Archive for November 26, 2012

Operation “Wallet Recovery”

I’ve heard it said many times by more than one supermarket retailer that they believe they have a very loyal shopper following.  Many of these same retailers are shocked when they discover that they are only supplying about half of these shopper’s grocery needs.  In fact, I have tracked the “wallet share” of several retailers with strong “loyalty” programs  only to watch a precipitous drop in their share of shopper requirements over the past five years, especially among their very best shoppers.

Yes, despite the best efforts of some very good retailers, they are losing their grip on their best shoppers. Certainly some this attrition is unavoidable.  New competitors  from other retailer channels are taking a bite out of the supermarket pie.  On-line retailers, Amazon for sure, are now selling shelf stable center store products on-line to a growing audience.  Big boxes and specialty retailers are taking significant share on both the “price” and the “fresh” pieces of the business.  Finally, with the lingering recessionary environment, shoppers have drastically expanded their “consideration set” for all their sources of grocery items as they have adapted a renewed “cost-containment” mentality.

Yet, growing the business for many supermarket chains is still possible, all the bleak aforementioned realities withstanding.  However, to be successful at winning back lost shopper share requires a plan that should include the following steps;

  • The first step in operation “wallet recovery” is understanding where the leaks are occurring and how big they actually are.  Both primary and secondary research will be needed in this step, but basic stuff, nothing terribly sophisticated needed to create this learning.
  • The second step is developing a strategy to recover this lost business, given the limited resources you have to do so.  This means not chasing every shopper, every dollar in every category.  It requires customer data, analysis and actionable strategies.
  •  Thirdly, the retailer must understand that winning back their shoppers share of wallet is an ongoing, never-ending process that must optimize limited resources and involve merchandising, marketing, merchandising and even human resources.  Consequently, great focus and commitment is required.

Customer loyalty is not dead, but it has changed.  It more elusive and less sustainable.  Successful loyalty marketing now requires new strategies and a focused, committed approach.  More to come on this topic.





Perishables Keep Many Retailers from Perishing

At the risk of stating the obvious, nothing defines a traditional supermarket chain better than their perishable departments.  Survey after survey tells us that superior meat, produce, and bakery offerings are consistent reasons why shoppers continue to patronize supermarkets.  Nurturing this marketing position is absolutely imperative.  But it has never been easy to do.  

Maintaining superior perishables requires an investment in in-store expertise, a reasonable approach to inventory control, high standards of product selection, the willingness to pull sub-standard product and  most importantly the flexibility to give up a few points in margin for the sake of these standards.  

Wegmans, HEB, Harris Teeter, and other notable supermarket retailers get it. Fresh Market and Whole Foods are examples of the viability of the market for superior perishables.  They know that their image in perishables is their life-blood.  Measure the average basket size of shoppers that buy two or more perishable items in your store.  If it follows the “norm” these baskets will be anywhere from $3-$10 more than your average transaction.

Instead of squeezing every last cent of margin out of the fresh departments, train your focus on investing in these areas, knowing that even at a few less points of margin, these departments serve as a magnet for shoppers, who value these investments and reward retailers for doing so.

Brand Equity Begins and Ends with Your Associates

Bricks and Mortar companies that spend millions on consumer research and multi-millions on in-store technology are wasting much of those capital assets if they first do not invest in human capital.

Yes that’s right.  Just when you think kiosks and self-checkouts are sub-planting the need for human beings in retail store fronts across the nation,  don’t forget that many of your customers still value human interaction.  Somehow, someway, these attention-starved customers will find one of your employees to talk to, even though locating them is becoming as rare as a sighting a Republican in Massachusetts.

Despite wave after wave of new technology, digital customer touch points, and e-commerce, your sales associates are still in charge of your brand’s image.  

Their demeanor, their ability to solve the customer’s problems, and the speed in which they do so, still means more to most customers than all the shopping apps and digital signs you can offer them.  Oh, and by the way, when the technology doesn’t work, it is the sales associate who must either fix the technology or work around it.

