propositions are those
factors that have traditionally been seen as basic drivers of consumer decisions including low prices,
high quality fresh produce and other fresh food, items on sale or money saving specials, varied selection
of grocery products, convenient location, and friendly personnel/good customer service. Convenience/
themes displays focus on snack and meal solutions and special occasions. Health and wellness displays,
which can also focus on organic, sustainable and eco-friendly products, are employed by 19 percent
of retailers. Value-seeking displays—or special price offers—are used by 14 percent. Surprisingly, just 1
percent stage ethnic displays.
Individual channels dominate certain areas. Supermarkets, for one, address health and wellness and core
value the least. These areas are dominated by drug (health and wellness) and dollar stores (core value). But
supermarkets lead in ethnic displays—even though out of 27,035 displays examined across all channels,
only 109, or 1 percent, conveyed ethnic-directed messaging. Fifty-eight of the 109 ethnic displays were in
supermarkets.
Given America’s changing demographics and retailers’ need to better know customers, this bears further
scrutiny. It also raises the question of whether or not retailers (and suppliers) are using the right display
strategy to change their value proposition and differentiate.
Despite the uncertainty around display strategies, retail and CPG executives interviewed by Booz Co.
for this analysis believe focusing on the overall shopping experience is a key growth enabler. They also feel
that personalized pricing and promotions will play key roles in digital and virtual marketing platforms.

57%
14%14% 14%
1%
Convenience and themes Health and wellness Core value Value seeking Ethnic
Source: 2013 CROSSMARK In-Store Marketing and Merchandising Assessment; Booz Company analysis
% display theme
Supermarket Display Activity by Theme

V. Tomorrow’s Merchandising
and Marketing Trends
Looking ahead, traditional elements like price/value and in-store displays and promotions will continue
to drive food sales. But the future of retail will also involve better use of data, further understanding
of shopper behavior and accepting that bricks and clicks will play vital, interchangeable roles. Retail
executives interviewed for this report described these key growth enablers as “personal, digital and virtual.”
1. Personal: To develop personal interactions with consumers, retailers will need to balance
taking advantage of the reams of data available about consumer purchasing behavior
without being invasive. This will involve retailers communicating at every turn of the shopper
experience so that they know their customers well enough to honor what they value,
respect and think.
This is best done if retailers do not cross the precarious communication line that would
make them feel they know customers well enough to predict or manipulate them. Shoppers
do not want to feel like they have been “figured out.” Retailers will find more fertile ground
if they convey that they are aware of peoples’ values, care about their concerns and share
their commitment to nurturing their families, communities and country.
2. Digital: Success will involve taking advantage of the ability to know when, where and
why customers are shopping so retailers can maximize their ability to assist them. This can
involve helping them procure desired items as fast as possible and checking out quickly
if they are hurried. It can mean helping them find the ingredients for their grandmother’s
favorite Thanksgiving recipe. Or, it can ensure that they receive the most useful coupons
based on their buying patterns. The more real time and personal these interactions are,
the better. People also do not feel their privacy is being invaded if they are offered real
help, real value and real contributions towards achieving their goals. People only resent it if
somebody is trying to use personal information to get them to do something they might not
want to because it helps the other party.
3. Virtual: The future retail experience requires vigilant awareness that there are no
boundaries to how or where customers shop. They have options as to where their food is
purchased and about whether they want to put it in a real grocery cart or a virtual one.

