Good question, isn’t it? Have you ever found yourself in a mall store and due to being in virtually the same environment as every other store, and being surrounded by virtually the same merchandise, have you had to step back outside the store and glance up at the sign to ascertain which store you’d ambled into? I’m willing to bet most of us have at some time or other.
What about supermarkets? That’s why a recent BusinessWeek article dubbed, “Supermarket Strategies: What’s New at the Grocer” didn’t grab my attention at first. The subhead under the title did: “From ready-to-eat meals to eco-friendly offerings, food retailers are finding more ways to distinguish themselves and win customers”. Now that line did pique my curiosity.
The gist: consumers are cutting out luxuries, and focusing on purchasing necessities instead. No news flash here. However, since housing, health and food costs constitute consumers’ largest cash outlays, customers are getting ever more frugal. Even with necessities. Upshot: “margins in the $547.1 billion dollar food market averaged just 1.84% nationally in 2008 according to the Food Marketing Institute.”
Since most supermarkets stock pretty much the same merchandise, have cut prices to the bone without much room for further cuts, with few “wow factor” new product offerings on the horizon, what next? The article states: “. . .food retailers are seeking out new trends and technology that might differentiate them from competitors.”
So, what are they?
* Smart shopping assistance. Consumers can breeze through stores with smart shopping carts that tabulate the products as they are added, and download available coupons for the products in the carts on their cell phones. They can then allow payment for the groceries without the consumers ever having to queue up in a cashier line. A number of large supermarket chains have implemented some or all of this; others are in the process of doing so.
* Convenience. Many large supermarket chains are opening up smaller stores in specific locations, stocking them with basic needs and ready-to-eat meals. Message: no need to travel out of the way to pick up a few items. Extra services like in-store baby-sitting make it quick and easy for consumers to shop. Wal-Mart’s Marketside, Safeway’s Market and Supervalu’s Urban Fresh are among those doing this. The thinking: a lower average sale is the likely scenario, but consumers will shop with more frequency.
* Catering to minority purchasing power. In areas where ethnic minorities live, smaller locations are catering their product mix and meal offerings to meet their needs. Examples: Wal-Mart’s Supermercado and Publix’s Sabor.
* Targeted in-store advertising. Example: Wal-Mart’s Smart Network features a technologically advanced in-store television that provides detailed product information and advertising on individual screens.
* New RFID technology. Wal-Mart and Walgreen’s are testing new RFID embedded microchips to signal to employees when store shelves need to be restocked and to help them restock product where it belongs. It is also being tested to make certain stocks are replenished to coincide with promotional ad campaigns.
* Development of niche private label products, such as new organic brands.
* In-store amenities like healthier restaurants; Whole Foods and Wegman’s have terrific ones.
* More eco-friendly store environments like Kroger and Price Chopper are building.
Implementing these ideas can lead to highly differentiated stores for consumers. Of course, when one supermarket chain implements any of these ideas successfully, can it be long before their competitors jump on the bandwagon? Then what?
Questions:
* What do you as a consumer, and as a marketer, think of these ideas as differentiators among food retailers? Do you think these will eventually be adopted by every major chain, thus losing their ability to be differentiators?
* What kinds of services/amenities would you like to see in your supermarket from the list above? What about services that don’t appear on the article’s list?
* Lastly, do you think these kinds of differentiators matter most? Or, would you prefer to see helpful, well-trained, service-oriented personnel in your supermarket instead? What matters most to you?
I’d love to hear from you.
Ted, here’s one crazy idea and then a more sane comment…
For differentiation, why not stock live fish tanks (3-5 feet tall) and have customers “fish” for their fish with nets? Seems to work in China grocery stores where customers value fresh, and you can’t get anymore fresh than “alive”. Of course, consumers have to be willing to filet, but perhaps that could be a value-add from the store’s butcher. I wonder what the FDA would say about this?
