GROCERY: Center Store Strategies: Center of the action

The supermarket center store can be saved, but it's going to take work. That was the key message of a recent Webinar, "Reinventing the Center Store: Category Innovation Survival Strategies," hosted by Columbus, Ohio-based management consulting firm Retail Forward and presented by Dan Stanek, the company's e.v.p., and Sandra Skrovan, v.p. and director of the Retail Forward Intelligence System, which supplies in-depth market information on various retail channels for about 250 retailers, suppliers, and other companies.

Before getting to the solutions, however, the Webinar presenters first took the time to lay out all of the problems in graphic detail.

"The supermarket industry, and especially center store, has been feeling pressure on many fronts as of late," noted Skrovan, pointing to such factors as more consumer dollars being spent on dining out than on food at home; heightened competition from the likes of warehouse clubs, super-naturals, and limited-assortment stores; and increased channel blurring, with mass merchandisers, drug stores, and even dollar stores firmly established as alternative locations to buy groceries.

Added to such challenges is the fact that "most supermarkets really have no unique selling proposition," as Skrovan bluntly put it.

Unsurprisingly, as a result of these conditions, supermarket industry sales have basically flatlined, and are expected to remain that way for the next five years.

As if this weren't enough, the traditional supermarket model itself is under siege. Buffeted by the low-cost, low-price model employed by Wal-Mart and its emulators -- complete with cheaper nonunion labor -- many supermarkets have struggled to stay in the game by lowering their own prices, but have ended up getting the worst of it in the subsequent price skirmishes.

And while most growth is occurring in the perimeter sections, pharmacy, and general merchandise, "the core of the store has remained pretty much stagnant," noted Skrovan.

Indeed, average new-store size is shrinking, with median square footage going from 54,000 in 1995 to 43,500 in 2004, and as retailers concentrate more on remodeling that reduced space to expand perimeter, specialty, and nontraditional departments, it's the center store that suffers.

The rise of private label also plays an important role in center store's evolution: A higher proportion of private label, rather than the traditional name brands, in a smaller section has triggered a full-scale battle for shelf space.

Breaking the rules

What emerges in the wake of such supermarket format overhauls, according to Stanek, is a two-pronged shopping experience. There's the "interesting" part of the store, or the perimeter, and then the "boring" part, or center store, which is "full of undifferentiated stuff," with "no stories being told."

The good news, however, is that after years of first ignoring the trend and then fretting over it but not acting, retailers and suppliers are finally "ramping up" their activity to save the center store.

This accelerated activity owes a lot to a comprehensive redrawing of category boundaries, resulting in entirely new departments and product mixes brandishing a more cohesive message.

An example cited by Stanek is Shaw's Supermarkets' store-within-a-store Wild Harvest section for natural grocery, dairy, and frozen foods. Taking up 8 percent of an average Shaw's unit's square footage, Wild Harvest boasts a distinct design package and signage, along with marketing support -- "a whole thematic treatment supporting a reason for being for this department," he observed.

Publix' new GreenWise health and natural food section is further pushing the center store envelope by planning the inclusion of fresh meat, a move Stanek called "a radical breakthrough for this type of merchandising concept." Additionally, Publix offers a monthly GreenWise magazine to familiarize shoppers with the section, and has even expanded the format to include standalone stores.

Then there's Food Lion's Bloom, which incorporates "a theme brought together around a need state -- convenience," said Stanek. That means such features as Table Top Circle, designed for shoppers' quick trips, which offers a convenience store format within a supermarket, and a produce section located in center store, in defiance of the operational constraints that usually confine fresh food to the perimeter. "They've broken the rules and created a whole new experience for the consumer," noted Stanek.

He was quick to point out, though, that the bright ideas aren't coming only from retailers; some are born of collaboration between vendors and their customers.

Kraft and Ohio grocer Buehler's Food Markets piloted the Mom's Kitchen department at three Buehler's stores as a destination for Nabisco brand cookies and crackers, creating "more of a comfort-food type of department" and highlighting Nabisco's status as a heritage brand that has forged an emotional bond with consumers over the years. The result of this experiment was increased sales not just for Nabisco items, but across the entire cookie/cracker category at Buehler's.

Meanwhile Cadbury Schweppes has devised a Total Beverage Center grouping all nonalcoholic beverages in one common area within the supermarket, encompassing three primary center store aisles and supported by such bold visual cues as floor graphics and color-coding to define aisles within the section.

"This is something that has implications across the store," said Stanek.

But if major changes like these are to work, they'll have to be backed by solid consumer information, he cautioned. Whereas in the past, center store layouts were largely determined by such operational concerns as package form, shelf size, or fixture type, now "the dictate is to become more shopper-driven in the way we organize center store." Of course, operations will still matter, but Stanek stressed, "We have to be more creative about how we solve operational issues within the consumer dictate."

Suppliers can also have a considerable influence on the evolving center store by providing various category alternatives, employing shopper insights and purchase patterns, facilitating an in-store sense of "theater" that mingles service and entertainment, and facing up to the "new reality" of private label, and then integrating it into the section's product mix.

Overall, according to Stanek, the push should be for solutions rather than components, with goals including greater convenience, more value-added features, a higher number of cross-purchases, and increased basket and impulse buys.

Additionally, with all of this collaboration and creativity must come the recognition that there's more than one solution to the problems of center store. After all, different approaches will work better for different retailers with their individual formats and sizes, and there will always be the need for supermarkets to differentiate to keep pace with the competition.

Noted Stanek, "We need to have various alternatives on the table at any one time."
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