“Mobile is the most disruptive piece of
technology available today. By 2018, 20 percent
of purchases will be influenced by mobile, maybe
more.”
—CEO, SERVICE PROVIDER
“Supermarkets are becoming more granular by
store, by day and by time, understanding how
consumers shop before they even shop.”
—PRESIDENT, WHOLESALER
Shoppers want to continually know they are
valued. This will make loyalty programs crucial
to retail’s future. Programs will include elements
mentioned above. But they will involve new
strategies, approaches and technologies. And
they will be more comprehensive, delivering more
than points.
Mobile technology should play a key role, with
tomorrow’s shoppers embracing personal in-store
mobile offers above all else. This is followed by
the ability to add value to the rewards program,
special treatment based on loyalty level and
in-store offers that recognize a shopper’s
significance.
From a shopper perspective many of these next-gen capabilities
will grow in importance
20122013future
Personalized in-store offers – mobile
Special treatment based on loyalty level
In store offers that recognize my value
Overall recognition that I am a valued shopper
Items that I may like based on recommendations
The ability to value add to rewards program
Source: Booz Company analysis
What is Important in a Loyalty Program?
N=680
4.3
2.4
2.1
4.0
3.6
3.3
3.7
3.5
2.9
3.5
3.2
2.8
3.4
3.3
2.1
3.0
2.8
2.6
Despite the evolution of new technologies, brand trust, circulars and price continue to be core shopper
influencers both inside and outside the store. According to Booz Co. consumer data collected in
conjunction with this analysis, during the planning phase of a shopping trip, 77 percent of consumers
cited previous brand usage and trust as the most important criteria, up from 74 percent in 2010. This was
followed by relying on newspaper circulars from home, which was chosen by 47 percent of people in 2010
and 54 percent in 2012.
In some cases, influencers remained the same but their method of delivery changed. Coupons sent home
were significant to 55 percent of respondents in 2010 and to just 46 percent in 2012. However, interest in
online coupon sites shot up from 15 percent in 2010 to 47 percent in 2012.

At point-of-purchase, shopper loyalty card discounts topped the list at 53 percent, up from 40 percent
in 2010. This speaks to both the growing number of loyalty programs and their further reach and
sophistication. Consumers are also paying more attention to labeling and packaging: 19 percent said this
was important in 2010 versus 37 percent in 2012. Interest in in-store flyers, however, fell from 48 percent
in 2010 to 35 percent in 2012. Most likely, this is due to the growing popularity—and lower costs—of
digital marketing.
Brand trust/circulars/price continue to be at the core of influencing
shopper decisions both today and going forward
2010 2011 2012
Previous usage and trust of the brands
74% 76% 77%
Newspaper circulars from home 47% 52% 54%
Coupons sent to your home 55% 50% 46%
Requested by a household member 39% 49% 53%
Coupons from an online coupon site 15% 35% 47%
Item Price 83% 86% 88%
Shopper loyalty card discounts 40% 47% 53%
In-store flyers 48% 41% 35%
Product Label/Packaging 19% 34% 37%
Signs or displays in the store 29% 29% 26%
Marketing Influencers in Item Selection
Percent of Shoppers Rating “Strongly Influenced” or “Influenced”
Source: The Dialogic Group; 2013, n = 1000
Pre-Shopping
Influencers
In-Store Influencers
Much of the planning and research phase of a shopping trip involves digital media, with two-thirds of
shoppers turning to online or mobile vehicles to find deals. Tech-savvy early adopters are most likely to do
this. Forty-eight percent of them view circulars on retail websites versus 41 percent of other shoppers, 47
percent print internet coupons compared to 41 percent of all others and 37 percent go to store websites
for coupons versus 29 percent of others.
Early adopters also dominate when it comes to visiting brand websites for coupons and viewing store
circulars on other websites. In some instances, early adopters are two or more times likely to use certain
technologies.

Shoppers are shifting to digital vehicles and mediums at home where
more than half search for deals digitally in some form
Link coupons to my frequent shopper card
Go to general interest websites for coupons
Get coupons on my mobile phone
16%
11%
5%
View the store circular on another website 17%
Go to brand websites for coupons 27%
Go to coupon websites for coupons 29%
Go to store websites for coupons 30%
Print coupons from the internet 42%
View the store circular on the retailer’s website 42%
Clip coupons from the newspaper inserts 59%
Check store circular in the newspaper 71%
All Shoppers
Digital Deals
Percent of Shoppers who Participate in Each Deal-hunting
Activity before Shopping (do at least half of the time)
Source: Survey of 2,000 shoppers for Shopper Marketing 4.0 study conducted Summer 2010 by Booz Company in collaboration with Grocery Manufacturers Association
Over the past 15 years or so, retailers have been aggressively launching and augmenting loyalty programs.
While 85 percent of grocery customers participate, less than 25 percent of them say they are influenced by
these initiatives when it comes to store choice, while 40 percent say loyalty schemes make no difference.
Just 23 percent say they are strongly influenced by them.
This behavior is very costly to retailers. For programs to be efficient, it is important that retailers use data
analytics to drive incremental sales even to relatively unengaged segments. The goal is to create programs
that are more tailored and offer personal value.
Today, consumers actively use loyalty programs to obtain lower prices, coupons and freebies. But
initiatives fall short when it comes to incentives like inviting shoppers to participate in special store
experiences or reminding them to replenish certain products. Recipes and health tips are also of interest.
While some loyalty programs involve cross promotions of fuel and food, they do not increase overall
category basket size. Through interviews with executives included in this analysis, Booz Co. identified an
emerging ideal program concept called “total wallet loyalty.” This type of initiative has all the elements of
an ideal loyalty program – ubiquity, exclusivity, high perceived value, personalization, convenience and high
ROI. Whereas current loyalty programs focus on what Booz Co. calls aligned rewards in grocery and
fuel; the total wallet loyalty concept involves a much broader swath of consumer spending, including gas,
grocery, telecommunications, drug, and department store purchases. Involving both online and mobile,
total wallet loyalty helps acquire new customers while increasing the value of existing ones.