Further evidence of my contention abounds.  Note today that the corporate title of “Customer Experience” is beginning to work its way into the corporate organizational charts.  I would suppose the title implies this individual’s performance is measured in standard metrics such as customer satisfaction, repeat visits, willingness to recommend, etc.  So if customer experience has emerged as a significant C-suite role, there must be a connection to sales performance, one that should supersede the continuous quest to trim labor expense out of said customer experience.  Speaking from years of in-store management experience, the biggest single asset or detriment to the “customer experience” is the performance of your in-store associates.

Conversley, you will not get an argument from me that there are labor savings and efficiencies to be had in most any retail operation.  However, when associate training, benefits, hours, and full-time status are continually slashed to “remain competitive”, there is a real risk of also slashing your customer’s reason for coming back to your store with the same knife. In today’s technology driven environment, where there is often little to separate one retailer from the next on product, price, and place, it is human capital, ironically, that can emerge as a real strategic asset, if it is regarded as such.

If retailers consider training, associate incentives, recognition, and the resulting “customer experience” an investment in competitive advantage, perhaps it will be viewed in a different light the next time budget cuts are mandated.  Remember, your associates  may be one of the last important attributes of your business you can truly own!

The Cost of “FREE”dom….

Anyone who has spent significant time in the supermarket business knows that there is no such thing as a FREE anything.  Buy One Get One Free promotions are among the most costly promotions supermarkets offer,  FREE Turkeys at Thanksgiving are just about the most expensive promotion a supermarket chain can endure.  So is it also with federally mandated  no or low cost healthcare benefits and a host of other new regulations that must be incorporated in the P&L.

National chain restaurant operations and their franchisees have already gone public with counter measures to the new expected expenses.  Layoffs, fewer full-timers, reduced hours for associates, and even higher prices to consumers are among the early reactions we see restaurant chains discussing.

Supermarket chains are not immune to more of the same.  Look for subtle changes to service levels and higher prices to begin to be noticed.  These moves are unavoidable and in aggregate likely to be universal across much of the business world beyond supermarkets, risking throwing the economy back into a recession.  With recession or even a slow down, coupled with the devaluation of the U.S. dollar due to huge national debt, the landscape for supermarket sales and profit growth is tenuous at best.

These issues have been elevated in discussion in every boardroom since the re-election of the president on November 6th. President Obama has already stated that higher taxes for many who own small businesses and the continuation of a larger role for the federal government is very much on his agenda for his second term.  There is no doubt this will mean a challenging landscape for most traditional supermarket chains.  

Consumers will react to this as well. Expect that shoppers will continue to be increasingly conscious of price comparisons, deals, fuel programs and private label savings. Dollar stores, and other price formats will continue to flourish.  Those traditional supermarkets that can accommodate new pressures on their P&L, while somehow preserving services and customer experience, will once again posture themselves for growth when we do finally emerge from this financial abyss.  For those that are already struggling today, the impending new set of economic issues could be a death sentence.  It is times like these that strong senior management teams really earn their salaries.  IF they make the right moves, investments and expense reductions they will have increased their chances of navigating through this challenging environment.






Focus on Five Things, Just Five

Sophisticated marketing plans often neglect to recognize the need for focus and customer recognition. I begin my conversation with many of my clients by asking “What are the five things your customers consistently give your credit for?” In some cases I can get one or two delivery elements, but most struggle with answering that question with confidence and clarity.

The point is that successful businesses establish a “clear identity” with their patrons. If that vision does not exist, there is more than likely a very weak customer connection in place.

So pick five things.  It could be a signature item or service or perhaps a customer experience element. Make sure each of these elements is important to your customers, and then circle the wagons around these five things.  Sure, it could be four or even three things you want to truly train your guns on, but five elements provides enough variety to cover marketing, operational, merchandising and service dimensions of the business.

Whether its five, four or just three elements, drill them into the corporate culture and insure that” no matter what” they are supported and associates are held accountable for that support.  Identify those elements that can differentiate your business, support them, defend them and do not relent…no matter what!!

Picking Winners and Losers

Traditional supermarkets are currently losing business on both ends of their customer spectrum.  On the “price” end of the business, Walmart, Target, Aldi, Sav-a-lot, and Club Stores continue to chip away at center-store categories.  Conversely, fresh specialty chains like Whole Foods, Fresh Market, and Trader Joe’s are showing up with increasingly regularity as accepted additional options for traditional supermarket shoppers.

