Archive for In-Store

Store Layout….Is There Gold to be Mined?

Colleague and shopping pundit, Herb Sorensen (www.shopperscientist.com), will tell you without hesitation that there is much to be gained by enhancing store layouts, particularly those that impede fluid shopper mobility within the store.   As just one example, we known from past studies on the topic that the more aisles and barriers a store has, the slower the pace of shopper spending.  This is particularly important when coupled with the knowledge that shoppers do not have an infinite amount of time to navigate through a store.

heatmap

Heat Map Depicting “Dense and Sparse” Shopping in Store.

In fact, after a few minutes into the trip, shoppers consistently speed up their pace, and accordingly decrease the rate in which they buy, speeding by aisles and categories that appear to be irrelevant to the shopper’s immediate needs or more commonly just represent too much time and energy to explore.

Most retailers are oblivious to these shopping tendencies.  In fact they design and stock their stores with the mindset that more aisles and products mean more sales opportunities.  It is just a matter of manipulating the shopper into spending more time in the store to take advantage of all of these great new products and departments.  Nothing is further from the truth.

Retailers who have taken the time to track their shoppers through the store…whether it be by personal observation or by technical means, are often surprised by many of the discoveries, including the following:

1.  How deep into the shopping trip, aka how long it takes for the shopper to select their first item for purchase from the time they enter the store.

2.  The miniscule percentage of time shoppers actually spend “shopping” as opposed to the time they spend traversing the store getting from one “shopping event” to the next.

3.  How little of the physical store shoppers actually traverse on any given shopping trip.

4.  How few aisles shoppers actually fully navigate as opposed to “diving into an aisle” quickly for a planned purchase and then revert quickly back to the perimeter of the store.

5.  How shoppers migrate naturally to open space, where they can clearly view the entire store, and conversely how consistently shoppers avoid tight, confining alcoves and aisles

Each of the aforementioned shopping tendencies represent opportunities for the retailer to embrace.  By understanding these consumer practices, retailers can make both subtle and overt changes to their layout and merchandising plan, resulting in a more efficient shopping experience for the consumer and larger baskets sizes for the retailer.

 

 

 

 

 

Amazon Fresh…Changing the Rules of Engagement

MorningNewsBeat.

A news article posted by MorningNewsBeat speaks to RetailNetGroup’s recent analysis of the experiment in on-line grocery shopping that is Amazon Fresh.  I am always interested in those who are convinced that to-your-door groceries is coming into its own.  While Ahold’s Peapod, Fresh Express, MyWebGrocer, and others have carved out a sustainable yet small niche in the grocery industry, Amazon may just be the one to kick start the offering on its journey to a more pervasive service.

Unlike those other services, Amazon is seemingly prepared to expand this service without any sustainable profit in sight.  They likely mean it when they say Amazon Fresh is a strategic initiative, not a profitable tactical one.  Without the burdens of financial contribution, coupled with Amazon’s mastery of logistics, Amazon Fresh could conceivably be the service that finally breaks through to critical mass.mobile-shopping

If that is true, Walmart, and all leading traditional supermarkets will need to pick up the pace on refining and expanding the services.  It could also mean that delivery fees are lower, order size minimums are waived, and it certainly could mean that home delivery and in-store pick up will never pay out using traditional metrics and full allocated costs.  Amazon Fresh may dictate that all players in this space see it as strategic as Amazon purports.

Departments and offerings within the mix of the traditional supermarket that do not profitably stand on their on is not a new phenomena.  Just add on-line grocery shopping to the list and understand the indirect benefits of incremental shoppers and transaction size growth that these services can foster.  With Amazon moving in, and Walmart not about to be left out of the mix coupled with more time starved, tecno-savvy consumers, the stars are aligning for grocery e-commerce.  Let the games begin.

 

Grocery Stores Losing Fresh Market Share ..Not Good News for Traditional Supermarkets!