Less than a quarter of shoppers are strongly inﬂuenced by loyalty schemes
Loyalty Schemes…
…make no
difference at all
to my choice
of store
…make a
great deal of
difference to
my choice
Grocery Customers:
Sensitivity to Loyalty Schemes
100%
Grocery
1
2
3
4
5
6
7
Rating
Source: Booz Consumer Survey, Booz Company analysis
41%
8%
6%
12%
10%
8%
15%

IV. Technology Trends
Technology will be the most critical catalyst of change as online, mobile and other variables continue to
touch new areas of consumer research, marketing and purchasing. Inside and outside the store, this has
prompted retailers to take a close look at how consumers use technology and how they can capitalize on
their habits. Below is a look at some of the key drivers of the technological revolution:
Online grocery ordering: One of the biggest competitive threats to supermarkets and other traditional
food channels will be online grocers, which are expected to command at least 11 percent of the food
market by 2025, according to AC Nielsen and Booz Co. But the segment has been slow to develop. It
was not until the widespread use of home broadband in the mid 2000’s that consumers began to seriously
embrace the concept.
Today, just $5.8 billion of total food and beverage sales are conducted online, according to the U.S.
Department of Commerce (2012). This represents an estimated 2 percent to 3 percent of total grocery
sales. All initiatives are regional, with only a half dozen companies providing home delivery. Online
electronics sales, in contrast, are $56.8 billion; online apparel is $54.2 billion.

As with other online categories, grocery consumers benefit from being able to shop for groceries when
and where they wish—even in their bathrobes. What they order and how often, though, will be determined
by category and purchasing occasion.
In the future, 65 percent of online food purchases are expected to be made up of non-perishables, further
eroding center store profits, according to estimates from Booz Co. Since shelf stable items can be price
sensitive, shopping is often carefully planned and scheduled. Online, this type merchandise is purchased
once a week or less, with consumers spending $80 to $100. There are cases, though, when shoppers buy
these items to fill an immediate need, often for tonight’s dinner. Then, products are not as price sensitive.
Thirty-five percent of online orders will likely come from perishables, estimated Booz Co. Since quality
can vary significantly, many consumers prefer to buy fruits and vegetables in person. But as online
retailers become better at using population density data, same and next day delivery are expected to
improve and fresh will comprise more of the online grocery market. E-tailers are also focusing more on
cost, convenience and easy-to-navigate websites, which could also make online grocery shopping more
attractive. But an online grocer’s strongest differentiator will be the quality and breadth of its perishable
assortment and how well it serves shoppers’ needs.
Smart phones: The role of smart phones in the retail experience reverses long-held beliefs that shoppers
revolve around stores. Today, stores revolve around shoppers in that the entire store—along with its
competitors—is carried in the consumer’s hands everywhere they go.
For many people, smart phones have already become akin to human appendages and are necessary for
survival. So much so that, according to an IDC research report titled “Always Connected,” 79 percent of

