How produce retailers can adapt to changing consumer habits

Consumer habits have a significant influence over market dynamics, with several factors like quality standards, prices and growing practices shaping purchase decisions.

As consumer preferences evolve towards health and sustainability, retailers encounter great challenges, including lack of demand forecasting, risk of stagnation, loss of market share, and reduced profits.

In this sense, retailers must enhance their adaptability and embrace appropriate strategies. This is essential to anticipate and effectively respond to volatility in consumer demand and to thrive in such a competitive market.

Why and how do consumer habits change?

The evolution of consumer habits is complex due to the multiple factors constantly evolving.

The visual appeal of produce, including aspects like shape, color, and size, significantly impacts consumer purchasing decisions, since it is the first thing they notice on this type of product. The perceived quality and taste of the produce play a crucial role in determining repeat purchases, being more likely for consumers to buy products that have already met their expectations of freshness and flavor. Consumers are increasingly looking for fresher and better-looking produce.

Price is another key factor driving consumer behavior. Consumers evaluate the quality of produce in relation to its price, determining whether the perceived value aligns with their willingness to pay. Quality produce at competitive prices tends to attract and retain customers, fostering loyalty and repeat business.

Consumers are also highly concerned with how produce is grown. Health considerations, particularly concerns regarding pesticide use, drive a significant portion of consumer decision-making. According to a survey conducted by the International Food Information Council (IFIC), 91% of consumers consider how their food is grown when making purchases. 

Moreover, 60% of these consumers cite the use of pesticides as a top concern. For those avoiding food due to pesticide concerns, 71% report avoiding vegetables, and 59% avoid fruits, underscoring the impact of cultivation practices on consumer behavior.

Other factors influencing consumer preferences include nutrition content, use of agricultural technology, environmental sustainability, use of natural resources, and farm worker welfare.

In recent years, there has been a notable shift in consumer preferences towards healthier and more sustainable food options. Increasing awareness of the health benefits associated with fresh produce, coupled with concerns about environmental impact and ethical considerations, has fueled this trend. For this reason, organic produce has been gaining popularity.

Consumers are actively seeking out products that align with their values, prioritizing health, sustainability, and ethical production practices. Stakeholders in the industry must adapt their offerings to meet these evolving consumer expectations. This can help to achieve a more sustainable supply chain.

The challenges faced by produce retailers

For produce retailers, navigating the landscape of changing consumer habits poses significant challenges that can impact their bottom line and market position. Here are some of the key hurdles they face:

Lack of demand forecasting and stable supply 

Anticipating how much of each type of produce consumers will want can be tricky. Without accurate demand forecasting, retailers risk overstocking or understocking their inventory, leading to inefficiencies in supply chain management, suboptimal pricing strategies, and misaligned marketing efforts. The lack of reliable forecasting tools can result in missed sales opportunities and increased costs associated with excess inventory or lost sales due to stockouts.

But even if they could have the necessary tools and data to have reliable forecasting, the reality in produce is that unpredictable events such as weather, pests or supply chain disruption can always alter the supply availability. Therefore, further complicated the mission to offer their clients with the stable, high-quality fruits and vegetables they are expecting.

Risk of stagnation and market share loss

Retailers who fail to adapt to changing consumer preferences risk falling behind their competitors. Stagnation can lead to a loss of relevance and market share, as consumers move towards retailers that offer products aligning with their evolving needs.

Moreover, with consumers increasingly seeking out alternatives to reduce their overall spending, retailers face the challenge of retaining their market share amidst heightened competition and shifting consumer priorities.

According to EY FCI latest insights, 54% of global consumers plan to lower their future purchase, while 57% express concerns about the increasing cost of groceries and household essentials. This poses a significant threat to retailers, necessitating proactive measures to retain and attract customers in such a competitive market.

Reduced profits

The combination of potential lower sales, food loss, and heightened competition can squeeze retailers’ profit margins, putting strain on their financial performance. Retailers must find ways to optimize their operations, minimize costs, and maximize efficiency to protect their profitability in the face of these challenges.

Strategies for adapting to changing consumer habits

In response to the challenges posed by shifting consumer habits, produce retailers can implement strategic initiatives to remain competitive and meet evolving consumer needs. Here are some effective strategies:

• Improve demand forecasting and secure a stable supply: Retailers can leverage data-driven insights, market research, and consumer feedback mechanisms to enhance their understanding of consumer preferences and behaviors.
  
  By investing in robust demand forecasting tools and techniques, retailers can better anticipate fluctuations in demand, optimize inventory management, and align their supply chain operations with evolving consumer trends. This proactive approach enables retailers to minimize stockouts, reduce excess inventory costs, and enhance overall operational efficiency.
  
  Furthermore, by streamlining their supply chain, generating value added partnerships, and improving direct communication with their suppliers to avoid mismatching supply and demand, retailers can not only secure a stable year-round supply of fresh produce for their customers, becoming even more competitive; but also make sure that they are not wasting resources and food in the process.
  
• Balance healthy produce with stable prices: Consumers are increasingly prioritizing health and sustainability. However, the inherent price volatility of the produce industry and elevated prices of sustainable practices can still be a challenge. Retailers can differentiate themselves by offering a diverse range of high-quality, nutritious produce at competitive price point and stable prices throughout the year.
  
  Retailers must ensure the right balance between health-conscious offerings and affordability. Remaining agile and responsive to consumer behavior helps stay competitive, obtain a broader customer base, increase sales, and gain customer loyalty.
  
• Partner with sustainable suppliers: Collaborating with suppliers who adhere to sustainable farming practices and ethical standards enables retailers to meet the growing demand for environmentally friendly and socially responsible produce.
  
  By expanding their network of sustainable suppliers, retailers can enhance the quality and sustainability credentials of their produce offerings and attract environmentally conscious consumers. This strategic partnerships approach fosters long-term relationships with suppliers, promotes transparency, and supports the transition towards a more sustainable and resilient produce supply chain.
  
• Optimize supply, storage, and delivery: Ensuring the consistent availability of high-quality produce and timely delivery to customers is essential for building trust and loyalty. Retailers can optimize their supply chain, storage facilities, and delivery logistics to minimize product waste, maintain freshness, and meet customer expectations for convenience and reliability.
  
  Investing in technology-enabled solutions, such as real-time inventory tracking, temperature-controlled storage, and efficient transportation networks, retailers can enhance operational efficiency, reduce costs, and deliver better produce. This customer-centric approach enables retailers to strengthen their competitive position, drive sales growth, and adapt to the evolving consumer habits.

How ProducePay ensures predictability for retailer success?

At ProducePay, we understand the role predictability plays in helping retailers navigate the uncertainties in consumer demand and market dynamics. That’s why we partner with the world’s leading growers and marketers to build programs that integrate the entire supply chain.

Through our Predictable Commerce Programs, we align buyer demand with grower supply points, enabling retailers to secure a 52-week supply, enhancing their competitiveness, and helping them to meet evolving consumer demands reliably.

By integrating the entire supply chain and leveraging our global network of sustainable growers, we create predictability that ensures quality produce availability at stable prices.

Moreover, we provide access to capital, technology, and enhanced visibility that facilitates a more transparent, connected supply chain. This allows growers and retailers to collaborate and communicate more effectively.

Sources: FAO, IFIC, Food Navigator