What Large Retailers Can Learn From Limited Assortment Grocery Stores

In a market saturated with every type of grocery retailer a consumer could imagine, what makes one store stand out? Large grocery retailers hold several obvious advantages when it comes to drawing customers: Size, selection, convenience, location variety, competitive pricing. These same advantages, however, might also lead to certain pitfalls in a consumer experience: Less employee availability, less innovative products, less exciting shopping. Limited assortment retailers—like Aldis and Trader Joes—seem to thrive in the spaces where the larger stores fall short. What makes the operation of a smaller, less assorted retailer succeed in these categories? And how can the big retailers learn from them?

In this blog post, we examine realistic ways that large grocery retailers can learn from the growing popularity and success of limited assortment retailers. Topics include: 

  • Treatment of employees & exceptional customer service,
  • Creating a singular shopping experience,
  • Narrow product selection without sacrificing quality, value, or innovation,
  • Emphasis on sustainability efforts

Treatment of Employees & Exceptional Customer Service 

It should come as no surprise that staff friendliness and service ranks high among factors a consumer considers when choosing where to grocery shop. A hallmark of limited assortment retailers is consistently positive employee and customer interactions. Trader Joe’s is known for hiring employees who like interacting with people; the store consistently gets top ratings for employee friendliness, the speed and proactiveness of its cashiers, and the overall quality of customer service. But beyond this, they care about their employees. During the pandemic, the retailer has made efforts to prioritize employee health and wellness.  

What can large retailers learn from the exceptional customer service offered at smaller retailers? A poorly paid, poorly trained, and poorly motivated employee at a large grocery store may be asked to balance a task like restocking, checking out, or bagging with the constant possibility of having to answer unpredictable customer inquiries— hopefully while possessing enough knowledge of the store layout and product selection to do so successfully. An employee who is unmotivated to perform well may flounder, answer incorrectly or unconfidently, and set off a chain of events that lead to a frustrated consumer with a bad impression of the retailer overall. As Zeynep Ton writes in Harvard Business Review, “When these nitty-gritty, ongoing operational issues are handled by low-paid employees at understaffed stores, the consequences for operational execution can be severe.”                   

The way you treat your employees directly impacts how they treat customers in return. An employee with high morale, compensation that aligns with their labor and qualifications, and an overall feeling of being a part of the mission and care of the company—rather than just a cog in the wheel—is an employee more likely to enjoy their job and improve the store environment for customers. Trader Joe’s maintains good treatment of their employees, consistently excellent customer service, and low prices. While there are obviously financial and operational differences between the operations of a Trader Joe’s and a larger grocery retailer, taking notice of how such a company treats its employees and how that treatment can directly affect customer service is something to consider when seeking to improve quality of customer service.

Creating a Singular Shopping Experience

Just like phenomenal customer service, an exceptional and positive shopping experience is best practice when wanting to keep shoppers coming back. How can you set yourself apart from the competition when it comes to shopping experience? Establishing even small elements of an individualized in-store experience keep customers loyal because they enjoy visiting your store. 

Consider why Trader Joe’s is famous for its one-of-a-kind shopping experience. “Bringing in billions of dollars from a cult of customers is no accident,” Catherine Clifford writes for CNBC. “The brand has carefully pruned its business strategy to inspire evangelism among its customers.” Shopping at Trader Joe’s isn’t just shopping: It’s a treasure hunt. The retail space is decked out in tropical decor, the employees are dressed casually, and the product signs are handwritten in bright, welcoming bubble-letters. Trader Joe’s feels homey and local; the retailer offers a selection of fun and seasonal products while consistently providing customer favorites in their in-store, relatively inexpensive Trader Joe’s brand. Establishing this unique store culture and brand identity is what makes Trader Joe’s such a consumer favorite.

Consider what could make shopping at a bigger retailer fun for the consumer: What product placement, display, or innovation of layout or signage could encourage a playful element in a consumer’s experience? Appealing and interesting physical advertisements can actively engage the consumer in the experience. Educating a customer about where a product comes from, what type of recipe it could be used in, or how they might use it in a creative way can add an element of engagement that is often missing or overlooked in the shopping experience. 

Discount grocery leader Aldi takes a different approach with stores that are quick and easy to shop. Shoppers are short on time and money—especially nowadays, giving COVID-era concerns for health and safety.  Customers appreciate that the small store size and limited product assortment encourages less time spent shopping by offering less choice without sacrificing quality. 

Similar to Trader Joe’s—just on a much smaller scale—Aldi also seeks to provide customers with a rotation of unique products, mixing in a treasure hunt element. The “Aldi Finds” program puts out nearly 100 unique products, ranging from seasonal items to home furnishings, small kitchen appliances, pet sweaters, and more. Vice president of corporate buying for Aldi U.S., Scott Patton, says, “We’ve carefully designed our stores and product selection to give shoppers a fast and convenient experience where they can also have some fun.” This model is, and continues to be, wildly successful for Aldi: Even in the midst of pandemic, the retailer is on track to becoming the third-largest U.S. grocery retailer by store count by the end of 2022

Consider how a large retail setting could highlight local vendors or innovative products that fascinate a consumer enough for them to stop and take a closer look. What is unique about the community surrounding a large grocery store that a retailer can take advantage of displaying in the midst of passive grocery shopping? Brand innovation and assortment is certainly appreciated by consumers, and a careful cultivation of said assortment can mean a highly individualized experience that a consumer will come to associate with a certain brand—which, in turn, encourages loyalty and future visits. 

