In the wealthy suburb of Carmel, Indiana, upscale, full-service grocery stores are being built at breakneck speeds. The newly opened Kroger offers $80 cakes, gobs of organic produce and aisles of gluten-free products. Live music is performed from the balcony of the café. This all seems to bode well for the real estate industry. And yet another type of grocery store is vying — and earning — grocery shopper market share.
- Consumers still want experiences that exceed their expectations.
- The full-service real estate model needs to change to stay relevant.
In the wealthy suburb of Carmel, Indiana, upscale, full-service grocery stores are being built at breakneck speeds. The newly opened Kroger offers $80 cakes, gobs of organic produce and aisles of gluten-free products. Live music is performed from the balcony of the café.
This all seems to bode well for the real estate industry. The aisles full of shoppers with gourmet deli items, freshly custom-packaged steaks and expensive wines indicate a strong economy.
The number of shoppers willing to overpay on their grocery bill for a full-service, delightful experience (in a gorgeously lit store with premium shopping carts and wide aisles) tells us that consumers are still willing to pay premium prices for excellence in experience.
That sounds an awful lot like what the entire real estate industry is hoping for.
And yet another type of grocery store is vying for — and earning — grocery shopper market share. It’s a far cry from the Kroger way.
Filled with mostly store-brand items, Aldi’s rock-bottom pricing becomes possible precisely because the consumers who are obsessed with shopping there are willing to make major experience trade-offs.
Shoppers have to bring their own shopping bags. It costs a quarter to get a cart, and the consumer only gets their quarter back if they return the cart to the cart corral.
They have little to no choice in individual items — reminding me of my son’s preschool days, when the teacher’s mantra “you get what you get, and you don’t throw a fit” saved many a toddler meltdown.
What’s truly amazing is that this store’s aisles aren’t just filled with customers; they are stunningly overflowing.
And their customer base is growing every day.
Headquartered in Illinois, Aldi’s store count is up to nearly 1,600 across 34 states and has been “steadily growing since opening its first U.S. store,” according to the company website.
That means in this relatively good economy, consumers are willing to sacrifice experience for price savings.
If that doesn’t indicate a growing trend that may not bode well for the real estate industry’s full-service model, I don’t know what does.
Are cheaper prices the only Aldi advantage? Maybe not
However, as so often is the case, in the Aldi consumers’ eyes, the experience may just well be the draw.
Sure, the price savings are nice, but is that really what is drawing consumers in? I’m not so sure anymore.
When Aldi first came to the U.S. from Germany, setting up shop in Iowa, the stores were often located in urban locations with low socioeconomic indicators.
But Aldi is quickly making inroads into wealthier suburbs and thriving in those communities, too.
Although it’s easy compare the Kroger experience and the Aldi experience and assume that Kroger’s is clearly better, for the typical Aldi consumer, most of the services Kroger offers simply aren’t important to them. In many cases, the consumer’s values also closely align with those of Aldi.
Starting to sound familiar?
When an abundance of choice eats up time
A prime example of the Kroger versus Aldi experience is the checkout aisle.
Sugary candy bars still line the checkout aisles of Kroger, although the candy bars are fancier than your typical Butterfinger.
But at Aldi, the sweet treats are replaced with single-serve packages of health-conscious foods like nuts, dried fruits, trail mix and granola bars.
Any mother toting kids to the grocery store will tell you that she doesn’t need or want more expensive candy bars conveniently located at toddler eye-level. But she might be willing to snag the trail mix without guilt.
Another experience-twist is the idea that consumers want more choices.
At Kroger, there are no fewer than 36 different spaghetti sauces. You can see consumers linger in this aisle for 15 minutes or more, scrupulously comparing labels and shuffling through coupons.
But a single grocery trip to Kroger can easily top two hours because every product requires extensive decision-making that takes in a multitude of factors: price, fat, sodium, coupon availability, quality…and the list goes on and on.
However, the Aldi shopper has virtually no decision-making to do. Because Aldi only offers one, maybe two, brands, and the quality of each offered is generally very good, the stores are much smaller than average.
Instead of a two-hour chore, consumers zip in and out of Aldi in 20 to 30 minutes.
What real estate can learn
That’s the experience the consumer values today.
Expediency tops extensive choice almost every time. A recent survey conducted by the National Association of Realtors via Harris Poll indicates that more than 90 percent of real estate consumers would value a one-stop-shopping experience where they can get their real estate agent, title, mortgage, insurance, movers, handymen, electricians, plumbers and so on all from the same place.
Even more eyebrow-raising? Sixty-four percent of consumers take advantage of the one-stop-shopping experience when it is offered to them.
How can we apply what we know about the Aldi consumer to the real estate industry?
First, we need to take a much harder look at what the consumer needs from the industry, and then we have to figure out what delights them.
We can’t assume that what delighted consumers five years ago will delight them today.
We’ve got to stop pointing at the tired old idea that “consumers are only interested in cheap commissions, and that will destroy our industry” — when in fact, what we are offering isn’t necessarily what consumers want any more.
We have to adapt and adopt change if the full-service real estate model will survive
Make no mistake: Consumers still want an experience that exceeds their expectations.
We, generally speaking, just happen to be terrible at defining what those expectations currently are.