Polishing The Centerpiece

Within an increasingly posh perimeter, center store is crying out for a facelift.

Walk in the front door of nearly every supermarket, especially a new prototype or major remodel, and what impresses you the most?

Most likely, it’s the lavish treatment given to produce, meat and other high-profile fresh food departments, right?

Whether it’s tricking out produce bins to resemble a farmers’ market, hiring a fulltime cheesemonger to dispense the trendiest cheddars and blues, or transforming coffee and foodservice areas into indoor sidewalk cafés, the greatest attention to date has been paid to making sure the sights and smells are unforgettable as soon as shoppers enter the store.

But what lies beyond fresh food is still, in large part, a new frontier.

Schnucks’ flagship prototype in Des Peres, Mo., which opened in September 2009, is a good example. “We were challenged to not let the experience fall off when you leave perishables and enter center store,” said Ross Hutsel, director of facilities engineering for St. Louis-based Schnuck Markets, Inc., during PG’s recent visit to the 74,000-square-foot market.

Schnucks took on this challenge by using the latest innovations in display cabinetry and energy-efficient lighting, as well as carrying distinctive design elements through all parts of the store. Apparently, these efforts to make shoppers feel more at home are working, based on customer feedback, according to Hutsel: “They didn’t say it looks expensive; they said it looks comfortable.”

Other grocers are making more concerted efforts to enhance the center store experience. One of the grandest plans is being mounted on behalf of the dairy industry by the organization that administers its check-off program.

Last October, Rosemont, Ill.-based Dairy Management, Inc. (DMI) unveiled the “dairy department of the future,” a joint effort with Kraft Foods and the Dannon Co. dating back to 2006. Based on testing and research, this coalition asserts that widespread installation of its recommended enhancements to the dairy department could mean an extra $1 billion in sales for retailers.

DMI notes that while the dairy department is responsible for a quarter of all sales profit while occupying less than 5 percent of store space, updating the dairy shopping experience has lagged far behind that of areas like produce, which have become the showplace of the contemporary “fresh store” concept adopted by many retailers. According to DMI data, dairy’s weekly true profit per base foot is $99.95, compared with $37.97 for produce and $16.15 for grocery.

By creating a three-dimensional dairy department that forces shoppers to linger rather than quickly rushing through it, DMI aims to elevate the role of the dairy section within the store by making it relevant to consumer needs, clarify its position in the shopping experience and better communicate dairy’s real value as part of the overall grocery dollar.

Dairy product launches have grown at a compound rate of nearly 11 percent since 2004, vs. 1.5 percent for produce, according to DMI data. Further, dairy is the reason for most “quick trips” to the store, so DMI argues that an enhanced dairy experience will defend against those trips migrating to other channels like drug and c-stores. As such, strengthening the dairy experience means strengthening the entire grocery channel.

The DMI program establishes four design principles for the dairy department of the future: contemporize the in-store environment with a fresh look; dimensionalize the department by creating secondary locations that slow down the shopper, rather than letting everything blend together; rationalize the shopping experience through better product placement; and invigorate shopper communications with information on lifestyle and usage needs.

Retailers employing these principles are getting good feedback in early testing, say the folks at DMI, though none are currently willing to go on the record about their experience. But DMI offers in-store shopper research indicating that the “reinvention” boosts consumers’ overall dairy aisle experience by nearly 5 percent.

Freshening Up

DMI’s ultimate vision is “to elevate dairy to the status given to other perimeter departments,” says Rebecca MacKay, DMI’s VP of sales and marketing. If successful in the long term, this would appear to provide the solution to the challenge expressed by Schnucks’ Hutsel, and undoubtedly many other supermarket facilities managers grappling with how to carry fresh food area enhancements through to the rest of the store.

“Shoppers told us the reinvented dairy department is fresh, modern, clean and organized,” notes MacKay. “We have had at least 18 retailers across the country employ our best practices to reinvent the dairy aisle. Some of them have employed our best practices on their own with success. They’re experiencing on average a 2.2 percent increase in units and 1.6 percent in dollar sales.”

