CPGmatters: Center Store Growth – a Journey, Not a Quick Fix

Discussion
Jul 08, 2013

Through a special arrangement, presented here for discussion is a summary of a current article from the monthly e-zine, CPGmatters. This article is based on The Tipping Point for Center Store, a report from AMG Strategic Advisors, the consulting unit of Acosta Sales & Marketing.

As traditional retailers attempt to reinvent their perimeter with a more dynamic shopping experience and capitalize on natural and health/wellness trends, they have eaten into center-of-store categories and diluted overall store profitability.

A range of efforts to revitalize center store traffic are being deployed: everyday low pricing; using center store to sell upscale non-food items (for example, Wegmans); and moving to an "all-store" brand format while limiting assortment (Trader Joe’s). We have also seen a shift in consumer/shopper focus. For instance, "owning" the organic/natural consumer (Whole Foods) or incorporating "store-within-a-store" (Target).

Beyond the healthy eating trend, the growing influence of Millennials and the U.S. Hispanic market as well as the expansion in cross-channel grocery shopping all must be considered if the center store is to return to a valued growth area.

The following are some strategic challenges that must be considered as retailers work with manufacturers to revitalize the center store. The nature of these challenges make it clear that there is no "quick fix." It will take time, considerable effort, trial/testing and thought leadership. Here are the challenges:

Holistic Understanding of Evolving Shopper Behavior: Retailers need to understand context for their shoppers’ behavior; that is, beyond the economic factors, such as generational differences, a broad competitive landscape that includes all channels, and shopper item selection and de-selection once in the store.

Shopper Insights Required: Loyalty card data can help retailers understand the linkage of center store and the perimeter. There is a need to understand the leakage to other channels, including e-commerce. Where and why is there leakage and where do shoppers continue to have "pain points" in their shopping.

Merchandising Innovation and Aisle Reinvention: Retailers need to consider holistic, shopper-centric shopping solutions that factor in the reduced time in the store, and the continued value of convenience; for example, sections for "stay healthy," school lunch sections, barbeque destinations, aligning complementary categories such as marinades in the meat section, etc. Operators also need to consider in-aisle display space that will bring shoppers into the aisle — perhaps meal solutions or a display of new items featured in a destination in the middle of the aisle.

Product Innovation: Manufacturers need to continue to delight shoppers with relevant innovation, taking into account the changing face and needs of the growing shopper base; for example, Millennials’ adventurous food palates, Hispanic interest in family options and healthier options.

What steps should grocers take to revitalize the center store? What do you think of the suggestions mentioned in the article?

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13 Comments on "CPGmatters: Center Store Growth – a Journey, Not a Quick Fix"

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Ryan Mathews
BrainTrust
They could start by reading old trade magazines from 5, 10, 15, 20, 25 or even 30 years ago. Then they could look in a mirror. The sad thing about this article is that I have read it several hundred times before … and still nothing changes. Somewhere out there in Retail Land it’s still 1965 and Mom is rushing to the supermarket, coupons in hand anxious to have dinner on the table for her 2.5 children and her husband when he comes home from work. Ah … the sweet, seductive power of denial. Given the consistent dip in supermarkets’ collective share of disposable U.S. food dollars, you’d think people would have caught on by now. 1965—if it ever existed—is long, long gone. Stores need to reflect and serve contemporary tastes and lifestyles—not serve as showcases and museums for products, new or hidebound—that customers simply don’t want. What would I do with the dreaded “center store”? Blow up the idea that a store has to look like a store has always looked. Make it smaller. Cater more to local needs. Actually solicit and act on customer feedback and integrate items into a purchase flow customers like rather than one that… Read more »
Bob Phibbs
BrainTrust

Adding more lines in a hope to add more profits isn’t proving reliable. Neither is the annoying habit of cardboard displays plopped down in the middle of unrelated center aisles. The long lines of product are still intimidating so customers make a choice at the end of the aisle whether to go down or not. Unless the customer can quickly see something that draws them to the middle, they will continue to selectively shop areas of the store.

Blow up the aisles (figuratively speaking) and learn from other retailers who have made shopping interesting and functional.

Paula Rosenblum
BrainTrust

I must be a bit confused. I thought the higher profit grocery items are located on the perimeter and the commodities (i.e. lower profit items) are in center store.

It’s a complex problem—and probably has as much to do with competitive pressures from other segments (mass merchants, C-stores and any other segment you can think of) as it does with how the products are merchandised.

My local Publix seems to have decided to re-arrange all the aisles in hopes of re-invigorating them. Of course, since they didn’t change the signage, there are just a lot of people wandering around looking for things that are no longer where they were. That’s probably not the brightest idea either.

Whatever a chain decides to do, testing the concept first would be a good idea.

Cathy Hotka
BrainTrust

The grocery sector has watched these changes with keen interest and has made significant changes to its business model. Grocers realize that customers may not be shopping for ingredients, but for meals. Dramatic changes in the number of store visits, basket size, and demographics have prompted grocery retailers to alter their layouts and their product mix. This new shopper journey will be on display at the Food Marketing Institute’s FMIConnect 2014 event in Chicago.

Warren Thayer
BrainTrust

Amen, Ryan. Spot on.

And, two pet peeves of mine: 1. Stores still seem to encourage interdepartmental warfare rather than cooperation and finding synergies; 2. Stores lament the flatness of frozen food sales, but still love to advertise perimeter items as “never frozen!”