As per the sane comment, grocers like Kroger are driving loyalty through their rewards cards. I know people who swear by “Ralphs Rewards” as the sole reason they shop at Ralphs. These reward cards are giving more than a discount at the POS station, they offer rebates back to the consumer based on shopping volume–and it’s not just pennies either.
Hi Paul,
Love the crazy idea, but I’ll bet sanitation issues would shut down market ideas that flourish in other parts of the world. . .so I expect lobster tanks to be the only mainstays in U.S. supermarkets.
Most supermarket chains offer rewards cards at this point, I believe. Expanding the rewards for these programs makes sense to encourage additional spending when every consumer instinct is to do the opposite right now.
Thanks, Paul, for your insights. I appreciate them, as always.
An obvious area in need of innovation, and an issue that is touched on by a few points on the list, is the checkout process.
Any way that supermarkets can make the shopping experience faster and more pleasant would push them up the list for me. There have been attempts to improve in this area, but most have been watered down and broken by red tape and hoops to jump through.
A good example is the self-checkout. These are a great idea, in theory, for both shoppers and stores. The problem is that most of these machines are too complicated for the average shopper, often leading to more frustration than if they had waited in the normal checkout line.
I love the idea of the “smart shopping assistance.” I think the idea has legs if stores can truly implement a system with the mindset and focus on improving the shopper experience, thinking long and hard about the steps in the process.
Agreed, Chris. People are so stretched these days, and so time-starved that any services retailers can offer to simplify and streamline the shopping process, is welcome. You’ve hit on something, though. Most of us have experienced difficulty at self-checkouts at one time or other. The ensuing frustration, as you point out, is a negative experience. “Improving the shopper experience” is the #1 consideration for every new idea supermarkets implement. Thanks, Chris, for sharing your valuable observations with us.
Hi, Ted.
I’ll have to take a closer look at the BW article.
I think if these guys want to make more money and take some pressure off their margins, they need to figure out who the most profitable target customers are in the market areas where they have stores and ask them some of the questions you pose.
What do they have problems with? Which of the grocery store brands provides a good solution? Do any? What do any of these potential services–the smart shopper assistance for instance–do for them?
Most grocery store brands these days seem to offer a little bit of everything–a little convenience, something in the way of low prices (even Whole Foods has a lower priced store brand), a little bit of organic, a little bit of “world” foods….But who’s best at any of them?
New products and services is one way to grow. The other is to develop and launch better marketing programs. I think there’s BIG time opportunity for grocers in the latter department as much as, if not more so, than the former.
my name is not ted!
You’ve asked some compelling questions, Kevin, and I thank you. I think you hit on something when you said: “Most grocery store brands these days seem to offer a little bit of everything–a little convenience, something in the way of low prices (even Whole Foods has a lower priced store brand), a little bit of organic, a little bit of “world” foods….But who’s best at any of them?” There’s an old adage that goes something like this: “If you try to stand for everything, you’ll stand for nothing”? How true.
Better to offer fewer, but better product mixes or services rather than trying to dabble in a little bit of everything. In that regard, Whole Foods has been very successful. Their brand represents a high quality mix of natural and organic foods, healthy prepared meals, baked goods, meats, seafood, gourmet quality offerings, international offerings, etc. Ditto for Wegman’s. That may demonstrate why they’ve both been so successful. Most importantly, they’ve stuck to their brands, not veering off course to do a little of this and a little of that. Unless they can incorporate additional services and remain true to their brands, they just don’t do it.
Adding to the difficulty for retailers at present, a less loyal consumer base and an economy that has changed purchasing patterns and habits. All of this pleads for more marketing focus than ever though, doesn’t it?
Thanks for weighing in, Kevin. I appreciate it.
Cool post, just subscribed.
Top of the day to you!
Interesting piece, we know that the vast majority of today’s consumer don’t cook they assemble, particularly during the work week. Food asembley consist of ready to eat ready to heat food components that are portable or as industry icons call “Grocerants”. The grocerant niche is the fastest growing sector of the foodservice industry today.
