Kroger CEO Shops the Competition
By George Anderson
David Dillon, chairman and CEO of the Kroger Co., understands the importance of shopping the competition.
“I get in (stores owned by) most of our competitors a lot,” he told The Cincinnati Enquirer.
Mr. Dillon said he has been impressed on shopping trips to Target and Wal-Mart.
In response to what the competition is doing, Kroger has developed and operates targeted formats, including food/drug combos, multi-department units, price impact warehouses, convenience and jewelry stores.
Meanwhile, Supervalu’s bigg’s unit in the Cincinnati area is undergoing a change to what it calls its “fresh” format. While being short on specifics, the company says the new format will enhance its produce offerings as well as wine, ready-to-eat and natural food selections.
Steve Kaczynski, president of bigg’s, said, “Customers want choice. We are going to make a different offering to consumers, and we’ll let the customers decide.”
Tom Herman, senior vice president of bigg’s, said the changes being made were not going to be simply a cosmetic makeover of the stores. “If you just go in the store, change graphics
and signs, you don’t get much for that. But if you dramatically change assortment and merchandising, you change your competitive edges.”
Moderator’s Comment: What must retailers look for to make the best use of competitive shopping trips? What retailers do you believe make the best use
of competitive intelligence? – George Anderson – Moderator
The key concepts which the stores are doing successfully are what competitors should be looking out for. These should reflect something different that can address a need which the current stores do not, or perhaps don’t emphasize enough of. This doesn’t mean that anything goes. Instead, change must reflect a measured focus, expectation and result. If the result does not occur, the expectations must be examined in light of the implementation, and the positioning of the same service by the competition. Everyone needs to be more customer centric, but at what cost?
Organizational change goes more than skin deep and is reflected in employee attitudes, corporate positioning, and even product presentation and offerings.
When shopping the competition, it is advised that the retailer do more than just check prices and assortment. Rather, the retailer should observe the store as a customer. Determine WHO shops, WHY they shop, WHAT they buy, WHEN do they tend to shop, WHERE in the store do they shop. If feasible, inquire about WHY they shop there.
It is not enough to note that a chain or store does “x” and we don’t…and it certainly is not recommended that a store copy another’s actions “just because they do it, we must.” Rather, it is essential to uncover how the stores are tactically and strategically accomplishing their objectives and seeing if there are lessons to be learned (or avoided) – and not just copy so as not to be left behind. Understanding what makes one business different from another and what can be done to either narrow or extend that gap is what is best observed.
Sure there are a number of factors to look at but the end result is what the competitor’s store is doing in sales and their sales per sq. ft. A store can appear to be doing everything right but if they have a low sales per sq. ft. then what they are doing right makes no impact. The same goes for stores that appear to be poorly operated yet achieve a very high sales per sq. ft. These stores make interesting study because there is usually some unique story behind the scenes. That is the information I find the most useful.
It makes such obvious good sense for grocery operators to shop at the competition’s stores. What better way to learn what the other guy is doing? Unfortunately, most grocery operators maintain that they are so busy that they don’t even have time to walk down their own aisles! I’ve learned a very good time to learn what’s going on in other stores is to take organized – or individual – store tours when attending out-of-town industry functions.
I started in the retail business in the 60’s; it was part of the job description to visit at least 1 of the competition’s stores each week. We had a check list that was filled out and sent to the corporate office. We checked cost’s, new products and workmanship to name a few things. I do believe that today most retailers/buyers very seldom get into the competition and check their category; they are too busy to get out. It’s unfortunate that they only hear it from the CEO, because that is what their companies are paying them for.
All retailers should visit the competition. While our distinguished panelists gave excellent suggestions, there is one suggestion that they overlooked.
We perform 1000’s of competitive shops each year for some of the nation’s largest retailers and we always suggest that they measure the competition using the same standards that they set for themselves. Have an objective set of eyes “secret shop” using the same criteria to determine how you compare to the competition on those items you have deemed important to your customers.
Whereas it is always important for upper management to see what the other guy is doing differently, better or more innovatively, it is equally important to see how you measure on an apples to apples set of rules.
The best run, most profitable retailers always see how they stack up against the competition. So kudos to Mr. Dillon, but he needs to go one step further.
The important consideration in my opinion is context. Just grabbing snips of another’s ideas then burying them in a sea of sameness won’t accomplish much. I believe that Target does a great job of first, borrowing from successful specialty chains (rather than copying other mass retailers or department stores), which helps them keep their aspirational edge and second, somehow manages to make it all their own at the end of the day. Walking into Target, I see “inspirations” from specialty concepts as disparate as Urban Outfitters, Pac Sun, Smith and Hawken (and hey, now they own the brand), Whole Foods, and Sephora, all executed meaningfully yet with Target remaining the master “brand.”