smart phone users have their phone on or near them for all but two hours of their waking day; 63 percent
keep it with them for all but one hour. For many, these devices have become their bill fold, watch, media
source, book and music library, notebook, mail box, movie theatre, life recorder and sharer, map and
weather station.
While many retailers’ mobile initiatives are still in their infancy, it should not take long for them to grow
up. By 2017, Booz Co. predicts smart phones will be 10 times more powerful. And they will have
new features, such as 3D and other type screens, near field communication (NFC) automatic payment
interfaces, location services and biometrics.
By 2016, the number of smart phone users in the U.S. is expected to increase 21 percent to 192 million.
The number of apps should climb from an estimated 50 million today to 94 million. As smart phones
become more complex and prevalent, so will retailer/consumer interactions. According to 68 percent of
1,500 shoppers surveyed, smart phones are expected to become an integral part of the retail experience.
A majority of retailers and CPG C-level executives interviewed by Booz Co. concur with this statement.
Most also expect in-store technology to be enabled by mobility. Key applications will be: price
transparency; in-store navigation; electronic rewards; payments; checkout; geo-positioning and loyalty.
Retail executives also pointed to the use of advanced analytics and big data, both of which are still being
studied and developed.
“We know we need to solve the multi-channel
retailing problem. However, with the pace of
technology change, we are not sure where to
start investing and the prioritization process is
very challenging.”
—CEO, REGIONAL RETAILER
“We are having solid success with our
“Bricks and Clicks” model – however, it is costly
and we are unsure as to how to integrate with
the stores – big challenge.”
—CMO, NATIONAL RETAILER
Today, smart phone use is already widespread
among consumers planning a purchase. The
most common practices (each 38 percent) are
comparing online prices while shopping in a
physical store and browsing products through
websites or apps. Other popular activities include
reading online product reviews, searching for/
using online coupons, purchasing products and
scanning bar codes for additional information.
Just 9 percent use their phones to purchase
products at point of sale. This should change
as more retailers adopt mobile wallet platforms.
Starbucks, for one, is already using Smart Wallet
in 7,000 stores in addition to its own mobile
payment system. Starbucks has conducted 100
million mobile transactions since 2011.

Shoppers are most likely to use mobile technology to obtain lower prices,
read online reviews and search for online coupons
Paying for goods or services at the point of sale 9%
Placing a bid through an online auction 15%
Using location-based services to ﬁnd a retail location 18%
Scanning a barcode for price/product information 22%
Purchasing products 22%
Searching for/using online coupons 24%
Reading online reviews of products 32%
Browing products through websites or apps 38%
Comparing prices online while shopping in the store 38%
Mobile Shopping Activities in the Past 30 Days
% of Smartphone Owners
Note: Q17.1A – Please select all that apply. Smartphones are likely to become an integral part of the shopping journey, which of the following do you see yourself using in the future?
32% of respondents (494 of 1503) selected “None of these”.
Source: Booz Company 2013 Consumer Trends Survey; Booz Company analysis; Nielsen analysis
Other technologies: While nearly all executives queried cited mobile as the most important driver of
change, other technologies should also play important roles in helping shoppers discover new products,
allowing retailers to offer just-in-time incentives and presenting relevant product selections.
Among executives who participated in this study, mobile’s importance was followed by Wi-Fi/near field
communications, onboard shopper personalized data base and instant promotions. Seamless payments,
geo-location and smart shelves were also cited as significant.
In-store technologies are destined to deliver a “responsive store”
environment for shoppers
Technologies That Will Drive The
Shopping Experience Transformation (by order of mentions)
N = 10
Source: CEO CTO Interviews with NCR Technology, IBM Retail Group, and HP Retail Group; Booz Company analysis
1. Mobile shopping
2. Wi-Fi/Near Field Communications (NFC)
3. On-board shopper personalized database
4. Instant promotions
5. Seamless payments
6. Smart shelves including stocking
7. Geo-location

Multi-channel Retailing: Retailers are looking for ways to integrate the new technologies and
applications that have come into being over the past two decades. Their aim is to deliver a seamless
experience that embraces bricks and mortar, clicks and bricks and clicks. But they must get out of the
comfort zone of store-centric thinking and begin looking at the industry in a more customer-centric fashion.
The seamless strategy requires that all aspects of the supply chain and related elements be fully integrated
and visible to all parties. This generally means that both bricks and clicks are working off the same
inventory and that every move that one channel takes is visible to the other. Product and service offers,
along with customer contacts, should be integrated in the same way. Websites should accessible via both
online and mobile devices.
Success in multi-channel retailing requires seven core competencies
across the entire organization
Multi-Channel
Food Retailing
“Best Practices”
Fully
Integrated
Supply chain
Seamless
Shopping
Experience
Consistent
Product and
Service Offers
Seamless
Assortment
Custom and
Mobile
Optimized
Website
Branded
Mobile
Application
Integrated
Customer
Contact
Organization
Source: Booz Company analysis
“Both retailers and manufacturers need to look at
other industries that are further along than food
retailing and learn from them.”
—CEO, CPG MANUFACTURER
Big Data: When combined, online and mobile
technologies, along with POS, social media and
other digital forums, Big Data can provide retailers
with every detail about every shopper. And they
can do it 24/7 during every store visit and at every
interaction. But due to cost, available technology
and other limitations, retailers are challenged as to
how to analyze and apply this Big Data.

