GHQ Cover Story 12/04: The Pursuit of Relevance

By George Anderson

Through special arrangement with Grocery
Headquarters Magazine, we present these opportunities to discuss the subjects of GHQ’s monthly cover stories.

Supermarkets today find themselves in a situation akin to candidates running for elected office. Every day is a new campaign to convince voters (shoppers in this case) that 1) they understand their needs and 2) they have answers (products and services) to make life a little better than their opponents.

In the U.S., every candidate who runs for the presidency gets asked a set of fundamental questions. Why do they want the job? What would they do if they win?

The current competitive climate for groceries also means supermarkets are having to answer some basic questions. What business are they in? Why would consumers choose to shop in their store rather than another traditional grocery store, a limited assortment store, supercenter, warehouse club, drugstore or other retailer selling similar items to the ones they sell?

As Bill Bishop, president of Willard Bishop Consulting told Grocery Headquarters magazine for its December ’04 cover story, The Pursuit of Relevance, “The most pressing problem facing the supermarket industry today in terms of competitive survival is re-establishing and/or maintaining relevance for the consumer.”

How to become more relevant to consumers in a marketplace focused on price by the likes of Wal-Mart, Aldi, Dollar General, etc. is the tricky part.

Thomas D. Cook, principal of King-Casey, Inc., a retail design firm based in South Norwalk, Conn. told GHQ, “Wal-Mart’s unique selling point is low prices, and nobody’s going to beat them on that. So brands and concepts need to find out how to appeal to the consumer on a different level than that. They try to get the best price, but it has to be in other areas, like product quality, store design and customer service.”

Peter Tlumacki, president of Northeast Store Development, in Quechee, Vt., said, “We suggest making physical changes – reducing the amount of grocery and amplifying the perishable end. We see that we don’t need to carry all of the lines of grocery items. We’re trying to make the store much more exciting and ready for the customers walking in for their dinners, whether hot or cold, and expanding on the excitement.”

Burt Flickinger III, managing director of Strategic Resource Group, believes Albertsons and Ahold are two large chains that have found ways to create some of the excitement Mr. Tlumacki and others speak about.

“The Albertsons combination stores having Toys ‘R’ Us, Staples and the Wild Harvest element from the Shaw’s acquisition blended with the best of Bristol Farms is a real superstar combo format that is within the four walls of a food and drug superstore,” he said.

“Stop & Shop has a powerful new Super Stop & Shop format that combines the best of natural foods, general market foods, Dunkin’ Donuts, Toys ‘R’ Us and Office Depot. Those stores are doing extremely well.”

Mr. Bishop sees opportunities to create a unique position with an increased focus on foodservice. “Virtually all of the restaurant growth today is in carryout. Here the supermarket has a marvelous opportunity, and some are taking advantage of it in a big-time way. Dominick’s has an incredible pizza special program, and folks are lined up 10 deep to buy pizzas on a Friday night on their way home. Face it, Friday night no one wants to cook, so one can see the relevance of this product.”

Many grocers see technology-enabled self-service as a means to meet the needs of consumers.

Jeff Lowrance, corporate communications manager for Food Lion, said the company’s new Bloom format offers consumers the option of using hand-held scanners while they shop.

“That gives them a little more control over the shopping process. It allows them to bag their own groceries as they go, and that speeds up the payment process. Plus, throughout the store we have information kiosks where they can locate products, get recipes, information about various wines, types of meat, etc.”

“The one thing that was echoed by consumers time and time again was the desire for convenience.” Said Mr. Lowrance. “We’re trying to meet the needs of folks who are very rushed, very hurried, looking to make their shopping easier, and looking to spend less time shopping.”

Food Lion has also made changes to store layout and increased its emphasis on home meal replacement items in the new format stores.

Moderator’s Comment: What fundamental questions do you believe supermarkets need to answer to be successful in the current competitive environment? Are
there operators that you believe are doing a particularly good job of establishing their reason for being in the minds, perhaps even hearts, of consumers?

Spencer Hapoienu, president of Insight Out of Chaos, told Grocery Headquarters that he’s looking for grocers to start making better use of their
loyalty cards to understand the needs of individual shoppers rather than simply act as a means to a discount.

“We’ll start seeing retailers using their data to fashion merchandising, promotions and marketing by relevant customer groups, different family sizes, and
by predicting what people are going to be using based upon the family makeup,” he said.

Retailers will also be shifting budget dollars as personal marketing becomes more prevalent, said Mr. Hapoienu. “The big move will be away from circulars
and into almost individual marketing using every means available, including direct mail, e-mail and the Web, he said. –
George Anderson – Moderator