Hi Steve,
Regardless whether consumers eat ready to eat foods or not, they have to go into supermarkets or other retail stores like Wal-Mart to purchase them. While many do avail themselves of prepared meals or “food components”, they also purchase other category products as well. So the question still remains: how can stores differentiate themselves from one another when so many offer virtually the same product mix and services. . .
Thanks for sharing information on this new trend, Steve. Much appreciated.
Ted,
Good post, but I think you are overthinking the issue.
This study by IBM clearly indicates that many groceries don’t just fail to differentiate, but rather fail to meet the ante of expectations w/r/t the basics of product quality, selection, customer service.
http://www.marketingcharts.com/direct/grocery-industry-falls-short-in-building-customer-loyalty-2581/ibm-grocery-customers-grocer-attributes-ratingsjpg/
So whereas you might think that groceries stores don’t do enough to “differentiate” themselves, it may be that they haven’t done the basics well enough to earn your business in the first place.
Wow, Rahm, your observations are very astute and you know what? You’re right. When customer expectations are met–especially when it comes to service, what a difference that makes. And, in a supermarket, selection, fresh products that aren’t on the shelf past their buy dates, etc, make a huge difference in customer perception.
You’ve given us a lot to think about, Rahm, and I thank you for adding your insights and this great link to the discussion.
I like your ideas Ted. Maybe also have cooking classes so consumers can learn how to cook better.
But I don’t think any retailer or any business should try to differentiate. Paradoxically, I think the focus on differentiation leads to sameness. Because your entire worldview is defined by the current market and competitive set. Instead, I think businesses should worry about creating absolute bliss for their customers. The rest will follow.
I would like to push back on the comment, “since most supermarkets stock pretty much the same brands…” Store brands are becoming an increasingly important lever for differentiation. Retailers are gaining significant share with their brands and delisting national brands as the recession has given them their moment in time. People don’t necessarily know that a brand IS a store brand, they are getting so sophisticated and high quality. Safeway’s O brand is now sold in other retailers. Then there are those using a vertical strategy like Aldi and Trader Joe’s (not to mention, coach, Mac, Gap, Apple). Finally, there is Herb sorensen’s radical set of recommendations. Plenty of opportunity to differentiate!
Hi Adam,
It’s true. Just about any new idea retailers come up with can be copied. So, to your point: it’s hard to use new programs, products or loyalty incentives as differentiators when the competition can implement the same ones, or go one better. The lack of great service is the one great factor that tends to lead to most customer dissatisfaction. Making that the number one focus, as you suggest, makes perfect sense for any retailer.
Thanks, Adam, for your sharp insight.
Hi Joel,
I agree with your assessment in some ways and disagree in others. It’s true that food retailers offer private brands, but within those brands, there are many of the same product offerings, aren’t there? I mean they all offer the same cereal products, the same canned tomato products, soups, cookies, etc. There may be a few exclusive offerings, but by and large, most of the mix is the same.
However, as you point out, Trader Joe’s is an example of a retailer whose private store brands comprise about 3/4 of its total product mix. They tend to surprise customers with an artful blend of gourmet, natural and organic products sourced from around the world. Their unique brand is a direct reflection of a unique product mix. I’m also quite aware of Safeway’s approach to private label and I’ve blogged about it in the past, as well as their decision to offer their own store brands to competitors. It’s an interesting idea, and we’ll have to see whether other supermarket chains embrace Safeway’s brands and place them alongside national brands. To see whether they become another “national” brand. . .
On the other hand, by and large, product selections look very much the same from one retail operation to the next, in my view. So as a couple of astute readers have already pointed out: service is perhaps the greatest key to true differentiation for any retailer.
Thanks for adding thought-provoking ideas to this conversation, Joel. Much appreciated.
just a question about your comment. It’s not rhetorical, although I do have a guess. Do you think that shoppers believe that store brands from different retailers are equivalent? If so, your comment is right. If not, your comment is underestimating the branding effects of store brands. My guess is that shoppers do, in fact, feel that one retailer’s store brand line is better than another’s.