“If you can’t translate the reams of [Big Data]
information into a strategy that can be executed
on the front lines, you don’t really have much.”
—COO, CPG MANUFACTURER
“The coming of “big data” has not fully arrived
yet. So, there is potential for a bunch of retailers
to become the next Amazon/Google.”
—COO, REGIONAL RETAILER
In a sense, Big Data embodies the entire
consumer-centric concept in that it harnesses
almost all the elements retailers need to
understand an increasingly complex shopper.
It involves knowing shoppers as individuals
and not just as a group or category. It includes
understanding their likes and dislikes as well as
the differences between what they say and what
they do without disrespecting the former. And it
means understanding that the consumer and retail
worlds never stand still.
But while Big Data and other technologies may
change how retailers achieve their goals, they will never change the goals themselves. As FMI president
and CEO Leslie G. Sarasin noted in a May 2013 industry speech, “Our job, no, our mission is to feed
families and enrich lives. We do that best when we understand who it is we seek to feed and how it is their
lives can be enriched.”

V. Conclusions
The five trends highlighted in this report are expected to impact the future of food retailing through 2025.
The data and insights provided in this summary are intended to help retailers better understand these
changes and prepare strategies to maintain and grow their competitive positions.
■■ Consumer Trends: Hispanic and Asian populations are expected to outpace the growth
rates of traditional Caucasians and will present opportunities for ethnic-based marketing
and merchandising. But the largest opportunity may come from broader assimilation
of ethnic foods by other ethnic groups. As the Baby Boomer generation ages, grocery
retailers will need to rethink how to effectively address their needs.
■■ Overall Grocery Demand/Capacity: The research points to uncertainties going
forward. Per capita demand is projected to remain flat. Yet grocery capacity has grown
and is expected to continue to grow primarily through capacity additions in non-traditional
channels. Online retailing will encroach on bricks and mortar sales, growing to an estimated
11 percent of the market by 2025. Retailers who can successfully differentiate from and/or
integrate these competing influences will likely succeed best.
■■ Driving the Consumer Shopping Decision: Six consumer defined choices and
tradeoffs are at the core of today’s overall shopper value proposition when deciding where
to purchase groceries:
•• Low prices
•• Sale items or money saving specials
•• High quality fresh produce and other fresh food
•• Varied selection of grocery products
•• Convenient location
•• Friendly personnel / good customer service
Grocery retailers will need to address price versus value creation positioning strategies.
The changing dynamics of consumer behaviors (including ethnic population differentiation)
underscore the need for understanding grocery shopper at highly granular levels.
■■ Tomorrow’s Merchandising and Marketing Trends: Overall, there are five forces
in merchandising platforms that dominate in grocery retailing merchandising: core value
proposition, value seeking, convenience/themes, health and wellness, and ethinic. These
merchandising behavior sets fundamentally inform retailer strategies for in-store positioning,
product offers and display. For consumers, value seeking and convenience are the most
important drivers when shopping for groceries. A capacity to use display beyond core value
propositions – especially to support private-brand strategies – is likely to become more
important.

Looking ahead a capacity to offer hyper-local assortment, personalized pricing and
promotions, and seamless multi-channel retailing is going to be important. One way
to deliver against these capabilities could be the development of a “total wallet loyalty”
strategy that incorporates web and mobile along with various partnerships to a far greater
extent than the loyalty programs of the past.
■■ Technology: Executives interviewed for this analysis agree that technology will be the
single greatest catalyst of change in the retail environment. Mobile technology use will
continue to grow at a rapid pace and will evolve the shopping experience. Tied to the
growth of mobile and other technologies, retailers will have access to huge volumes of
data. Those who are successful in harnessing the flow of data and applying meaningful
analytics will reap rewards. Most retailers will strive to implement a seamless retailing
environment integrating their specific channels. This will involve collaboration with supply
chain partners, more seamless multi-channel marketing, localization, and assortment, and
integrated management of customer relationships (personalization).

Food Retailing 2013: Tomorrow’s Trends Delivered Today Executive Summary

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