How the New Math of Grocery Retail Has Emerged as a Global Threat

Anyone who has taken high school algebra knows that the only way to increase the value of a fraction is to increase the numerator or decrease the denominator. If the numerator goes up and the denominator of the fraction remains the same, the value goes up. Likewise, if the denominator goes down and the numerator of the fraction remains the same, the value goes up.

At my company — a strategic consulting group with a history of working with grocery retailers — we were recently reminded of this dead simple mathematical expression through our research conducted in the United States and Australia. We found that the way consumers today perceive value is by dividing the perceived quality of goods by their price. What’s interesting is that not too long ago, it was increasingly about the numerator (the quality). Now, it’s also the denominator (the price). The reality is that both quality and price matter now, and that’s a challenge facing many grocery retailers in many different geographies. And, based on our research, the trend is not likely to reverse anytime soon.

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