Image: Kroger
BrainTrust Predictions 2016: Broadlines/Grocers
Among broadline chains, Target is expected to see further recovery this year through its efforts to further distance itself from Walmart and recapture some of its cheap-chic reputation, according to a poll of RetailWire BrainTrust panelists exploring 2016 prospects.
Wrote Paula Rosenblum, managing partner, RSR Research, “So far, I think Brian Cornell has made all the right moves, and everything from product to marketing are back in the groove.”
Added Arie Shpanya, executive chairman, Wiser, “Target has improved their brand value by offering stylish items at competitive prices. They’ve mastered omnichannel retail with their Cartwheel app, and they understand that e-commerce’s share of the retail market is growing quickly.”
Mr. Shpanya also felt Walmart would recoup its investments in e-commerce and employee wages. He added, “They’ve also announced their own payment platform to rival Apple Pay, so they’re not losing focus of their brick and mortar channels either.”
Ms. Rosenblum was more cautious on Walmart, believing its target market is largely saturated and that the company is facing newer competition from dollar stores, fast-fashion chains and a resurgent J.C. Penney. She said, “I think the company’s best bet would be to stop opening stores and focus on keeping its core customers and solidifying its basket sizes, but management doesn’t seem have the will to do so.”
In the grocery space, Kroger, H-E-B and Aldi were highlighted as likely outperformers in 2016.
Keith Anderson, VP, strategy & insight, Profitero, said Kroger and H-E-B have both “been disciplined in following the strategies that have carried them over the last 20 years and show signs of careful openness to new ideas to position them for the next generation of shoppers.”
Ben Ball, SVP, Dechert-Hampe, believes Kroger will continue to benefit from continued smart acquisition selection and steady management as well as good fundamentals. He also thinks Aldi’s geographic expansion and tests of their expanded category format will both be winners. Ball is less certain about Albertsons, believing their merger integration “will be an ongoing headache.”
Ron Margulis, managing director, RAM Communications, sees ShopRite/Wakefern “already winning customers from the A&P/Pathmark debacle and will likely keep them in 2016 and beyond, proving it’s important to be good and better to be lucky, but best to be both.”
Discussion Questions
Which grocers and broadline retailers do you expect to outperform their segment in 2016? Why? What factors will be most critical to achieving success?
Poll
BrainTrust
Kai Clarke
CEO, President- American Retail Consultants
Frank Riso
Principal, Frank Riso Associates, LLC
Kroger will continue with its successes, as will Safeway, as we see more continuation of focus on their customer’s immediate needs, and the growth of electronic target market segmentation through product differentiation throughout these chains. Target is moving in a different direction, but only time will tell if we start to see the grocery end of Target truly perform like the rest of their stores. Grocery takes up a large amount of space and delivers the lowest ROI in a mass-market Target.
I do not think you can have this type of discussion without including Publix. They continue to expand north and continue to take market share and wow their customer base. Also Costco gets it right every time. Now adding gas pumps to the mix will increase their popularity. I also see CVS adding more grocery to their stores and becoming more of a c-store then most traditional stores in that space, less the cigarettes.
Lastly, as the Delhaise/Ahold merger moves forward, the big sleeper may be Food Lion. They may decide to leave the 1950s and join the pack in the new century and begin to upgrade their stores.
Within the grocery segment, Kroger is one of the strongest. Their acquisition of Roundy’s and unveiling of Main & Vine suggest they are looking to expand their footprint and remain relevant to shoppers.
I’m also a huge fan of H-E-B and Wegmans. These two powerhouses will continue to outperform the segment. Keep an eye on H-E-B’s online initiatives … I believe their patience in launching will pay them dividends.
I agree with the sentiments relative to Target and Kroger. Target’s Brian Cornell brought in a key food marketing person in the form of Anne Dament to lead Target’s food reinvention. From what I have observed in their test stores, I believe she will make a difference.
As noted previously, Kroger continues to be the innovator and sales growth leader in the industry. Besides its recent fresh initiative, Kroger continues to reinvent itself. From its leading-edge focus on customer analytics via dunnhumby and its innovative Customers First program to its online shopping and electronic shelf tags to its complementary acquisitions, Kroger has generated 48 consecutive quarters of positive identical supermarket sales growth.
Don’t forget the German retailers. Aldi is getting stronger and now Lidl will bring its innovative food retailing model to the U.S.
Two other regional chains will continue to grow and be successful: Shoprite (Wakefern) in the Mid-Atlantic/Northeast region and Publix in the Southeast. Why? Both are very customer-centric and on-trend with healthy options. In addition, Shoprite is developing a reasonable omnichannel presence. While Publix lags on offering the full array of its products online, I see this as changing. In the meantime, Publix and Wegmans always lead in the customer delight game.
I agree with Paula, that Brian Cornell has made the right moves and will continue to do so in 2016. He has wisely teamed up with CVS to handle the pharmacy end of the business. Migrating CVS users to his space benefits both retailers and the shoppers.
Further, he is returning Target to its core proposition: Design for All. Just because something is inexpensive doesn’t mean it has to be ugly too. Target is a destination for good value and good design. Clever merchandising means that shoppers don’t leave without an upsell. Target is a winner in 2016. Go Brian Cornell!
Retailers that have a differentiated positioning in the marketplace will tend to do better. That includes Costco and Target. Additionally, retailers that have bet on big consumer trends will perform better. These consumer trends can range from wellness to convenience as examples. This will include Kroger, CVS, Aldi and Amazon.
Kroger will stomp the food space. They have a strong and shopper-respected loyalty program. Watch out for Kroger.
Costco will also have a strong year. Seems more and more Millennials are getting into the Costco mode and the Costco team is tuning their assortments to better map to their most regular shoppers.
The Home Depot is on a roll. They are refining their order online/pickup at store program — from promoting it more online and in-store to tuning store layouts to make the pick up process faster and simpler.
Last, Walmart will have a strong 2016. Their people, merchandise, channels and pricing are aligning with the stars. Watch for a strong year with the Wal!
I’d keep a sharp eye on Wegmans. It is already one of the most respected operators in the country and its newest stores in Virginia and Massachusetts continue to ratchet up the bar. It is also taking innovative steps behind the scenes to improve merchandising efficiency. The attendant financial gains will make it an even more formidable competitor.
Albertsons appears to be poised for a very successful 2016. Most of the Safeway post-merger integration work is behind them, and they are moving away from their Transition Services Agreement with Supervalu.
Albertsons has a strong management team with deep experience in the supermarket industry and good momentum going into 2016 as they leverage the scale of the combined operations. A likely IPO during 2016 will position Albertsons for long-term success under public ownership.
Kroger should be successful due to ongoing improvements to fresh departments and also more large stores.
Safeway continues to suffer from very high everyday pricing and poorly staffed stores in NorCal. Some better ads may help get them low or no margin sales but with their outrageous prices, few regular price items will go into those baskets. I don’t see a great future without major changes in price and some hard lines on stores that refuse to staff properly.
Everyone will say Kroger because they are the default answer. Big, well run and publicly held. They are only in the news because their stock is traded. But in reality they are just average. The above average companies will out-perform and nearly all of them are privately held. Usual cast to include Aldi, Trader Joe’s, HyVee, Publix, Woodmans, WinCo, Wegmans, Wakefern, and HEB. Sales per sq ft is how you determine performance. Kroger is right in the middle.