A recent study conducted by the Nielsen Perishables Group reveals that selling fresh product in supermarkets is, like many other aspects of the business, becoming increasingly more difficult.  While fresh categories are transitioning from reliance on commodity markets and seasonal strategies to more of a packaged goods approach, one of the supermarket’s long-standing advantages over its supercenter competition is fading away.bag salads

Bruce Axtman, president of the Nielsen Perishables Group states within the new report extracted from Supermarket News;

“Fresh as a commodity market is changing and can no longer just rely on strategies that are determined by supply and commodity prices,”  “Suppliers and retailers are slowly but surely transitioning to the consumer packaged goods style of category management based on the knowledge of both consumer and performance data to better understand how various consumer groups purchase fresh foods differently, at which stores, and at what price points.”

Bruce’s comments are significant. Previously sold as predominantly bulk products,  pre-packaged and sealed, meat, deli, and produce items are now taking on the personalities of their sister departments like grocery, general merchandise and health & beauty care.  That implies that fresh departments are now subject to category management principles, pricing models and even supply chain functions that resemble non-fresh departments, all of which can provide efficiencies for grocery retailers, both traditional and big box formats.

But with this trend, warehouse stores and supercenters are poised to gain more of the fresh business….. at the expense of traditional grocers.

Supercenters as a channel of trade, are gaining in their share of the “fresh market” at the direct expense of their traditional supermarket competitors.  This same Nielsen Study predicts that warehouse stores will gain 2% share of the fresh business and supercenters will gain 1% over last year, while traditional supermarkets will lose 2% of this profitable business.

One could argue that the fresh business would be trending away from traditional supermarkets even without the aforementioned  trend of  “the packaging” of fresh”, but clearly the consumer acceptance of pre-package meats, produce, deli, and even seafood product plays right into the hands of the volume-oriented big boxes, who lack the expertise and the business model to support more traditional open-market type fresh presentations.  Pre-packaged, case-ready product is just what the perishable doctor ordered for price formats whose business model appreciates the labor savings inherent with pre-packaged perishables.

So what does this mean for the business?  

Once again, traditional grocers will need to re-invent their fresh departments and services in order to defend this very critical and profitable part of their business…..a daunting task given the current consumer trends towards the acceptance of packaged fresh product and the resources of the big box stores to provide an ever-improving alternative to bulk produce and the service meat, deli, and seafood cases!

Editor’s Note:  In recent posts, I have talked to specifics that traditional retailers can employ to sustain their fresh business. More to come on this topic as it is critical for the continued wellbeing of supermarkets that they continue to dominate “fresh”.

 

 

Read More: http://supermarketnews.com/produce/grocery-stores-losing-fresh-market-share#ixzz2O1lamLQn

 

 

 

Walmart Recognizes Out of Stocks as Self-Inflicted Wound

Walmart CEO, Bill Simon recent revealed in an internal memo that Walmart’s out-of-stock position was a problem and one that is getting worse, not better.  Kudos to Mr. Simon for being a leader and recognizing something that most of us in the retail industry are aware of, namely that despite flow casting, just in time, demand planning processes, there are still too many items missing in action when you walk down the aisles of your favorite store.

Out-of-stock3As with any retail issue, a piece of this problem is out of the control of the retailer.  Recall items, pack changes, and other manufacturing problems can be a source of the out.  But the majority of the out-of-stocks I see in stores are due to too few associates in the store, actually using the systems they have available to them, to replenish a sold out item in a timely fashion.

Past research on the topic of out of stocks has placed the average number of items missing from the shelf at about 7% at any time.  If you are a high volume retailer, such as Walmart, the 7% number is likely to be woefully conservative.  But even at 7%, and knowing that only about half of the shoppers will substitute another item for the one missing, you are talking about huge lost dollars sales.  As Mr. Simon puts it, out-of-stocks are inherently a  “self inflicted wound”.   Unlike many others, retailers can control and recover much of the damage inflicted by missing items.  In order to do so they must first recognize it as a problem and monetize the problem, as Mr. Simon has done.