Good question, Joel. Overall, consumer perception of private store brand quality has risen substantially. As to whether consumers view all store brands as having parity, that’s another question, and I suspect this goes to overall store preference and loyalty. For example, would a Safeway shopper who purchases the O Organics line brand buy similar organics from a competitor of Safeway? They might if it’s a Whole Foods, a Ralph’s or the like. On the other hand, they may feel comfortable only purchasing O Organics because they’ve become accustomed to it and find it to be consistently good.
You know, Joel, today’s consumers know that a handful of national brands co-pack the store brands, so I do believe there is more of an overall perception of quality across the board. Just from my own experience and my gut. . .but of course, that isn’t scientific. As you stated your educated guess, this is my educated guess.
Nice article, Ted. After reading it (and the comments), I have to agree with Rahm. Many of the innovations risk alienating customers, especially if they have a “learning curve.” And more bells and whistles will never make up for poor standards and practices.
I went almost a year opting to eat take-out and fast food because the one major grocer around here (Publix) runs its business poorly in the small ways. Tiny parking lots, no shopping cart drop-off points, clerks who barely speak English, and confusing sale language (e.g., “20 for $6″ instead of the discounted per-unit price) all alienate customers.
As it stands, grocers haven’t fundamentally innovated because they don’t NEED to innovate. Since food is a need, and competition in the grocery sector is relatively low, many of these companies have simply refused to address basic issues in their business models.
Anyway, I want to see a store that makes shopping feel like shopping, not torture.
Thanks, Brian, for the kind words. What I’m hearing from a number of respondents to my blog is that there are two major request customers have of supermarkets: consistently good service and the basic amenities that make it easier for customers to shop. Publix is noted for excellence as a retail chain, but if the company is failing to provide the basics in the store you’re shopping in, then your entire perspective about Publix is not favorable overall.
I especially like the way you summed this up, Brian: “Since food is a need, and competition in the grocery sector is relatively low, many of these companies have simply refused to address basic issues in their business models.”
You’ve made a strong argument and let’s hope the supermarket chains make the changes they need to so that their customers have better experiences when they shop.
I believe that the whole store experience will change in the next ten years.
I see four primary forces at work:
1 Materials handling automation
2 Energy and material conservation
3 Time conservation-our most precious resource
3 Personal accountability for health and food quality
So it makes no sense to stack huge stores (which need air conditioning, heating, lighting, and staffing) with large quantities of packaged goods, so that customers can go through an inefficient find/pick/move/checkout/pay process.
Stores will be much smaller and will concentrate on fresh food on the one hand and display (only) of packaged goods on the other. We all want the buying experience of looking at the package, squeezing the toilet paper, or sniffing the shampoo. We don’t want to lose that!
But when we choose the item we want, we hit a cell phone app or a button on the display, and the product is automatically picked and packed for us in the back warehouse.
We walk to the front with our fresh food and are met there with the chosen packaged goods, or they are delivered.
The good things about this approach:
1 It is social-we still run into our friends.
2 It’s sensual-we still get to squeeze and sniff.
3 It’s fast, because only a few of each item are displayed, the stores are smaller and more focused, and orders are assembled as you choose.
4 It will save time, energy, and money.
5 Suppliers will be able to use creative and focused displays to give more information and more emotional influence to a product, instead of just maximizing facings.
6 Stores can give more emphasis to fresh local food, and prepared foods, with less distraction from packaged goods.
Interesting ideas, Graeme, and I appreciate your bringing them into this conversation. You’ve made a number of good points here about the expense and inefficiencies that affect retail in your first four points. Retailers have long grappled with supply chain issues and they’ve worked to streamline handling and transportation costs. They’ve become increasingly efficient with the POS scanning systems in ordering and restocking processes, for example. They’ve made sure to maximize truckloads. Major retailers like Wal-Mart have been responsible for many of these changes. And, of course, Wal-Mart has been working on distribution center efficiencies with the use of RFID technology.