And a refresh like this, rather than a complete and costly remodel, may be just the thing to jump-start center store sales without breaking the bank or disrupting shoppers for an extended period of time. In fact, a growing number of retailers are employing this very tactic, affirms Paul Weitzel of Barrington, Ill.-based consulting firm Willard Bishop.

“A refresh of the center store allows retailers to maintain the relevancy at a much lower investment cost,” says Weitzel, who notes that “a typical refresh can generate a 3 percent sales lift across the center store. That means for a store averaging $500,000 per week in sales, grocers can expect to recover their investment in approximately eight months.”

For an estimated $100,000 for equipment, fixtures and labor, the more affordable center store refresh seems like a drop in the bucket compared with the cool $3.5 million required for a typical remodel, adds Weitzel. “For every store remodel, a grocer can complete 16 center store refreshes for the same working capital and at a significantly better payback,” he says. “Every dollar is tight. Converting capital from remodels to refresh more stores is a good first step to ensuring retailers maintain relevancy with their best shoppers.”

DMI estimates that the cost of retrofitting an existing store with its dairy department enhancements starts at about $2,000 per location, depending on exact circumstances. “There’s a whole range of options,” says MacKay, “from redoing flow to a full-blown redesign.”

Based on initial results, DMI is poised to take its program to the next level. “We are currently in discussion with a retailer to build from the ground up and make our vision a reality,” confides MacKay, who would only identify the partner as a “major Midwestern retailer. It’s a new store situation, and we’re in the design concept stage,” she adds.

A cornerstone of DMI’s master plan to enhance the dairy department is an “activation guide” titled “The One Billion Dollar Industry Opportunity,” which is available along with other related information at usdairy.com, the Web site of DMI’s Innovation Center for U.S. Dairy.

“Another key opportunity is leveraging the health-and-wellness equity of dairy,” says MacKay. “Retailers have an opportunity to strengthen their association with health and wellness, and become a more trusted resource to their shoppers, who reward retailers with their loyalty.”

Heart Beats

The health-and-wellness trend was also behind a center store campaign launched last year by the American Heart Association (AHA) Food Certification Program.

AHA secured ad space with a relatively new in-store advertising program called “Integrated Shopper Marketing Ads.” ISMAds, a product of Little Rock, Ark.-based Vestcom International, are shelf-edge digital color labels that communicate brand, price and a promotional message. From Aug. 31 to Oct. 15, 2009, 2,184 grocery stores — including Bashas’, Bi-Lo, Brookshire’s, Foodtown, Harris Teeter, Marsh, Pathmark (A&P), Roundy’s Super Markets, Unified Grocers, Wakefern Food Corp./ShopRite, and Supervalu’s Acme Markets, Jewel-Osco and Shaw’s subsidiaries — participated by allowing ISMAd hangtags to flag AHA heart-check mark certified products on the shelf at the point of purchase.

During the four-week shelf-tag promotion period, shoppers who purchased at least two AHA-certified products were also handed promotional messages at checkout to further build awareness of the heart-check mark. Messages were tailored depending on which distinctive “heart-healthy” market segment shoppers represented as captured and stored in the Catalina shopper transaction database.

The AHA/Catalina campaign, in conjunction with the ISMAd shelf-tag promotion, achieved its primary objective to increase sales of certified products among targeted consumer segments, according to program managers, who added that sales lift by shopper segment ranged from 1.5 percent to 6.7 percent, and over 5 percent storewide for certified products.

“The campaign was most impactful among the “Conflicted Heart” segment, which is positive, given this group has an interest in nutrition but struggles with adopting heart-healthy eating patterns,” according to the study.

Interestingly, although most shoppers weren’t specifically looking for the mark when entering the store, 60 percent said it has a positive influence on their purchase decision once detected, and 75 percent signaled a much higher likelihood of buying a product with the heart-friendly logo, the AHA notes. Moreover, one-third of shoppers recalled receiving the Catalina messaging, and 80 percent reportedly read or skimmed it.

“We know that eating healthier is on consumers’ minds these days and they are trying to make healthier food choices,” says Beth Peta, director of brand management-private brands at Eden Prairie, Minn.-based Supervalu, Inc. “We wanted to make it easier for our shoppers to do so and felt that AHA is a recognized equity in that area that would aid us in doing so .… The heart check is an impactful mark on the package.”

