How Non-Food Diversification Can Reignite Brick-and-Mortar Retail
Retail is not dying - it’s evolving. While online channels continue to surge, one piece of the puzzle is often overlooked: the potential of brick-and-mortar stores to reinvent themselves through non-food diversification. For large food retail chains, the non-food segment is no longer just “extra shelf space”- it could be the very strategy that brings customers back, boosts margins, and sets them apart from the competition. This perspective is powerfully illustrated by Krešimir Matišić, our Executive Director of Trading and Category Management, who, through his leadership of trading and category teams across five countries, has seen firsthand how challenging it is to adapt legacy systems and mindsets. But he has also seen what works - and where forward-thinking retailers can win big. This article outlines why non-food is the next frontier for brick-and-mortar success and how smart diversification can transform in-store experience and profitability.
1. The Brick-and-Mortar Dilemma: Decline or Reinvention
Foot traffic is down. Operating costs are up. Traditional food retail is under pressure. Many retailers are closing stores or reducing space, viewing physical locations as liabilities rather than assets. But what if the problem isn’t the format, but the function? Retail giants like Walmart, Carrefour, and Tesco aren’t giving up on physical stores; they’re redefining them. They’re turning stores into omnichannel hubs, experience centers, and curated showrooms. According to Krešimir Matišić, this shift in thinking marks a turning point. He sees non-food categories as one of the most powerful tools retailers have to reposition their stores, not just as points of sale, but as destinations that drive relevance, value, and long-term customer engagement.
2. Non-Food: The Margin Booster Hiding in Plain Sight
Food retail chains already have what many retailers dream of: steady footfall, established infrastructure, and strong customer loyalty. However, their non-food areas are often underdeveloped - poorly curated, lacking in customer experience, and treated as an afterthought. According to Krešimir Matišić, non-food categories such as home essentials, gardening, DIY, seasonal, and lifestyle products can significantly increase margins, extend dwell time in stores, and deliver differentiated value when managed strategically. He points to elements like curated collections, limited-time assortments, locally tailored selections, and exclusive collaborations as key levers. As Matišić observes, a traditional food retailer without a well-executed non-food strategy often becomes indistinguishable from its competitors. Rows of identical products, identical pricing, and no unique experience - this is what leads to consumer fatigue. But non-food, when done right, creates contrast. It builds curiosity, drives foot traffic, and invites higher spend. It becomes the differentiator in an otherwise commoditized environment.
3. Learnings from Global Leaders
- Walmart leverages exclusive brands and seasonal non-food events to drive repeat visits
- Lidl and Aldi create excitement and urgency with limited-time offers in non-food aisles
- Carrefour is piloting in-store services, sustainability zones, and modular non-food setups
As Matišić observes, these retailers aren’t guessing. They’re using data, customer insight, and agile sourcing to build non-food ecosystems that complement, not compete with, their core food business.
4. What It Takes to Win: Modern Category Thinking
To make non-food work, Krešimir emphasizes the need to stop treating it like “leftover space.” It requires:
- Dedicated category teams that understand local needs and global trends
- A mix of core and rotating products to surprise and engage shoppers (just look at the latest Konzum offering of attractive Fiat 500 Suitcases)
- Integration with e-commerce and loyalty programs
- Smart store design that blends food and non-food experience
Matišić also highlights the importance of empowering younger, agile professionals with bold ideas and pairing them with experienced buyers who know how to execute. It’s not just about the product; it’s about creating a story in every aisle.
5. The Road Ahead: A Market Full of Contrasts
The European retail landscape is entering a complex phase. Web sales are growing rapidly and recessionary signals are flashing across multiple sectors. Rising costs, shifting consumer priorities, and potential regulatory changes are reshaping the industry. In this uncertain environment, investing in non-food might seem risky.
But what’s even riskier? Standing still.
Retailers who avoid diversification risk becoming invisible - one more generic supermarket in a sea of sameness. But those who embrace thoughtful, data-driven non-food strategies will build resilience, relevance, and renewed shopper engagement. This doesn’t mean going all in overnight. It means testing, learning, and iterating. It means creating a shopping experience that gives customers a reason to return, not just for groceries, but for inspiration.
Final Thoughts: Time to Rethink, Not Retreat
Brick-and-mortar isn’t obsolete. But it does need a new purpose. Non-food categories offer that purpose, and the potential to spark transformation from within. As Matišić emphasizes, retail leaders who embrace this shift won’t just survive, they’ll shape the future of in-store retail. It’s time to move from shelf-fillers to experience-makers!