To your point, the shopping experience is important to customers. We want to see, feel, sniff, etc. Shopping in a retail environment but then placing a list to be filled from a distribution center may not be the ideal solution you think it is. Remember the old catalog showrooms where the same principle was in place that you’re discussing? They ultimately failed as a model after enjoying strong success for a while.
No matter, what, service issues are at play here. And retailers would still have to run large inventories in DCs so how much more efficient is that? Customers would have to wait for orders to be filled so how efficient is that? Currently, if customers know what they want and prefer to avoid shopping in crowded stores, they can use services like Peapod to place electronic orders and have them shipped right to their homes for a nominal fee. . .so I’m not sure whether the model you propose is feasible or not. Maybe other DF readers would like to weigh in on this one. . .I invite different opinions on this.
Thanks, Graeme, for giving us a lot of food for thought, if you’ll pardon the pun. . .
Your points make great sense, Ted, but I am not sure if I communicated clearly.
I am suggesting that the stock of packaged goods would be maintained in an automated system in warehouse space behind the store. As you chose an item it would be automatically picked and placed with other items in your order, so that when you choose the last item and hit buy, all of the items in the order are sent to the front of the store. I don’t know about you, but I find the option of home delivery unappealing. I want it now!
I am trying to preserve the see, feel, sniff experience and offer the best, most concentrated, most effective marketing environment around products and brands, but at the same time eliminating the need to stock shelves with large quantities of goods, and then carry them around in carts.
The automated handling system would not work unless it was as fast as filling a shopping cart and more convenient.
Just trying to think ahead, Ted, and I really appreciate you giving us the opportunity to talk about it!
Thanks, Graeme
Graeme,
I understood what you were saying, but what I was trying to communicate back to you is that waiting for orders to be filled from a warehouse, even if it is in back of the store, could take a lot of time. Customers don’t necessarily like that. It could take longer than standing in checkout lines, you know. Also, there are many costs associated with running any warehouse operation. That’s why Wal-Mart is trying hard to eliminate steps and additional personnel by using RFID technology. Since supermarkets are a business of pennies for profit, this model might be unwieldy. Worst yet, if it takes too long to fill orders from a warehouse, I can see a lot of disgruntled shoppers. As you said, when we go shopping, the attitude usually is: “I want it now”.
All I’m saying is that for this kind of model to work, many details would have to be considered and the whole process streamlined as possible. It would have to be tested in a limited number of stores to get consumer feedback and iron out the bugs, and even then, I’m not sure it would be feasible.
My gut tells me that most customers would prefer having a cart that tallies each item they put in themselves. Especially if that whole cart load could be paid for at the end without having to wait in line. But that’s just me.
Thanks, Graeme, for sharing your ideas. Great innovations are born when people start thinking about new possibilities, don’t they?
Ultimately, what supermarkets are facing now is a result of their own lack of vision. Most retailers have spent the past 50 years as purveyors of other companies’ brands without creating their own brand equity. So in 2009, what’s the difference between any major chain? Nothing. (With a few notable exceptions like Stew Leonard’s, Wegmans and Whole Foods)
What I find interesting about a lot of the comments is that most of the writers possess very little understanding of what makes a supermarket profitable and successful. We as retailers probably need to keep that in mind as new programs and differentiation strategies are created. For example the typical self-checkout experience. The average customer neither knows nor cares what a PLU is but most self-check computers ask the customers to enter that code for any random weight item without a UPC. In fact, the sentence I just wrote further demonstrates that retailers speak a language that is entirely unique to them. As long as we use this language to create ideas, it will continue to be more of the same.
Supermarkets face intense competition from each other, convenience stores, restaurants and basically anywhere you can get food or water. In 2007 more than 50% of all food dollars was spent in foodservice. Without a little recession, the numbers would still have supermarkets in the minority.