Then and only then can you begin to allocate resources against this issue, knowing that there is a huge ROI waiting at the end of the process.  Being the opinionated guy that I am, here are a few suggestions as to how address out-of-stocks more effectively.

1.  First, do not solely rely on systems and reports to fix the problem.  Some person or persons needs to be accountable and have some addition human resources available to execute the fix.

2.  Audit the stores individually and identify chronic outs perhaps due to pack size of the product and allocation of adequate space to stay in business delivery to delivery.  Every store can be different in the sales pattern and space allocated to an specific item.

3. Systematically check your shelves twice a day, once in the morning, even after the stock crew has finished their work, and a second time in the mid evening, or in the middle point of whenever your business is peaking for that day. For sale items and other fast moving items, additional checks may be needed.

4.  Develop a working knowledge of why certain items are chronically out of stock and insure through addition back stock or an outside display that there is plenty in reserve if the shelf capacity is a limiting factor.

5.  Track your progress and sales on the items that are being monitored.  There is no proof of concept  like seeing sales growth among items that have been chronically inclined to be missing in action attributed to the new attention they are receiving.

Building upon Mr. Simon’s comments, I see out-of-stocks are a “shelf-inflicted wound.  Check your shelves daily, develop a system that works for you,  and don’t settle for average when it comes to something that you can control.

 

 

 

 

Is Your Digital Strategy “Active” or “Passive”?

All the hype, pomp and circumstance aside, digital marketing is mere blip on the radar screen for most retailers…especially those in the grocery channel.  I say this with all due respect to grocery retailers as I understand their need to hitch their wagons to those media and programs that represent critical mass.  Accordingly, digital engagement in the grocery channel, defined as communicating digital content and offers,  is far from grabbing the headlines away from traditional venues and promotions.

My assessment of as to why digital programs still live in the periphery of the retailer marketing options centers around whether digital programs are passively or actively promoted.  Pour another cup of coffee and let me explain.

Passive digital programs are those that are launched relatively quietly, typically exclusively on digital touch points.  For example, in the case of a grocery retailer offering load to card or load to account digital coupons, there is often little or no mention of these programs in the mass media such as weekly circular television, radio, or even direct mail.  Further and even stronger evidence of the passivity of promoting digital content, there is rarely any mention or reinforcement of the program in-store.  Please don’t bother asking a cashier or associate about the program in-store, you will only get a blank look and a shoulder shrug.

Another key component of a passive approach to digital is content itself.  Retailers who expect hundreds of meaningful, widely WinnDixe1purchased brands to drive the content bank of these digital programs, often find that unless the shopper is in the market for an obscure meat seasoning, or a new herbal toothpaste, the digital offers available have little relevance to their shopper’s needs. But yet retailers who take a passive approach launch programs with these offers and then wonder why engagement is so disappointing.

Here’s the first take-away for retailers.  Digital is not going away.  Shoppers want it.  Shoppers are hooked on the concept and other channels of trade and on-line retailers are setting the early shopper expectations in both content and technology. As Winn-Dixie aptly “tags” their new digital program, “The Future of Savings is Here”.  They have it right.

The second important point for retailers is that passively engaging digital and waiting for the content to arrive, is depriving them of a golden opportunity to become a committed leader and thus gain share of wallet from their current shoppers and actually be in position to lure shoppers from their competitors. But this can happen only if the retailer takes an “active” approach to digital.

Here are a few recommendations I offer to become an active retail digital marketer.

1.  Shout about the program in-store. Point of sale signage, bag stuffers should tell the story.  Associates should be aware of the program and endorse it at every opportunity.

2.  Drive the digital content with retailer-sourced offers.  Make the commitment to have some of your “skin in the game”.  Measure results and then “invite” your brand partners to contribute based upon your early positive results.

