Competition heats up in natural

Natural Food Merchandiser's annual Market Overview took place last week and almost the entire webinar focused primarily on competitive threats facing natural retailers.  At the heart of the discussion was an overview on how both Kroger and Walmart are capitalizing on natural product trends to drive sales in their stores.

Bill Crawford, the Director of Retail and Custom with New Hope Natural Media, provided the industry overview from NFM's recent survey of more than 400 retailers, while Joe Dobrow, author of Natural Prophets, provided insights about the competitive threat from conventional/mainstream retailers.  Together they gave a great overview of the natural channel and the competitive landscape.  

I wish they had included in their survey questions about how consumers shop. Specifically, where do natural product shoppers purchase the bulk of their natural product staples?  Consumers have learned to cherry-pick different retailers to fulfill different needs. What's most likely the case is that consumers are buying more of their natural product staples from mainstream retailers and shopping natural product retailers for their specialty items - items not available at mainstream retailers.  

Dobrow's and Crawford's analysis validated everything I've been saying for several years now. The competitive landscape in natural is changing. Mainstream retailers are working harder than ever to capture a larger share of natural products sales. Natural retailers need to become more strategic if they hope to compete effectively against their mainstream counterparts.

Joe quoted a comment made by the COO of Kroger in a December 6, 2013 FoodBusinessNews article stating that “if the retailer’s natural food sales were compared to those of other natural foods retailers, Kroger would be the second largest retailer”.  The article went on to say that Kroger plans to continue growing their natural and organic sales “because that is where the consumer is headed”.  Joe also highlighted a market basket analysis he recently completed in Phoenix where Kroger's market basket was 20% less expensive than Whole Foods and 13% less expensive than Sprouts (the same 33 items were purchased from each retailer).  

As more and more consumers continue to adopt healthier lifestyles, there needs for healthier product solutions continue to grow.  Health-conscious consumers will typically pay a premium for quality products that meet their specific needs.  While this is great for natural product manufacturers, it creates a real challenge for natural product retailers to remain competitive.

Does this mean that natural product retailers are in jeopardy of being eliminated by their mainstream counterparts?  Not at all!  What this does mean, however, is that natural product retailers need to be more strategic when it comes to their product assortment, the way they merchandise and promote products, and the way they price products.  

I've always said that natural products retailers “do natural” far better than anyone else - especially their mainstream counterparts.

Shopper’s perceptions equal their reality.  Consumers are continually evaluating retailers on every shopping trip. For this reason, natural product retailers need to be competitive on the top selling items in their market.  This certainly doesn't mean the natural retailers should become a carbon copy of their mainstream counterparts.  It does however mean that natural product retailers need to work hard to capture more of the natural products sales in their market.  

The easiest way to do this is to competitively merchandise, promote, and price select items available for sale at other retailers.  Once a shopper enters your store, you then have an opportunity to interest them in some of the many other products you sell that are not available anywhere else.