My point is that what every supermarket wants is loyalty. Until retailers begin to step out of their traditional boundaries and create truly “customer-centric” marketing programs, consumers will continue to do exactly what we TAUGHT them to do…switch stores for whoever has the best price on Coca-Cola that week.
As an industry insider, Barrie, your words carry a great deal of weight and I defer to your knowledge and expertise. I will say this: that many supermarket chains have embraced store brands and worked harder to hone their product offerings, packaging and market support behind these brands in a meaningful way. I was just reading today that Safeway’s O Organics brand, for example, posted a 50% increased in volume in Q1 of 2008. The brand is on track to realize $400 million in sales this year.
Having said that, I think we all agree that a “customer-centric” attitude is a “must” for food retailers if they want to break out of the pack. Your issue of trying to get loyal customers is no different than any other retailer’s, regardless of merchandise offerings.
You’re right: consumers have been taught to shop multiple circulars for the best weekly specials. They shop in numerous outlets and glom from the end caps. Then they move on to the next food retailer. But what does that ultimately do to establish long-term loyalty? How does that improve the profit picture. It doesn’t.
Thanks, Barrie. I truly enjoyed reading your comments and insights.
My personal experience leads me to believe grocery customer loyalty is a combination of location, customer service and popularity.
A popular store generally turns over produce quickly, which means that the produce always looks better than produce did at the store(s) customers deserted for the newest fad.
A location with easy access to nearby residential areas helps. I am thrilled to once again shop at a Wegman’s store, but the location isn’t on my route home; it is in a new, busy shopping area on a busy commercial 5-lane road — good for not-so-local shoppers, but not so good for day-to-day shoppers.
Customer service is important, but I put up with average customer service and baggers who put the cabbage on top of the ground beef for years because the store was on my route home.
= = = = = = =
@Graeme–One reason the “everything is in the warehouse” doesn’t appeal to me is that I prefer my packaging without dents, bent corners and other damage.
Fussy shoppers won’t be happy getting home and discovering that they were charged for the low-fat crackers but received the low-sodium crackers because someone was careless or the manufacturer put the wrong RFID tag on the box. They won’t be happy if the tuna can has a big dent or the juice bottle is sticky on the outside.
Stores will have to be able to deal with people deciding not to buy things at the checkout and wanting last-minute things they forgot — so the system has to be planned for those issues
When I find out hundreds of grocery store cashiers have endorsed an automated system after working with it for six months, then I may believe it will work. But if it is designed by an engineer without input from customers, store managers, category managers, manufacturers (who may want freedom to change package sizes) and cashiers, then I won’t be enthusiastic.
Also, how would this system handle the products that are now shelved by vendors, such as potato chips or bread?
Would it eliminate those jobs and change those distribution channels, and if so, what would be the consequences in terms of freshness, product condition and product quality?
Welcome back, Barbara. Nice to hear from you again.
You’ve raised many good points, and again, it seems that more convenience and better service are key to customers. I especially like the question you posed at the end, in reference to Graeme’s idea: “Would it eliminate those jobs and change those distribution channels, and if so, what would be the consequences in terms of freshness, product condition and product quality?” This is a truly important question.
Also loved this observation: “But if it is designed by an engineer without input from customers, store managers, category managers, manufacturers (who may want freedom to change package sizes) and cashiers, then I won’t be enthusiastic.” Great idea. Why don’t supermarket chains invite the input of their customers when they’re thinking about implementing new offerings, services or conveniences? They could advertise they’re seeking customers’ assistance in their circulars and direct them to a web site for their input. They would probably glean some great insights if they did this.
Bottom line: if supermarkets want loyal customers, their priorities ought to include offering the kinds of conveniences their customers value, and consistently good service.
Thanks, Barbara. You’ve added a great deal to this conversation.