Wal-Mart has borrowed some of the same ideas as of late and I think they’ve also done a super job of integrating fresh ideas into their new concept stores without abandoning their low-cost core.
There’s nothing new under the sun…yet interpretation still makes it fun.
I am impressed that Mr. Dillon gets out and does his own legwork (I hope he does the family grocery shopping as well!). I have frequently complained in this space about grocery retail executives who avoid the stores – their own and others – and the message that sends to the store level troops.
All the best retailers I’ve met or interviewed love being in the stores. Sam and Bud Walton would always visit the competing retailers before or after a new Wal-Mart opening to compare prices. An article I wrote almost 20 years ago gives the example of how the two were able to rattle off dozens of products a competitor had at lower prices, and how they identified assortment differences that could impact Wal-Mart’s price image. It wasn’t until he had more than 400 stores that Bernie Marcus of Home Depot had to cut back on visiting the competitors because he had been on the covers of most of the major business magazines.
It makes such good sense to not just walk competitors, but to even have your team walk some of your better stores in your own chain and talk to the customers, look in their shopping carts, stand on the front end and watch and LISTEN. I have seen some of the better retailers like Target for example, have their buyers go to different formats, channels of trade and magazines and look at what and how product is being offered…no one of us is as smart as all of us.
Just a footnote to Ron’s comment. When Sam cruised those stores (or sent teams out to look at stores) his intent was to find out what the competitor was doing “right” that Wal-Mart wasn’t or, at the very least, what others were doing better. Too many retailers look at their competition with an eye to reinforcing their existing opinions.
I think the best answer to the first question is ‘everything.’ Retailers that really understand their competitors don’t simply look at price – yet the survey would indicate that is primary. Certainly, everyone considers price when looking around, yet in doing so, they are missing the real reason for being there. That is, from my view, taking the journey in understanding why the consumer has made an alternative choice than shopping with you. That’s why they are a competitor, right?
Take an opportunity to visit a competitor and not pay a single bit of attention to the price of anything in the store. Put it out of your mind and focus upon ‘everything.’ Okay, so ‘everything’ might include price. I’ll concede that. What I won’t concede is that it’s the most critical factor. It’s one of a long list.
Look at ‘everything.’ That includes counting customers, cleanliness, entrances, checkout areas, merchandising, product selection, store layout, observing traffic flow, checking market baskets, polite questions of customers, and the list goes on and on. If you are astute, it’s the conversations that you can strike up with both associates and customers that will glean the most.
This is really the most fun activity in retailing. It leads to understanding and creates engagement. One of the most fun things is doing it with a different associate every week. It’s an opportunity for teaching, but even more so, it’s an opportunity for learning from a fresh point of view and a fresh pair of eyes and ears.
Who does it best? Well, that really would be a competitive secret or competitive intelligence – wouldn’t it?
This discussion topic underlines the intensity of competition in the retail industry. While in many of the other industries such as manufacturing it is harder to gain access to the competitive information, retailers have to display their guts out to everyone – price, assortment, display, etc. While it is tempting to emulate a successful competitor, every retailer should stick to their own strategy, brand, and business plan. As such, with blurring segmentation, every other retailer could be competition. In any case, keeping eyes and ears open to what the competition is doing is the first step of any competitive strategy.
Auto manufacturers routinely do tear-downs of competitive products, essentially disassembling and reverse-engineering the vehicles. It’s a brilliant idea, cashing in on the R&D billions spent by others.
It may also explain why so many cars look alike, and have essentially the same features.
Advertisers (retail and otherwise) always hold advertising creative up to this standard: could anyone say that? Fair enough. My question is: if I plunked a blindfolded customer in your store, and yanked off the blindfold — would they know they were in your store? Or is your store unmistakably generic?
With all the respect I have for Mr. Dillon, it is a shame he didn’t speak to specific consumer centric needs for the industry, and what Kroger is testing. Or, maybe he implied that with the Target mention.
A retailer just can’t be a ‘big box’ store with price and variety. He isn’t selling to our grand parents and great grand parents. New audience, retailers!
Shoppers have changed, and some retailers just want them to be a number, and a sales figure. I know consumers who detest the thought, and are going elsewhere! Hmmmmmmmmmmmm
It’s really hard for many retail executives to shop the competition. Many seem to think the purpose is to make themselves feel good. I sometimes see them going around in groups, with the subordinates echoing the boss’s pronouncements. The best way is go visit by yourself, during prime shopping hours. Bernie’s suggestion of paying for professional shops of your competition is excellent. It sure would be great measure and motivator to post the results!