3.  Tie digital into the mainstream of your marketing program.  If you offer paper coupons in your circular or paper direct mail, convert them to load to card or account.  Also, think about layering digital bonus savings on front page items, end cap features, perhaps have a “Store Managers Digital Offer of the Week”.  Get inventive.

4.  Measure the results and use the resulting customer data to become iteratively smarter about which offers and content drive the best results among your shoppers.

5.  Don’t forget to include store brand offers.  Nothing will get your brand partners interested in participating faster than if they see their share of category sales diminishing due to the impact of your store brand digital offers and campaigns.

Active digital engagement is an opportunity to lead, differentiate and embrace the future.  Staying passive will keep you comfortably operating in the past or at least until you fade from the scene.  It’s your choice.

 

 

 

 

 

 

 

Brand-Retailer Relationships: “Partnering” or “Biting the Hand that Funds You”

When the Food Marketing Institute met this year for its annual warm-weather retreat, aka, The FMI Midwinter cooperationsConference,  one of the topics that is being touted was “partnering”, specifically between the Food Marketing Institute and the Grocery Manufacturers Association, (GMA). A perfect partnership opportunity for the two major food industry organizations to combine forces, share expenses and develop notable synergies.  Stay tuned, but I see no reason that this new marriage should be a long a prosperous one.

But as for the members of these two fine organizations, the individual brands and retailers, “partnering” has produced mixed results.  Over the last twenty years several industry movements have served as catalysts for partnering.  Category Management (CM), Efficient Consumer Response (ECR), and more recently Shopper Marketing-Path to Purchase (PTP) have led to co-authored and co-funded studies that lead to books and presentations.   But lasting partnerships among brands and retailers, not so much.

Reasons for less than optimal results abound. The truth is that on key cultural and process issues, brands and retailers are wired very differently. Retailers live in the moment.  Brands often live in the future.  Retailers adjust the components of their business hourly, while brands deliberate and strategize over months and years.  Brands move managers and executives relatively quickly through their organization, while retailers tend to keep their team members in positions longer.  Both feel they “own” the customer and are keenly anxious to extend that advantage.  For these reasons and others, many retailers continue to “bite the hand” that funds them.  In turn, brands continue to believe they represent a significant portion of the retailer’s life to form a direct to shopper relationship.  Both practices are unwise and bode poorly for the future.

Technology and a sagging economy have nurtured a new variable, namely an empowered shopper.  This shopper has ceased control of the conversation and is quickly demanding better information, more relevant deals, and more efficient shopping alternatives that only the brand and the retailer together, can deliver.

Loosely translated, retailers with data and new shopper touch points need shopper insights and content from brand to attempt to satisfy the insatiable appetite of the new empowered shopper.  Sure, brands and retailers can try to go it alone, but given the short window of opportunity, new competitors pouring through that window each day, and the impatience of the shopper, it is hard for me to image anything but the power of a well formed partnership providing the best solutions for the new millennium.

As with all things that yield positive and timely results, there are requisites for success.  Here are some.

  1. Lasting partnerships are formed typically at the top of each organization.  The commitment must be clear and consistent.
  2. A good partnership has an accountable contact person on each side of the relationship, who must answer the bell when things get bogged down or do not flow as expected.
  3. Outcomes must be clearly communicated with success metrics known to all.
  4. There must be equal or near-equal benefit from the relationship.
  5. The partnership must grow and evolve, rather than stagnate and become mundane.

Perhaps the conversations at FMI Mid-Winter will serve as a harbinger for further brand-retailer alliances.  The shopper is waiting….waiting…waiting…

 

mh

 

 

 

 

 

 

Taking “Price” Off the Table

For those of you in retail, I challenge you to survey your shoppers with a simple question….

           “If you could change one thing about our stores, operations, and services, what would it be?”