Narrow Product Selection Without Sacrificing Quality, Value, or Innovation

SKU rationalization is a tool that can help large grocery retailers manage and narrow their inventory without sacrificing quality or value. It also allows room for product innovation that can draw consumers in and keep them engaged in the shopping process. This is something Trader Joe’s and Aldis does exceptionally well: Given the small size of the stores and physical proximity of product, a shopper is more likely to make snap purchasing decisions in a shorter period of time. 

Trader Joe’s carries about a 10th of the SKUs traditional grocery retailers do. While some products remain consistent and reliable staples, the grocer’s flair for innovation that feels fun is absolutely unmatched. Experimental products make shopping feel like exploration and discovery, which encourages both a positive overall experience and a higher chance for impulse buying. Not only is the excitement of discovery psychologically appealing, but limited run items create a sense of urgency and the impulse to buy on a whim, while demand is high and supply is restricted.

Customers appreciate a retailer’s attention to reducing product variety in a way that doesn’t sacrifice innovation. Shoppers look for unique products and brand variety, but not in excess. Reducing a particular item’s variety to a well-edited assortment means a customer spends less time deciding what to buy, which in turn decreases the time a customer spends selecting their items in the store, which, ultimately, increases a customer’s satisfaction with the overall shopping experience. Read our recent blog post on SKU rationalization to learn more about how the system can streamline and improve your supply chain from warehouse to shopping cart.

Emphasis On Sustainability Efforts

Grocery retailers—no matter how big or small—have a responsibility to make sustainability a priority. Consumers expect this in 2021 and beyond, and they want to know about what the stores they shop at are doing to combat their effect on the environment. Take Aldi for example: The retailer received a 2020 Green Power Leadership Award from the Environmental Protection Agency and several other honorable recognitions for their long-term efforts in sustainability. Aldi demonstrates dedication to use of and transition toward greater energy efficiency, including use of green power, environmentally friendlier refrigerants, energy-saving LED lighting, energy-efficient refrigerated systems, and rooftop solar systems. Efforts also extend to recycling, reducing wasteful packaging, and minimizing and preventing food waste. 

Larger retailers would do well to be as transparent as Aldi is in their efforts. Retailers providing clear and specific information about what they actively do to reduce their environmental footprint is appealing to consumers who put their own care into such efforts—and consumers do care about sustainability. A 2020 report on consumer behavior by IBM shows that almost 6 in 10 consumers (57%) are amenable to shifting buying behavior in order to reduce environmental impact; with consumers who claim sustainability is a priority, an even higher 77% are willing to change their consumption habits based on retailer offerings. 

Clear signage and advertisement of sustainability efforts will encourage consumers to feel involved in the sustainability effort, as well as just better, overall, about the ethics of the store where they are shopping. Consumers expect clean label products to use packaging rather than plastic, like plant-based or renewable materials, and are more likely to shop at grocery stores that carry these types of eco-friendly items. Providing products with eco-friendly packaging that gives the consumer clear instructions on how to recycle extends the feeling of participating in sustainability efforts all the way from the checkout line to the home. 

Shoppers who are doing their own part to reduce environmental impact like to shop with companies that share the same priorities, and are willing to pay for products that align with these principles. Beyond a social responsibility to contribute to the reduction of physical waste and energy consumption, large grocery retailers will find embracing sustainability efforts improves customer satisfaction and keeps consumers who care returning to their store.

Conclusion

There will always be key differences between large retailers and limited assortment retailers. Price competition almost always goes in favor of the smaller retailer, whereas size and breadth of selection and services is a huge advantage of a larger retailer with more physical space. Regardless of pros or cons for either size store, the larger retailer can still learn a lesson or two from an Aldi or a Trader Joe’s in areas where they consistently thrive, such as customer service, product innovation, and sustainability. In a market where consumers have a plethora of choices and little time on their hands, every small decision about the in-store shopping experience counts. But no matter the size of the retailer, one principle perseveres: Thinking forward is best practice as the consumer and the world in which the consumer lives continues to change.  

To learn more about using SKU rationalization, download our e-book on the subject, which brings together insight from Date Check Pro and Itasca Retail. In this e-book, you learn:

  • Why the right category assortment is important for stores and their customers.
  • How to avoid the factors that lead to having too much inventory. 
  • The essential data needed to guide SKU rationalization decisions. 
  • The solutions that will enable retailers to get the job done right.
Download the SKU Rationalization eBook

Keep an eye out for our next eBook: 2020 Consumer Survey Report Index