Stores Looking to be Different
By George Anderson
Food stores are increasingly becoming a niche business as operators have learned that the path to success lies in targeting specific core consumers instead of trying to satisfy the needs of a wider base.
“Shifting consumer behaviors and attitudes, shorter product lifecycles, new store concepts and competitive pressures from a broad range of retail formats are driving a fundamental change in the way food retail companies do business,” said Michael Sansolo, senior vice president for FMI, in a released statement. “There is no longer a ‘one format fits all’ supermarket. Understanding the specific needs of your targeted consumers and delivering what they need are essential for success.”
According to FMI’s Facts About Store Development research study, stores are increasingly testing out new formats with the greatest number going the gourmet/specialty route (66.7 percent) followed by experiments with organics (50 percent) and ethnic food markets (25 percent).
For many retailers, targeting specific consumer groups means developing unique formats often within the same market. Stores are using cooking demonstrations, coffee bars, dollar aisles, gasoline, in-store pharmacies and in-store convenience areas as a means to attract and keep shoppers.
Changing a store’s focus to target specific consumers has also led to numerous store remodels. According to FMI, nearly 60 percent of companies responding to its survey invested in at least one store remodel.
Moderator’s Comment: What do you see as the most significant development in-store that operators are using to differentiate
themselves from other food competitors? What food store operators have done a superior job in tailoring multiple types of store formats to meet the needs of targeted consumer
niches? –
George Anderson – Moderator
I agree completely with something Camille said in answer to the question about ethnic foods – people will increasingly shop in more than one place in order to get what they want. I have said repeatedly that no one store can be all things to all people all the time. This is where the opportunities for differentiation can be maximised. During my recent whiz around S Cal supermarkets, the one that most impressed me was Major Market. I can’t remember how many units they have or how wide an area they cover but the range and quality seemed far more interesting and attractive to me than any of the others in the area – including Trader Joe’s and Whole Foods which I also visited and liked for different reasons. I’m probably showing my bias towards independent stores again but for me, the best thing a supermarket can do is to assume it is independent and exists purely for the benefit of its customers. If it does that, then the whole business will benefit through both increased and improved performance in-store and at corporate level.
Successful stores recognise and leverage the unique strengths of individual employees. In my local Sainsbury’s there is a lady of a certain age whose official job it is to keep the checkouts tidy. She clears away products customers decide not to buy after all, keeps the bags neat, assists cashiers if they need to find a price and so on. At least that’s the theory. In reality, she spends a lot of time distracting and entertaining whinging infants while their harassed parents get through the checkout.
And this is a real service! When you’re trying to pack seven bags of groceries, locate your wallet and field questions about cash back and whether you’re collecting school vouchers, and all the while your baby is screaming blue murder, it gets a little stressful. Up pops a mumsy staff member happy to spend five minutes entertaining your grouchy infant… Honestly, you’d pay good money for it.
There’s no way this can be a company policy, though – I guess a savvy store manager noticed the reaction from parents and realised that an employee who at first might appear to be wasting time was in fact providing an appreciated service. More of the same would be good. It builds loyalty.
Many stores are trying new things and that is good. As more consumers demand what they want when they want at the price they want, the stores that can satisfy the needs will win. There is definitely room for low-price stores. Competing against Wal-Mart for that space is difficult so many stores are trying alternatives. However, there will continue to be a need for low price stores offering food that appeals to ethnic groups so Wal-Mart does not have the corner on the whole market. Providing products and services for specific groups of consumers who demand customization is certainly a good strategy. Determining which consumers are valuable to you and what they want and then delivering in a format and price that consumers want is a huge challenge. Experimentation in this area is important. Learning about consumers and what they want from these experiments is even more important.
I agree that most supermarket innovation is so widely copied that it doesn’t feel like innovation. It feels like “me-too.” It’s devilishly hard in retailing to be truly unique. You can’t patent a store.
James Tenser’s point about retailers “all trying to be different together” (a common trait among teenagers as well) is very well taken. But this will shake out. The natural reaction to superstores that aim to fill every possible shopping need fairly well is to have specialized stores evolve that do one thing exceedingly well. There are plenty of examples of the model in international markets. Think “the green grocer,” “the Hallmark card shop,” the local butcher or wine merchant. The biggest question for supermarkets is whether or not consumers will see “food store” as a sufficiently differentiated alternative.
I see lots of interesting and desirable merchandising efforts enumerated here. But I don’t see any of them as true differentiators. If 76% of your competitors also have a floral department, then how does having one set your store apart? The FMI report tells us how supermarkets are attempting to be different in the same ways.
Not that this is a bad thing. Customers clearly want these services and merchandise categories – that’s why they are popular. But adding a coffee bar, organic pasta, and some gasoline pumps to a conventional supermarket is hardly a differentiating strategy. You might just as well throw some organic spaghetti against the wall to see if it sticks.
Hy-Vee is one who gets it. Despite being a chain they operate each store as a “chain of 1” allowing the store director to go in whatever direction is right to meet the needs of their shoppers. Their approach must be working as they’re able to go toe-to-toe with Wal-Mart Supercenters.
To James’ point, I think it’s a little alarming that supermarkets are evolving from all of them being “the low price leader” (actually, most of them still all say that) to “the upscale convenient meal solutions store with healthy delicious food and associates who care.” But as usual, some retailers will just talk about it, and not really execute. The real differentiation here is not just offering these things, but doing them well. Shoppers figure that out pretty quickly, and vote with their dollars.
I agree with the first thread in this discussion that indicates these choices do not depict true differentiators for today’s consumer. The rushed and demanding “tech savvy” consumer is far more interested in “dial-ahead” to the deli counter, self serve check-outs, automatic coupon dispensing to a consumer who might not ordinarily carry coupons with them (remember they are rushed and demanding) and other such technology based services and aids that will help them get their shopping done more conveniently and with less hassle. I would also add that the environment is becoming more important to them as well if they are not price shopping alone. Trader Joe’s has a great handle on the environment concept and actually generates comments such as “I Love that store” when their name is mentioned. Not too many grocers can make that claim. So if looking for the true differentiators that also “save the sale” (every retailer’s mantra) look for the tech savvy stores that also create a fun shopping experience! They will be raking in the dough!