0809_LowPriceArrowFrom my experience over the years in retail,  the overwhelming answer to this query will be ‘LOWER YOUR PRICES’.  In fact, this response was so dominant our consumer surveys were designed to deflect this common response.  To do so we added the caveat, “Other than lowering prices, what would you like to see changed….”   Yes, we worked overtime to take “price” off the table and out of the discussion with our shoppers.   We assumed that lowering prices was something that shoppers will always ask for, even unreasonably so.  Further, we knew that lowering our prices was really out of the question, in fact we spent endless hours looking for ways to “smartly” raise prices to achieve margin goals.

So with “price” out of the discussion, we could then move on to ask our shoppers about aspects of our operation that we actually were willing and able to change.  The lurking danger of dismissing consumer sentiments should be self evident.  Competitors often find ways to accommodate your shopper’s wishes.   When they do, sales, market share, and store traffic reflect your indifference to shopper imperatives.  In fact, the emergence of Aldi, Walmart, and other “price” formats is a function of traditional retailers unsuccessfully attempting to take “price” out of the consumer discussion, into the headwinds of declining incomes and recession.

The stark reality is that those that have successfully relegated “low prices” to something less than a shopper headline, have invested heavily into services, product quality, and store facilities.  In the grocery channel, Whole Foods, Fresh Market, Wegmans, and even Publix are among the list of retailers who understand that if you are to be known for something other than “price” and known to the extent that “price” is no longer a consumer priority, you must make a commitment to create a shopping experience that effectively changes the subject.

No silver bullets here,  but my advice to retailers who struggle with meeting their shopper’s “price” expectations would be to chose one or two areas of your operation and build service and product quality programs around those offerings. As one example, if you want to be known for the best produce in the market, actually buy and maintain the best produce and train your associates to be knowledgable experts in both product and preparation of the product. Be consistent and talk about it incessantly.  Once credibly is established as the place to go for produce, you might be surprised how much you can charge for bananas!

 

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!

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. 

mh

 

 

 

Is There a Future for Traditional Supermarkets?

The trend is clear.  The growth in the U.S. grocery sector today is not found in traditional supermarket formats but rather with specialty stores like Trader Joe’s, Whole Foods, and Fresh Market.  There are further signs of life on the other end of the spectrum as there is also growth opportunities  for smartly located  “price” oriented stores, especially the smaller, quick in and out formats like Aldi’s and Sav-a-lot.


But it has been a proverbial month of sundays (aka, a very long time) since the days of traditional supermarket chains planning dozens of new stores in their capital expenditure plans. Today, after another tough year of “comp sales” their press releases focus more on updating existing facilities, consolidating, and the ever-euphemistic “right sizing” of the number traditional grocery stores.

 

 

I see three prevailing reasons for this dearth of growth.

  • First, the sluggish economy has slowed residential growth and consequently the opportunity for new shopping centers and emerging business locations that have traditionally been fertile ground for supermarket expansion.  (BTW- If you are counting on the leadership from Washington D.C. any time soon to finally get fiscal policy right and end this malaise, don’t hold your breath)
  • Secondly, competition and complacency are killing traditional stores.  In medical terms, the autopsy of the traditional supermarket will read something like this; “death due to over-exposure, and multiple lacerations from savvy competitors over an extended period of time”.  I mentioned these competitive culprits in the opening paragraph.  They are at good at what they do and they have figured out how to profitably propagate their formats and brands nationally.
  • Thirdly,  traditional supermarkets are closing in on the end of their product life cycle.  For more than sixty years, this format has carried the load for grocery selling in the U.S.  Current trends indicate that there is little doubt that the traditional supermarket needs a radical reformation, or they go the way of the drive-in theater, the eight-track tape player, and vinyl records.  It should be no surprise to anyone.  Incredibly, these stores are designed for a shoppers that no longer represent critical mass.  The whole concept of grabbing a cart and a shopping list and spending 45 minutes to an hour shopping for food is already a rare and dwindling behavior.   None the less, traditional supermarkets are built for just that type of trip. (I could bury you with facts and figures to support this contention, but I constantly strive for pithiness).  

Game, set and match.

