The past decade has been a disruptive period for the supermarket sector. Technological advancements, shifting shopper expectations, evolving food habits of consumers and western cultural influences through expats has changed the way how supermarket retailers operate in Sri Lanka. The pace in which the industry is changing has been brisk and showed no signs of halting in 2020 despite the pandemic. Though supermarket retailing is relatively smaller in size than general trading retailers, the sector has witnessed an exponential growth which is steady and sustainable in the foreseeable future in Sri Lanka. Though the bigger revenue maker is the general trade for businesses, the future is undoubtedly supermarket retailers.

Globally retailing has gone beyond supermarkets to hypermarkets and hybrid-markets. Tech driven in store experiences are the trends shaping supermarkets in 2020. In-store pop ups and events, analytics for personalized customized experiences, shop and eat concepts, aiding product discovery, social e-commerce, sustainable ‘greener’ way to shop are few of the many global trends that are propelling the supermarket sector globally. The stretched time lag in adaptation of trends amidst developing countries should not blind businesses and marketers in Sri Lanka from seeing that the future of retailing is through Supermarkets, though General Trade dominates retailing now in the country.

In Sri Lanka, household penetration of supermarket shopping has more than doubled over the decade, with an average YoY growth rate of 7.3%, clearly indicating a steady but a sustainable growth. It won’t be wrong to state that the supermarket shoppers are becoming more and more loyal to the channel when witnessing the purchase of all essentials through supermarket, including fresh produces such as vegetables, fruits and meat products and dry rations such as rice, sugar, milk powder, etc.

Does spending power infiltrate supermarket growth?

The average monthly basket value has also doubled over the past decade which clearly indicates the increase in the spending power of a supermarket shopper over the past years. Does this evidentiate that the growth of supermarket is eventuated by improved standard of living and upgraded lifestyles? Possibly a yes, as it is often seen as an aspirational channel of shopping or relatively an experiential shopping channel for the masses in Sri Lanka. This notion is also broken by certain local chains by making the experience of supermarket shopping affordable and accessible for all socio-economic classes in Sri Lanka.

What dominates the shopping basket of a supermarket shopper?

While the supermarket growth is expatiating, understanding the changing shopper choices which dominates the shopper basket is also vital. The priority essentials lead the table including vegetables and rice which is habitually bought from the pola (general trade) for better pricing and quality. The behaviour shift of purchasing priority essentials and fresh produces at the supermarket clearly indicates the trust built on the channel over the years. While majority of the products listed as the top 20 items in the basket seems usual, confectioneries, ice cream and bakery products break the general presumptions of what would fall under essentials which are often bought and in larger quantity/value. This behaviour was also witnessed during the lockdown, along with the essential buying, the cravings were also given priority during grocery shopping. Is this just a temporary behaviour shift or can it be sustained? Food for thought for marketers!

The answer for the questions can be unearthed by a retrospection of the past decade. The table depicts the shift in the top 20 products of the supermarket shopper basket from 2012 to 2019 as per SRL’s SuperTrak reports (Modern Trade Tracker).

While full cream milk powder is no more the most purchased or highest spent item in the shopping basket, liquid milk is slowly but steadily improving its stand. This indicates the directional behaviour shift from powdered milk to liquid milk to fresh milk which is in par with developed nations’ milk consumption patterns. Improving living standards, health conscious lifestyle, sustainable living are few reasons that can be attributed to this. The leveling up of fruits and the drop in margarine can also be attributed to the same notions.

Confectionary, eggs, and bakery items have entered the priority list in 2019 kicking out spices and pushing down yoghurt to the bottom of the list. While confectionery is placed amidst the top 10 items can be attributed to the increased priority given for cravings, bakery products can be due to the trending hybrid-market phenomena globally.

The top 20 categories of contributed 52% of the shopping basket 8 years ago has gone up to 64% in the last year which signifies that the Supermarket shoppers are spending more on the top categories. This is also clearly witnessed when analyzing the same with the top 100 categories which is contributing close to 98% in 2019.

Understanding of the supermarket shopper behaviour and choices is crucial for businesses and marketers to streamline their strategies accordingly. Given the channel size (General trade being the bigger revenue contributor) and the lack of data accessibility of supermarket chains poses a challenge to marketers to rationalize actions and investments towards modern trade. Therefore, it is vital, that the shopper behaviour should be continuously monitored, not only at product category level, but also at the brand level (and even SKU level) understanding volume and value-based positions (market share) of brands. Though the market is considered to be monopolistic dominated by a few giant chains (the top two chains are at a penetration of 70%+ & 60%+ respectively as at March 2020), there are more than 30 strong regional stand-alone players who are also substantially contributing to the growth of the sector.

It is time for marketeers to place more focus towards building the Modern Trade business of their product portfolio as the future relies on this channel. As much as it is important to sustain the growth in General Trade, which is the Cash Cow for many consumer goods businesses, Modern Trade is a definite star for which more and more investment and drive is required in the current context foreseeing where the future is headed towards. Businesses need to have dedicated Modern Trade personnel to drive the channel, shifting from having a ‘Brand Manager’ as a custodian of a brand, to having a ‘Modern Trade Brand Manager’ focusing solely on driving this channel through specific strategies and plans.

The shopper behaviour in Modern Trade are so distinct, diverse, and ever evolving at a faster phase in comparison to General Trade. This can be attributed to the higher spending power, differing lifestyle, higher standard of living and the channel itself being portrayed as an aspirational shopping channel. Therefore, how we drive brands in Modern Trade needs to be different and a blanket approach on marketing of a brand across all channels is not going to work anymore. With this it is safe to conclude Modern Trade needs more focus than ever before as a channel amidst marketeers – a dedicated Channel Marketing Manager, Channel focused strategies and plans are the way to go to ensure you have a fair share over this promising channel. Most of the MNCs and local giants are already in this pathway and now it might be the time for the rest of players to strongly strive through.

On the other hand, let’s take a quick look at the supermarket chains which are intensively rivaling with its competition to stand out and to lead this dynamic industry. While the supermarket giants are competing to differentiate themselves from the rest of the competition either through cost leadership, experiential shopping experience, going green concept, etc the rest of the regional standalone players have created their own niche segment that they hold strong within. Continuous innovation on the product ranges, linear processes, achieving customer service excellence are few of the key focal points of supermarket giants now to ensure they are ahead of its competitors.

Supermarkets are also striving to be in line with the global trends of shop and eat concepts, sustainable ‘greener’ way to shop and social e-commerce which are experienced by shoppers in the recent past despite the pandemic which has also fueled the innovation in this industry.

Let us plant the right seeds in the right places for a better prospective future!

NOTE: SRL SuperTrak is the FIRST Modern Trade tracker in Sri Lanka launched by Survey Research Lanka, a full-service independent marketing and social research. Consultancy Company and First established Media Research Unit in the country.