Michael Twitty
Guest
Michael Twitty
3 years 2 months ago

Sure, I think we’d all agree that fixing the center store is a journey. Does anyone happen to know what’s broken? More specifically, do we all have the same idea of what the end of the journey looks like? Fixing center store requires greater specificity of the objective, AFTER we have reviewed the available facts and data. Are we seeking greater penetration, buying rates, profitability, ease of shopping, shopper satisfaction, foot-traffic during the week, share of category sales, etc.? Let’s get a narrower definition of the problem before we try to solve it.

Once we settle on the objective, or at least a prioritized list of objectives, let’s look at the available data. For starters:

  • Many shopper surveys indicate that the thrill is gone when it comes to the majority of grocery shopping.
  • One widely used and trusted industry consultant offers some pretty solid data that indicates that center-store categories generate more profit than perimeter categories.
  • Unit sales of many center-store categories are in decline…do we know why?

After the insight/data review, we should be able to more clearly state the objective and the metrics we will watch to see how well the proposed solutions work.

Camille P. Schuster, PhD.
BrainTrust

Shopper insights is most important of the suggestions mentioned and that is something that has been reiterated many, many times on this site. However, it is most difficult. On a store by store basis, retailers need to understand the consumers walking through the door and offer products and services that they want.

The recommendation is easy. The implementation is difficult and critical for success. Some consumers are single and want to purchase products in packages appropriate for single servings. Some consumers are shopping for their families. Some are looking for items that fit the diet prescribed by their doctor. Some are looking for easy to prepare products. Some are looking for organic items that can be used to cook from scratch. Which of these consumers are coming to your store? If you don’t know, then any reinvention you try is just a shot in the dark.

Gene Detroyer
BrainTrust

After Ryan’s comments, there is nothing more to add. Why do retailers always want to go backward when their customers are moving forward?

John Karolefski
BrainTrust

The center store of supermarkets has traditionally accounted for the majority of the stores’ sales and profits. But the times, they are a-changin’. Retailers and makers of shelf-stable products in the center store are reporting dips in sales as shoppers buy more food on the perimeter.

For retailers, the obvious path forward is to shrink center store and enlarge the perimeter departments to match shopping patterns. Of course, that is easier said than done. The challenge for food makers is more daunting.

Herb Sorensen
BrainTrust
All very good comments here. As I see it, the fundamental problem is that supermarketers actually run TWO stores under one roof—a warehouse for their brand suppliers’ benefit—the “center-of-store,” and a perimeter, where they, the supermarketers, actually try to sell the shoppers stuff. The suggestions here that are particularly meritorious all involve the retailer moving some of that “perimeter” thinking to the center of the store. This is very unlikely to happen, in a major way, for the same reason that shoppers neglect the center of the store: WHAT SHOPPERS DO NOT SEE, IS NOT “IN THE STORE!!!” Since the vast majority of those 40,000 SKUs in the store are in the center of store, they are effectively not seen by shoppers, period. But perhaps more seriously, they are not SEEN by management, either. And just like for the shoppers, it doesn’t mean they are never seen, just that they are not “in your face” seen, continually. THAT’s why management conveniently allows the center of store to wither—they are doing what shoppers instinctively do, too. Spending 10 years mulling this problem has led me to believe that the only way to effect, practically, a wholesale change in this situation—that could… Read more »
Lee Peterson
BrainTrust

There’s a dynamic at retail now called “endless aisle” that center store merchants should look in to. Let’s face it, there’s nothing good about shopping the center store, it’s a fulfillment trip (hence the ramping up of the fresh areas). So why not follow through on that?

If center store was all done online or simply ordered online and picked up in store, or delivered to you from the store, would anyone complain? Doubt it. Probably celebrate. But no retailer promotes or even does that very well. For the most part, it’s not a focus. Instead, they’re going to leave it for Amazon and Walmart who are merrily on that path as we read.

Center store merchants need to get into the 21st century before the retailers that get it drive them back to the stone age (extinction).

John McIndoe
BrainTrust

Center store represents about two-thirds of CPG dollar sales, and 70% of unit sales. This area plays an integral role in serving the needs of consumer packaged goods (CPG) shoppers, is the catalyst for trip missions, and supports shopper loyalty and driving revenues. But, competition for share of center store continues to intensify, with competition coming from across channels. In the end, the winners in the battle for share of spending and loyalty in the center store will be those that provide superior products a better, more relevant selection in the center store. Products that are tightly targeted against the needs of a retailers’ shopper base at the store level will prevent customers from defecting to another retail banner, and lure them into the center store and encourage them to buy products there versus competing perimeter department solutions.

While today’s needs have been defined by pervasive consumer rituals, such as home-based eating and self-reliant health and beauty care, tomorrow’s needs will look different. Staying on top of, or ahead of, changing times is critical.

Nancy Cruger
Guest
Nancy Cruger
3 years 2 months ago

Loyalty cards tell you what a person is purchasing. But do you know how long they are spending in the store? Where are they spending their time in the store? Are they getting everything on their list? Do they shop from a list or impulse purchase? Do they re-visit a particular section of the store?

What if a “GPS” app for stores, connected to a person’s loyalty membership was available?
Shoppers can enter their shopping list between visits, connected to their loyalty card; when they arrive at the store, the app can be designed to ensure the shopper is mapped through all aisles over the course of a designated period of time. Coordinate the sale items/promotional items similar to items purchased in the past.

Benefits to the shopper may include allow shoppers to find EVERYTHING on their list, preventing backlog-route around heavily congested aisles, and routing past promotional items that were purchased in the past.

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