“Shoptimizing” Center Store

Center store purchases are up among a group of consumers dubbed “shoptimizers” by a study commissioned by Henkel, the Scottsdale, Ariz.-based manufacturer of such center store brands as Purex laundry detergent, Soft Scrub cleanser, Dep hair-care products, Dial soap and Right Guard deodorant.

Shoptimizers — shoppers who plan ahead, study retail circulars, make lists, clip coupons and favor everyday low-price (EDLP) strategies — bought more from center store and less in the fresh sections during 2009 than in 2008, according to Henkel’s “Shopper’s Perspective Study.” This group of shoppers has grown: it accounted for 31 percent of store revenues in 2009 vs. 30 percent the previous year, the study found.

This is compared to “mainstreeters,” who do little planning, favor EDLP and respond to in-store promotions, and “carefree” shoppers, who show little concern about plans or price labels. These groups also increased their retail grocery spending in 2009, but do more of their buying in the fresh departments. They’re also less influenced by economic conditions, with mainstreeters spending $81 more and carefrees spending $246 more during 2009. (Demographics are evenly split across all three shopper categories.)

Shoptimizers are most influenced by economic conditions, and thus spent $24 less per shopper during 2009. In constant search of the best deal, they shopped at 11 retailers on average. But shoptimizers still spend the most of all three groups — an average of $7,100 annually, $1,500 more than carefrees and $850 more than mainstreeters.

The Henkel study says grocery stores did well in attracting shoptimizers away from other channels during 2009, a year in which drug stores actually lost some shoptimizers, reversing a trend that was on the rise since 2006. Supercenters picked up the most shoptimizers during the recession, and club stores boosted their share as well.

So what does all of this mean for center store?

It means the way to the most dedicated and organized grocery shopper’s heart is through careful price strategies supported by coupon-based marketing campaigns. It means grocers appear to be doing something right, as they’re drawing these folks away from the drug channel, which is actively expanding its grocery offerings. But it also means traditional grocers had better keep watching how supercenters and club stores are wooing these shoppers.

Since shoptimizers spend more in center store than the other groups, aggressive grocers would be wise to employ innovative marketing techniques to keep up this positive trend and keep shoppers from buying their canned goods at Costco and their milk at CVS. That means connecting with consumers in a way that persuades them your supermarket is the most important and most relevant to their needs.

“It’s clear that relevancy will be a key to future growth,” says Willard Bishop’s Weitzel. “Retailers are finding loyalty can be a fickle thing and they have to work twice as hard today to connect with shoppers and maintain their business.”

Front and Center

With center-store merchandise like candy, beverages and periodicals also sold at the front end, a new study may reveal opportunities for boosting sales of these products wherever they are located.

Conducted by San Juan Capistrano, Calif.-based Dechert-Hampe, the “Front-End Focus” research study — sponsored by Mars Chocolate North America, Time Warner, the Wm. Wrigley Jr. Co. and the Coca-Cola Co.— tapped the insights of leading grocery retailers representing more than 3,200 stores and 12 percent of U.S. grocery volume.

Among the key insights of consumer shopping behavior at the front end:

  • Some 90 percent of shoppers will occasionally purchase items at checkout, many on a weekly basis
  • About 15 percent will make a purchase from the checkout on a shopping trip, more at regular lanes, and fewer at express and self-scan lanes
  • Confectionery, magazines and soft drinks are purchased by the most shoppers most frequently and on an impulse basis
  • Shoppers tend not to switch lanes or shop across lanes. Nearly 30 percent of consumers said that if the front end item they were looking for weren’t available, they wouldn’t buy anything on that trip

Checkout sales represent more than 1 percent of total store sales — a contribution that’s larger than all but a few major product categories and even many entire departments. As such, retailers should manage the front end as a department with a dedicated manager.

While sales performance at checkout varies widely based on merchandising practices, the study defines a set of best practices that can help retailers realize up to a 30 percent boost in sales and profits at the front end, which, based on the total grocery sales volume, represents a roughly $2 billion gap.