Before you ask me to check my medication, I do realize that traditional supermarkets will continue to sell groceries for many years to come.  There are over 35,000 of these things out there to be amortized and the accountants alone will prolong the death of this mighty beast until the last drop of  EBITDA is extracted from its veins.   But the trend is clear.  So the next time you see a flyer for a grand opening of a brand new supermarket, consider attending and save the balloons. Its something you can share with your grandkids someday.

 

 

 

 

Understanding “Extended Contribution”

Anyone who believes that successful retailers are driven purely by the numbers are either studying for their CPA, new to retailing, or perhaps both.  Walmart, Kroger, Wegmans, Publix, HEB, and  other successful grocers were  all founded by visionary entrepreneurs who understood that providing a pleasurable shopping environment along with the right products at a reasonable price, with an added touch of special service was the perquisite for success.

The aforementioned group of retailers were certainly not oblivious the science of retailing.  They know very well the numbers and the processes that make for a profitability, but rather they understood that some elements of  retailing remain imperative even if they can not be directly attributable to significant sales and resulting profits.

Here are a few offerings and amenities that often are not profitable as individual entities;

  • In-Store Pharmacies
  • Nutritional Programs
  • Organic Products
  • Sushi Bars
  • Coffee Bars
  • Salad & Soup Bars
  • Home Delivery Service (and In-Store Pick-Up Service)
  • Home Meal Replacement Programs
  • Carry-out Service
  • Bulk Foods
  • Service Seafood

So why do we still find many of these offerings in very successful and profitable stores?   The quick answer is these services promote the image of the store and the all-important aspect of variety that many shoppers expect their traditional supermarket to offer.  Given financial analysis of these offerings, individually, it becomes a no-brainer for their elimination.  However, take away any one of the listed services and you will likely lose shoppers or shopping trips of your existing customers that transcends that individual offering.

The savvy, “artful” retailer understands this principle.  They have learned to discern the difference between the individual financial profile of each offering and its “extended contribution” to the business.  Measuring this contribution can be difficult.  If you are a retailer that uses surveys to gauge customer perspectives, you already have a tool in place to score these amenities and services to better understand their perceived important to your customer base.  If you happen to have customer data at the household level, you have an opportunity to profile users of these amenities and determine how these shoppers rank in terms of their importance to your business.

No matter how you determine the “softer” contribution of these often forgotten bits of the business, eliminating them purely on the direct financial contribution, can be disastrous, especially if they happen to be important to your image and to your most profitable and prolific shoppers!

 

mh

 

Sign of the Times: “New Lower Prices”

“New Lower Prices”…..”Prices Locked In Until Next Thursday”, “We’re Dropping Prices Everywhere”, “Consistently Low Prices”

Does all of this look and sound familiar.  You don’t have to shop very many stores before you see a new banner hanging over the aisle or a sign in the aisle, boasting about how suddenly, out of the blue, a retailer has found a magical way of lowering their prices. I maintain that so many traditional retailers are launching these new programs and promotions, that instead of invoking the excitement and trial intended, shoppers take a deep breath and keep moving down the aisle.

Too much of a good thing almost always dilutes the impact, and I think we are seeing just that.  The consumer isn’t buying much of this anymore (literally or figuratively).  All the banners and new signs that retailers spend millions on each year are wasted if the program that the signs communicate is not founded in a sold, sustainable, believable platform of reality.  Instead most traditional supermarket retailers cut prices only in desperation, a last dreaded resort.  Reactive price cuts almost always produce little or no sales bump, but do manage to negatively impact profit margins.

The culprits preventing successfully modifying a retailer’s pricing position are known to all of us, but primarily many retailers are just not designed to incur extended periods of lower margins rates.  After a few months of viewing graphs and charts with arrows going in the wrong direction, the order is given to begin to raise prices, lots of prices on other items in hopes of recovering lost profit. As a consequence, the retailer’s poor price position is worsened, not improved.