Ted, I agree that retailers are building their private label presence. But they have been doing that since the early 90’s. The majority continue to just create knock-off versions of national brands. We consistently underestimate our customers. I am quite sure that they understand that there is no difference between the Star Markets 5lb sugar and the Stop & Shop 5lb sugar and Domino 5lb sugar. Where is the innovation? How can private label build loyalty when it is the same stuff with a different name on it?
You are right, Safeway’s O has a clear point of differentiation. Or should I say “had” because they are allowing non-competitive retailers to sell the brand. Did they learn nothing from A&P’s decision to allow other retailers to sell Eight O’Clock coffee?
Private label will not build loyalty until the offering is unique. But there is a catch-22 here…how do you get a customer to trust you enough to try your unique product?
As one of the other comments pointed out, traditional supermarkets fail to meet the minimum expectations of customers. Until we dig in and commit to understanding consumer needs and then satisfying those needs, we will continue to try to build a better mousetrap by adding fish tanks and digital toys. By digging in, I mean that we must commit for long enough to find out if it works. In a penny business we tend to create new programs and then cut the program as soon as we need more pennies. And the cycle continues.
You know, Barrie, I agree with most of what you’re saying. However, some stores do a bang-up job with their private labels. Customers might expect operations like Trader Joe and Whole Foods to offer unique, even exotic PL items, but supermarkets like Wegman’s do, too.
Regardless, the store brand business is up due to tightened consumer belts, so stores might feel less impetus to get creative. I believe that’s a mistake. Besides offering more organic and natural choices, how about a bit of gourmet or some international/ethnic foods? Since people are eating at home much more these days to avoid large cash outlays in restaurants, they might respond to more exotic choices and experiment more at home. . .Mightn’t cooking classes or demos in the stores would encourage customers to buy and try some of these foods?
BTW: loved your insights on Safeway’s decision to take its O Organics line national. I blogged about this a few months ago, wondering whether or not this was a good move.
The supermarket business is a business of pennies, as I stated before, and as you’ve reiterated. Your point is an excellent one: no program can possibly work if stores don’t put enough resources into them–and try them for long enough. With your most recent observations it all boils down to this yet again, Barrie: food retailers must find out what the customer truly wants in the way of programs, products and services and deliver them, consistently and well. Otherwise, loyalty will continue to be elusive.
I’ve really enjoyed this conversation, Barrie. It’s great.
Ted, I happen to passionately love the food biz and could talk about it all day so feel free to cut me off any time!
The thing about Trader Joe’s, Whole Foods and Wegmans is that most people are not lucky enough to have access to these outstanding retailers. I am not trying to say that no one does anything right, but that there are very few who do everything right. The chains you mention are the exception, not the rule. And don’t forget that all of Whole Foods’ excellence is not enough to keep customers loyal in these tough times. They seriously underestimated the power of the “Whole Paychecks” joke. Now that times are tight, their same store sales in some of the hardest hit areas are down more than 30%.
Which takes us back to the original question of how to build loyalty. When a retailer as fine as Whole Foods, with a clear vision of what they want to be and flawless execution against that vision struggles when times get tough one must question if the vision is flawed? Or is it simply that retailers continue to lack real insight into what drives consumer loyalty. Or should I actually be asking “What drives ongoing and sustainable loyalty?” I would bet that Whole Foods has tons of studies that indicate that organic and natural products are a priority and that customers are willing to travel and pay extra for those products.
In these tight financial times, it is essential that retailers sieze the opportunity to regain lost ground to foodservice. I completely agree with you that cooking lessons is a great way to accomplish that. I was in Wegmans the other day and saw a woman in a white chef’s coat whose title was “Meal Coach.” In addition to formal classes, she just walks around the store and helps people find what they need to put dinner together…an amazing concept that would be sure to please a customer holding a package of hamburger and wondering what to do other than burgers.
Most retailers are not willing to put a highly trained (i.e. expensive) person on the floor without being able to measure the ROI.
Barrie,
I love your passion and I thoroughly enjoy reading your thoughts. No need to stop on my account; nor on the account of DF readers. People stand to learn a lot from seasoned professionals, and they can apply what they learn to virtually any business they work in.
