The fledgling natural products industry was worth only $1.9 billion in 1980, but by 2016 it had grown to $141 billion in sales. And New Hope Network reported that 44% of those sales were in conventional retailers versus only 39% in natural markets. Clearly, natural products represent a growth area for mass market retailers.
One factor retailers must have to succeed in this business is an appropriate placement strategy for natural products. There are three options to consider: segregation, integration and segregated integration. There are also three types of shoppers to consider: those who primarily buy natural products, those who mostly buy conventional products, and combination shoppers who buy both product types. Understanding where a retailer’s current and future customers fall on this spectrum will inform decisions about the most appropriate natural placement strategy.
A retailer with a segregated natural set takes all items marketed to the natural or free-from shopper and places them in a destination zone. It’s a clean approach and helpful to the natural shopper, but it also requires space. Plus, conventional and combination shoppers may miss the section entirely as they continue to shop by category in the main part of the store.
Woodman’s, an employee-owned 16-store grocery chain in the Midwest, has mastered the segregated approach with no less than two full aisles dedicated to natural and organic foods which some shoppers view as a store-within-a-store, allowing them to skip an additional trip to a natural grocer.
Retailers that integrate natural items shelve them alongside conventional products, allowing easy comparison for combination shoppers and more choices for conventional shoppers. But without adequate signage it can also lead to confusion about which products are “truly natural.” The approach can also turn off the natural shopper who just wants to find natural items quickly.
Pharmaca Integrative Pharmacy, a 30-store chain located in five states with full prescription service at each location, is an example of integration done right. There, the conventional products have been integrated into a front end that is primarily comprised of natural products.
Segregated integration may offer the best of both worlds, with natural products as a group of a larger subcategory. Natural shoppers can easily find what they need, while combination and conventional shoppers can still compare options if they wish, and on-the-fence consumers may be convinced to “trade up” to a natural product, which may bring in a higher register ring.
Roundy’s Supermarkets, a subsidiary of Kroger Co., took a segregated integration approach more than 10 years ago in many of its stores. Shoppers would find all-natural soups, for instance, in an area of the soup aisle marked with natural signage. This helped combination shoppers traverse the entire store.
Brands looking to pitch natural products to conventional retailers need to understand each store’s placement strategy and craft a merchandising recommendation accordingly. Those recommendations may include cross-merchandising where appropriate.
Cross-merchandising natural items offers a way for a brand to increase exposure and for a retailer to gain sales.
Natural endcaps are another way to capitalize on this growing trend, particularly around such themes as cold and flu or summer fun: Think natural sunscreen, insect repellent, lip balm and shaving products.
Clearly the natural market is growing, and more retailers are sure to buy into this explosive segment that only shows signs of increasing acceleration.