Modifying a retailer’s position on price is a task that goes well beyond hanging signs and shelf tags, it must start with rethinking the entire operation.  First the question should be asked.  “Is price really our problem”?  If you find you are perceptually 10-15% higher priced than the price leader in the market, the answer is likely, YES.  If not, perhaps other issues need priority attention before embarking on a new pricing program.  I recommend having a Price Monitor customer survey in place to track those important metrics.

The next question ought to be,  “Can we profitably operate on one or two percent lower gross margin”?  That’s right.  Real price cuts means selling for less, not moving the problem from one department or category to another and hope that the shopper doesn’t notice.  This means that EBITDA expectations should be adjusted down and for more than just a few months.  Price cuts should be viewed just as much as an investment as a remodeled store is.  They should be given time to payback.

Which leads to the final question, “What are the expected outcomes of the price cut investment”?  I recommend having clear objectives mapped out for both short and longer term.  Recovering lost market share, customer counts, increased basket size, improved dollars per square foot are all viable success metrics.

Changing long-standing customer perceptions takes time, financial investment, and consistency.  If there isn’t an appetite for all three, save the expense on all the signs, banners, and shelf tags…..they won’t matter.

 

mh

 

Why Bad Things Sometimes Happen to Good Retailers

There is almost no margin for error these days when it comes to service or operational excellence.  The competition is unforgiving and for the most part, so is the customer.  Loyalty is often allusive and depending upon your definition of the term, is becoming even more so if  you believe much of the research about the next large demographic group of influence, the Millennials.  Earning their repeated business will be tantamount to herding cats.

Someone believable once said that “you are only as good as your weakest part”.  That adage certainly holds true to larger retailers who have great programs and intentions, but somehow do not get them communicated or executed in all stores, everyday.  To complicate matters, I often find that many retailers are in denial about the existence of their “weakest parts” such as inconsistent customer service, poor store conditions, and even execution of chain-wide promotions and marketing programs.

In fact, some of the best retailers I have either shopped, consulted with, worked for, or visited have been subject to bad things happening, despite great plans and intentions.  It happens to the very best.  There are a variety of reasons for these often brand-damaging inconsistencies.  Among them are;

  • The newest, best and brightest stores get the attention of a new born baby, but older, often smaller stores are often off the  radar screen when it comes to both operational and merchandising attention.
  • Tangential to bullet number is the unavoidable limitations that smaller, older stores struggle with vis-a-vis their larger, newer sister stores.
  • With constant cost-cutting becoming the new reality for retailers, there are fewer district or field managers, fewer merchandising specialist, and clearly fewer folks in the stores to support corporate mandated standards.
  • Despite new technology pervading the retail landscape, some retailers are still not very good about communicating to the stores in a manner that is effective and clear.
  • Finally, accountability relating to store execution, (or poor execution from HQ) is often poor.  When things do not happen the way they should, there are not quick-read metrics or reports available for review and remediation.

Most of the operational and communications short-comings are fixable.  Some require investments and still others may invovle tough decisions to close older stores, but others are more about priority alignments.  When bad things happen, good retailers have the following options;

  1. Before branding campaigns are developed, think through how the least of your stores might support it.  If the bottom dwellers do not fit the image and the essence of the campaign, consider adjusting the campaign to have relevance in these smaller stores, or longer term, consider re-bannering them so they do not negatively impact the consistency of delivery.
  2. There are a myriad of new communication technologies out there.  Many can offer hand-held or tablet communications so that store and department managers have access to plans and imperatives directly from HQ. If you are not good at communicating, there are tools to help you get better!
  3. When sales are down and pressure mounts, resist severely cutting labor (at store level) to the point that the “blocking and tackling” execution of customer service and operations are at risk.  All of the great communications and plans are moot if there are not folks on the front lines in position to energetically and accurately execute the plan.
  4. And finally, and most importantly, have the right measurements and reporting in place to understand when poor execution occurs.  Consequently, if you are providing the tools and resources to execute plans, and they are not handled properly, hold folks accountable.  It is the right thing to do.