Quite right: Whole Foods, Wegman and Trader Joe’s are not available resources in many markets. However, that doesn’t mean other supermarket chains can co-op their ideas. For example: why can’t more supermarkets make it a point to offer products from local producers? Improve their ready-made meal selections? Food service is extremely important. Bring in more naturals and organics at sharper everyday prices? Improve their store brand quality and offerings? There are many things they can do, aren’t there?
As to pricing, Whole Foods has always been more expensive than its mass market counterparts. Yet, they offer value-priced private label offerings under their 365 brand. My guess is they will seek to improve efficiencies, and add more value-priced selections to their mix. Regardless of cost, I expect WF will continue to offer cooking classes to its customers, as well as nutritional assistance. They will still offer seminars on health and wellness, prevention through wise food choices and supplementation, and the like. That is how they build loyalty with their customers; even if people buy less during a tough economy, they will still look to a Whole Foods for the largest share of their spend. I’m willing to bet on that. And don’t forget Barrie, WF stores are positioned in areas where the local customer bases are more educated and affluent.
You’re right: organics and naturals are continuing to grow as categories. Not as prolifically as they did before the crash in September, but they’re still growing, though perhaps not in double digits. On the other hand, mainstream supermarket categories have been relatively flat for years. And those are facts mass marketers know–so why would they continue to relegate organic foods to a dark, dusty corner of their stores in many cases?
Ted,
You and I are like-minded in what supermarkets can potentially be to their customers. In many ways, supermarkets live the definition of insanity “doing the same thing over and over and expecting different results.” The fact that mid-tier traditional supermarkets consistently imitate each other is what opened the door for a competitor like Walmart to steal 50% of dry grocery and non-food dollar sales. They knew where supermarkets had fatter margins and honed their pricing strategy to the point of total destruction one category at a time. And yet week after week, the majority of supermarkets continue to run a hot price on Coke or Pepsi, $1.99 boneless chicken breast, and Tide or Charmin on the front page. That may be a slight over-simplification, but you get the idea.
The decision being made is to use price to drive traffic and hope customers buy something else while they are in the store. Instead, the decision should be to understand what consumers define as “value” and then deliver against that. My guess is that Whole Foods understands their “value proposition” better than ever before. I expect to see them come out of this period as a stronger and more dangerous competitor. As food safety becomes more terrifying every day, they are in a unique position in consumers’ minds: they trust Whole Foods. As traditional supermarkets have proved over and over again: Tweaking price image is easy to fix, gaining trust is not.
Natural and organic produccts are a great way for supermarkets to ease food safety fears and address obesity/health issues, but that is just not an approach that most of them are comfortable with. Now a BOGO on 2 liter Pepsi, that is easy to execute and measure.
Barrie,
Can’t we blame many businesses in many sectors for “doing the same thing over and over and expecting different results”? It’s much more work to do what you propose, isn’t it? When retailers start digging to find out what their customers value, it takes time, capital and human resources, and a willingness to CHANGE things.
You brought up another important thing: food safety. Here’s another area where stores can take a stand. You know, Trader Joe refused to import any products from China for a time, due to food contamination scares. . .don’t you think that assured their customers? I’ve been saying for some time in my posts that traceability, transparency and complete disclosure would be tremendous assets for any supermarket chain if they’d take this bull by the horns. But you know, I think the ones that do will endear themselves to consumers and turn them into brand loyalists. As you pointed out: gaining trust isn’t easy for most food operations, yet it is important to all consumers, isn’t it? The potential to do great things and rise above all of the competition is there. . .emulating at least part of the Whole Foods or Wegman’s model would be a start. Any takers out there?
Thanks, Barrie. This is all great stuff.
I have just read all the comments and there are many great comments. I think a lot needs to be said for great customer service and I think that a lot of these big guys don’t do it well. So what actually makes for good service in a supermarket? Is it as simple as good & friendly service? Or is it much more?