How following neighborhood demographics can bring in cash for your Grocery Store

Shopping for groceries is a weekly, sometimes daily, occurrence.  Of all of the shopping consumers do, supermarkets are the places frequented most and because of this, shoppers become personally connected to them.  They get to know the layout of their favorite stores, are encouraged to forge a relationship with their butcher and fishmonger, perhaps even have a favorite cashier who packs up their groceries exactly as they prefer.  This is even more true in the case of neighborhood grocery stores, who are an essential part of their communities, trusted to carry products that their customers rely on to feed themselves and their families.

But as neighborhoods experience shifts, whether from age, ethnic or other demographics, local grocery stores must be keen to respond accordingly to ensure they continue to service the area population.  As Millennials shift into a head of household position, their tendencies towards both healthier choices and reliance on technology affects their attitudes and shopping behaviors dramatically. Urban areas that may have once been dominated by a specific nationality, shift to welcome new ethnic communities. The cultural traditions and food preferences of that group must be accounted for in order to maximize business growth and profits.

Changing Neighborhood Demographics

Awareness of neighborhood demographics, especially changing ones, can be leveraged to increase sales by converting these new residents into shoppers as well as by optimizing product offering and associated marketing efforts.  It is important to focus on how to appeal to specific demographics including age, ethnicity/language and interests/lifestyle in the area where your store is based (grocery, quality food, etc).

We’ll break each of these down a bit further, beginning with Age.

Why Age Matters

To start, the average American is living longer than previous generations, and having kids later (or not at all).  Additionally, some are choosing to stay single, all of which affect the purchaser and type of purchase. According to Forbes, there’s been a steady uptick in packaged single-serving food items in grocery stores, a nod to this trend.  On the flip side, one in five Americans lives in a household with more than one generation – a record 60.6 million people. Interestingly, this has given rise to Millennials opting to borrow cars, either from family members or on demand services like Uber and Zipcar, shifting their spending to smartphones and digital equipment rather than monthly car payments.  For natural grocery leader, Whole Foods, this means that even in suburban locations, they now seek out densely populated locales, convenient for both drivers and pedestrians. Lastly, many markets, especially large cities such as Chicago, IL and Washington, D.C., are seeing an older generation moving back to urban areas. Causing a sort of “renaissance of the neighborhood,” according to the Washington Post, as empty nesters downsize while looking for more entertainment and activity for their new found free time.  Corner stores have come nearly full circle from their beginnings as crucial to the foundation of a community, to a downturn that, at worst, depicted them as lowbrow and undesirable beacons of a downtrodden area, and now poised for a rightful return to glory as important pillars of the neighborhood, serving as much as a source of physical sustenance as a gathering place for sharing and socialization.

All of these factors bode well for the neighborhood grocer, underscored by a rising sentiment of supporting small and local businesses, as long as shop owners ensure they understand the needs and preferences of these new patrons.

How ethnicity and language demographics affect your business.  

Over time, neighborhoods that were once dominated by a particular subset of the population may see shifts that bring new groups into the area.  Buzzwords like “food desert” and “gentrification” give a certain impression that these are based solely in economics, which can play a role, however, often doesn’t paint a full picture.  As demographic shifts occur, typically over time, customer preferences follow, especially in grocery. For example, Pew has predicted, “Asians are now on target to surpass Hispanics as the largest foreign-born group in American by 2055.”  One Mercato client, experiencing this first hand, noticed a neighborhood population shift that brought a large population of Korean Americans.  Catering to this potential new customer base, the store incorporated Korean products, language and hashtags into their social media posts and saw both an increase in traffic as well as an unsolicited visit from a local Korean news station.  Recognizing a potential new customer base and communicating with this group directly created a welcoming invitation and showed support of this community from the neighborhood grocer.

Being aware of community changes that impact tastes, customs and traditions can open your business to new product offerings, and connecting with members of these communities in their own language builds a stronger bond.  Data, whether via third party research or directly surveying residents, can also help determine what new products can help your store succeed with new groups.

Interests and lifestyle changes

Major shifts have and continue to occur as it relates to consumer interests and lifestyle specific to food consumption and purchasing.  One such trend is an uptick in the focus on health products, often driven by a higher level of education. Whole Foods takes advantage of this, counting on consumers who are willing to pay more because they know about the health benefits of eating organic or are interested in exploring less common foods.  

Across the country, knowledge has spread regarding food choices, which, when coupled with higher income can lead to more luxury spending. According to Magid, a Minnesota-based research firm, “half of U.S. consumers shop at three or more stores to get all their groceries, which include a growing number of specialty items.”  Willing to forgo convenience to secure the products they prefer, either nutritionally, culturally or otherwise, grocery shoppers are knowledgeable about products and spend time seeking them out.  

Further, in “Grocery: The Buying and Selling of Food in America,” Michael Ruhlman, well known culinary author, writes that grocery stores are “ in truth a barometer of our country’s collective state of mind.”  From cooking shows and magazines to food restrictions like gluten and dairy to diet trends ranging from paleo to keto to veganism, consumers have perhaps never been as focused on the substances they consume, religiously checking ingredient labeling and researching claims like non-GMO.  And, in many cases, they want all of these things to still be quick and convenient, offering new challenges for packaged and prepared foods.

Consumers trust the stores they patronize to stock the products they need to meet their dietary needs and preferences, especially those within the neighborhood they call home.  

So where to find this information?  Many resources exist, including the Small Business Association and trade associations specific to the grocery industry, but even starting more generally can help.  Visiting the Census Bureau’s website and clicking on “State and County Quick Facts” for your state will give you county-by-county demographic information. The Bureau of Labor Statistics also offers its Consumer Expenditure Survey which collects household expenditure information by category and groups consumers by income, household size, race, gender and other characteristics relevant to your business.

Certainly, large grocery retail chains, those with physical locations as well as online presence (and both in the case of Whole Foods/Amazon), leverage demographic data in selecting locations as well as product offering.  They have proprietary algorithms that crunch the numbers, analyze the trends and leverage this information to propel continued expansion and growth. However, both their size and need for scale limit the ability to connect directly with a community, which is where a competitive advantage can be realized by local, independent grocery stores savvy enough to both pay attention to the data as well as have a meaningful connection with the individuals who populate their neighborhoods.  Seeing shifts first hand can give a leg up to small business owners to capitalize on demographic changes by responding in support of both current and potential customers.

Not all trends are applicable in all markets, for every store or its specific situation.  This is why it’s critical to evaluate your current customer demographic – age, ethnicity, income, education level and any other tangible measures you can acquire – and use them to create a customer experience that is tailored to your neighborhood and its shoppers.  If this is your first time leveraging demographic data, begin by setting a baseline from which you can measure changes going forward and allow that to help drive decision making around product offering, pricing and promotions. If you’ve leveraged data in the past, compare historical information and sales to determine how you can appeal to and serve customers better.  Track information objectively, measure key performance indicators consistently and keep current by staying well connected to changes in the community.

Intuition is important, but when supported by data, the ability of a neighborhood grocer far outweighs that of the big box stores who typically make decisions on numbers alone.  Mercato supports its customers first hand knowledge of their shoppers with demographic trend information which allows local grocery stores to stay ahead of trends and market changes.