Harris Teeter Supports Local Growers

The resulting impact on many, (not all) traditional retailers are negative comp sales, lower margins, and poor overall financial performance.  Some, such as Food Lion, have tried to overhaul their image and offerings with new private label lines, lower prices and sharper promotions.  Others, like Raley’s in Northern California, have launch significant new loyalty programs.  Still others are remodeling their stores and adding new fresh and organic lines of perishables to stave off further attrition.

Two, retailers, however, have continued to produce positive comp sales and have grown their revenues through a variety of programs and initiatives.  The first is Kroger.  Much has been written and said about their dedication to investment in data, fuel programs, and overall pricing prowess.

The other is Harris Teeter, based in Matthews, NC.  Harris Teeter recently posted nearly 4% same store comps for the year, while increasing their shareholder dividend.  They have consistently innovated by offering in-store grocery pick-up, expanded their perishable offerings and services, and have cemented their leadership in their communities through giving and sponsorships.

One could also argue they understand who they are and are not.  They are competitively priced, but certainly not attempting to compete with Walmart and the other “price” players in their markets.  What they have done is expanded their value proposition on-line with digital coupons, and extra value for their e-Vic (electronic frequent shopper program) shoppers.

In essence, Harris Teeter exemplifies a retailer who follows the basic, but often times difficult formula for success. They understand their value proposition to their shoppers and continually re-inforce it.  They stay competitive in price with innovative promotions and embracing digital content.  They also are not shy about making some aggressive investments in their stores and programs to keep shoppers engaged and loyal.  All of this is executed with remarkable consistency.

Harris Teeter is a winner.  But winners are often targets for other winners to challenge.  To that end, Publix has recently announced a major move into the Charlotte, NC market, one where Harris Teeter has significant share.  So Harris Teeter will be tested once again to make adjustments to defend their turf.  But one thing they will likely not do to beat Publix is change the formula that has yielded so much success in such tough times. 





The Great Digital Disconnect

Like many things that come along in the world of retailing, digital content and especially digital coupons have been a disappointment to many with regards to their immediate impact to the business.  While shoppers are increasingly pre-shopping on-line, loading coupons and building shopping lists prior to their journey into the world of bricks and mortar, their activities still remain on the peripheral of most retailers mainstream focus.  This is particularly true in the grocery channel, where I have spent the majority of my career.

There are number of theories about why digital content has not become a more significant element of shopping.  Some of the barriers that are evident to me are;

  • Lack of Technology Integration In-store:  That translates to the inability for most retailers to allow the shopper to actually use their mobile device in-store to aid in the shopping experience.  Mobile payment capabilities, while catching on, is still not ubiquitous to the point of becoming mainstream for the shopper or the retailer.
  • Competing Value Propositions: Brand money and retailer focus always migrates to those elements that move cases, drive sales and can be measured.  While digital content is considered slick and most retailers believe it is the communication media of the future, paper coupons, weekly circulars, and other traditional promotions still bring drive the vast majority of sales and the quick return on investment that brands and retailers must have to run their business.
  • Dearth of Digital Content:  This is the biggest void.  Clearly many retailers and manufacturers are dipping the toes in the water, but digital offers and information continue to be an under-nourished entity, which is especially damning if the brand and retailer want to target this content so that it is meaningful to the shopper.  Hundreds of digital offers, covering some of the highest household penetration categories need to populate the offer bank, not a just few dozen, that mostly contain high margin, low penetration categories, that is the norm today.

Digital content has been wrongly positioned (in my humble opinion) as a series of stand alone events and content that often have no connection to the mainstream value proposition of the retailer.  To that point, there is an opportunity to gain acceptance and reach a degree of critical mass with digital content, if two things happen.

  1. The digital content is directly linked or layered to existing value elements of the retailer.  This means digital deals that are positioned as bonus savings on end cap items in the store, front page items in the circular, or even targeted offers that are in direct mail or email communications.
  2. There must be evidence of these digital offerings in-store.  Signs with QR codes to connect with content, references to how to load digital content to the shopper’s account while the shop in the store is rare.

When these conditions are met, shoppers will embrace the offers, engage with digital content programs at a much higher level.  Consequently, brands will be more likely to spend their trade or shopper marketing dollars with the retailer who can deliver a more holistic digital approach.  Then the fun begins.