Among the key practices and recommendations to retailers seeking to leverage the value of the front end checkout:

  • Merchandise checkout displays to reflect shopper buying behavior. Select items with high penetration that are purchased frequently and that are commonly bought on impulse
  • The focus should be on the “power categories” that represent almost 80 percent of front end sales and profits: confectionery, magazines and beverages. These categories also represent 83 percent of the opportunity gap
  • Merchandise self-scan lanes with a focus on the key power categories
  • Carry confectionery on all lanes and merchandise it on both sides of the consumer to generate impulse purchases
  • Maximize magazine presence at the front end on end caps, as well as in the lane, to enable browsing
  • Over-the-belt merchandising should include power categories
  • Make top-selling magazine titles available on key lanes
  • Make beverage coolers available to shoppers on 80 percent of lanes including express and self-scan, including water, energy, and both carbonated and non-carbonated beverages
  • Provide a moderate space for GM/HBC; most of these items are need-driven and many are also located elsewhere in the store

New Show Spotlights Dairy Retailing

The new International Dairy Show, set for Sept. 13 through Sept. 15 in Dallas, will include educational sessions focusing on the grocery channel and how retailers can enhance their dairy departments.

“Winning at the Store Shelf”: Presented by Mark Deuschle, SVP of the Utah-based Park City Group, the session will discuss how retailers and suppliers are responding to an increasingly competitive environment by teaming up on consumer-centric initiative designed to retain and grow business

“Going Upscale: Repositioning Private Labels”: This session will explore the trends and driving factors of the upsurge in private label product sales as a rocky economy had shoppers looking for more value in the supermarket. Douglas Palmer, VP of own brands at Montvale, N.J.-based A&P, is expected to be part of a panel presenting examples of products transformed into upscale private brands, and how this has impacted sales and consumer perceptions

Other educational sessions with retailer appeal include “Innovation in Dairy Snacking,” looking at what dairy-based snacks might be coming to supermarket shelves next, and “Dismissed! When Flavored Milk is Absent from the School Lunch Line,” analyzing the effects of changes in school nutrition programs, which could have a long-term impact on kids’ shopping habits as they grow into adult consumers.

Signature sessions include “To Market, To Market: Selling Food to Children,” a panel discussion on regulations and standards for kid-focused products, and “Eating Patterns in America,” presented by industry analyst Harry Balzer of the Port Washington, N.Y.-based NPD Group.

The main event kicking off the show on Monday, Sept. 13, is a conversation with former President George W. Bush, who will discuss his White House tenure, followed by a question-and-answer session with Connie Tipton, president and CEO of the Madison, Wis.-based International Dairy Foods Association, the show presenter.

More information on the show and how to register is at www.dairyshow.com.

Keeping it Relevant

Retailers are finding they have to work twice as hard to connect with shoppers and maintain their loyalty.

“The bar has definitely been raised, and retailers are trying to be more relevant with their shoppers,” says Paul Weitzel of the Barrington, Ill.-based consulting firm Willard Bishop. “Retailers are spending more money. They are putting more long-term strategy into the planning process, and they understand it’s only going to get more difficult to create strong loyalty. Being relevant is everything and the key to future success.”

That’s hugely important to center store, since today’s consumers have more choices than ever before regarding where they’re buying everything from meat and produce to canned goods and paper products.

Weitzel, in the June issue of Willard Bishop’s Competitive Edge, suggests 10 ways for retailers to be more relevant with their shoppers:

  • Ensure end caps convey a strong price image consistent with overall pricing strategy
  • Reduce shelf clutter
  • Apply SKU rationalization on a category-by-category basis, according to consumer demand
  • Build more efficient, easier-to-shop stores
  • Get new items on the shelf faster
  • Minimize out-of-stocks
  • Eliminate unnecessary categories
  • Celebrate food
  • Ensure adequate labor
  • Refresh the store more often

Weitzel places particular importance on the last item. “Most retailers today are still on seven-to-10-year remodel schedule,” he says. “More retailers are trying to extend this schedule because remodel costs have gone up significantly.”

More information is available at www.willardbishop.com.

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