Progressive Grocer’s exclusive front end grocery retail survey.
Logic would dictate that the most valuable real estate in the supermarket is that which gets the most foot traffic, yet results from Progressive Grocer’s first front end survey indicate that the potential of this key area is largely overlooked.
According to survey data, front end revenue accounts for 4.3 percent of total store sales. But this data should be viewed with caution, because even when the front end is recognized as a stand-alone section of the store, it’s not tracked with the same rigor as other store departments. The front end is regarded as checkout, not necessarily a purchase destination.
“We have a front end manager,” says Bill Summers, a store director for Maceys Food and Drug, in Utah. “[But] our front end is only concerned with customer service.”
“Front end is a bit of an afterthought,” admits Sam Masterson, EVP and COO of Carson, Calif.-based retailer Bristol Farms, “although it’s regarded as prime merchandising space, along with the lobby entrance area, because it’s where the most traffic is.”
The similarities in store design belie the different approaches retailers take to front end. The majority of retailer respondents to PG’s survey come from companies with more than 11 stores. Survey results indicate just more than eight registers per store across the entire sample. Interestingly, nearly three-quarters of respondents indicate that each store determines assortments available at the front end, compared with a little more than a quarter of respondents who indicate there’s a set planogram (which may include a variety of checkout assortments) across the company. A deeper look at the data indicates that the fewer registers a store has, the more likely it is that assortments are created just for that store. The likelihood of homing in on customer needs is greater when done on a store-by-store basis.
Front End Frustrations
PG’s findings illustrate an interesting opportunity for retailers tasked with expediting the checkout process for customers while also providing easily accessible merchandise that’s equal parts reminder and impulse.
While three-quarters of retailer respondents indicate that compared with last year, checkout times have remained the same, 15 percent of respondents indicate a decrease in checkout time. The decrease is offset by the 10 percent who indicate an increase in checkout time. The average checkout time is 3.4 minutes. As reported in FMI’s “2012 Industry Overview,” the average per-customer transaction was $35.01, so roughly $10 a minute. The average annual number of trips per week is 1.7.
Kroger has undertaken a substantial investment in checkout technology that consists of infra-red sensors that count customers to most efficiently schedule checkers. The Cincinnati-based grocer boasts a wait time of 30 seconds or less, down from four minutes just a few years ago. High traffic is great, but such speed surely cuts into the ability to make an impulse purchase.
On the plus side, front end margins tend to be higher than elsewhere in the store. Recent research commissioned by the National Confectioners Association, for example, indicates that margins of front end candy sales are very high — 37.1 percent, higher even than the healthy 28.1 percent margins of the candy aisle. Layered with the impulse nature of checklane products, these data indicate that consumers are willing to pay full price, if not a premium, for these impulse items.
Respondents have few concerns about issues that might plague other categories of the grocery store, including out-of-stocks, shrink or customer complaints about assortment. “There are no metrics for front end shrink,” says Bristol Farms’ Masterson. Rather, he sees product rotation through checkstands as an issue. The same checklanes tend to be used throughout the day. Cashiers, who aren’t merchandisers, might do their best to replenish inventory of these active checklanes between the ebb and flow of customers, he says, but checklanes that aren’t in frequent, active use don’t see much inventory movement.
Who’s in Charge?
A core issue with front end, according to Bristol Farms’ Masterson, is that while retailers recognize the value potential of the space, it’s not really its own department with dedicated metrics of labor, cash flow, inventory, shrink, etc. “If you can carve it out as its own sales department and you can see the P&L for the front end, that space will become golden.”
While data don’t illuminate the success of front end management, they do paint a picture of space supported by any number of positions and departments.
More than half of respondents have a dedicated front end manager or category manager responsible for the section. While fewer than 17 percent of total respondents consider shrink a concern, those respondents from stores with a dedicated front end manager are dramatically less inclined (8 percent) to think this way than are respondents who don’t have a dedicated front end manager. Where the store manager is in charge of the front end, 25 percent of respondents believe shrink is a concern.
Stocking tends to be a shared duty, with managers, department category managers (such as beverage) and even vendors taking part. More than a quarter (26.3 percent) of respondents indicate that vendors are stocking the front end. Products stocked by vendors tend to be magazines and other publications. Products stocked by department/category managers include candy, beverages, snacks, baked goods, produce and floral.
“Category managers recognize that the front end is a better place for merchandising, especially for impulse items,” says Bristol Farms’ Masterson. To make the best use of limited space and shorter checklanes, Bristol Farms merchandises typical impulse items such as gum and candy above the belt. Checklane displays facing the store are treated as end caps, which are given greater merchandising attention.
Progressive Grocer asked respondents to indicate the degree to which items sold well at the front end; these largely remain items that can be consumed immediately. Top performers were gum/mints/candy (77.8 percent of respondents), beverages (67.4 percent), and snacks (60.9 percent). Interestingly, when “good” and “OK” responses are combined, 95.6 percent of respondents indicate gum/mints/candy, along with 82.6 percent for both beverages and snacks.
Products listed that are least likely to be carried include books, household items, and memory cards/film/disposable cameras.
Retailers are also investing in equipment that allows them to offer hot and cold items and fresh flowers, in addition to the traditional candy and gum. While these items are considered impulse and likely don’t add much time to checkout, there’s a potential downside: Equipment tends to remain in one place, making those checklanes preferred. But overusing the same lanes is a burden on POS equipment as well as on product rotation, notes Bristol Farms’ Masterson. “It’s a management issue, but it’s important to spread out the workflow and cashiers across all lanes to alleviate rotation problems and even out the wear on equipment.”
In addition to being among the top performers sold at front end, beverages are also the top piece of specialized equipment that supports optimal merchandising. Respondents were asked which special equipment they had, including for cold beverages, frozen treats, hot sandwiches/hot grab-and-go foods, floral, hot beverages, and fresh chilled sandwiches. Three-quarters of respondents have one or more beverage coolers. Two-thirds of respondents have at least one freezer case for ice cream and frozen novelties. Approximately half of respondents have at least one floral bucket, and about a third have fresh chilled cases for sandwiches and other grab-and-go fare. Many indicate that they have other equipment, including baskets for crafted jewelry, shelving for impulse items, and $1 grocery specials.
Perhaps more important than a subjective observance of performance are actual sales. According to respondents, gum/mints/candy comprise a little more than 20 percent of checkout lane sales, followed by magazines and beverages (13.5 percent and 13.3 percent, respectively), snacks (8.7 percent), and smoking accessories (7.2 percent).
As mentioned, beverages aren’t only top-selling items, but also items retailers are supporting with special equipment. Drilling a little further, retailers indicate that cold drinks, including soft drinks and energy drinks, as well as candy, are top-selling items.
In a Perfect World
Aside from simply having more room at the front end, retailers indicate they’d like the entire area to be redesigned with new shelving and displays. In terms of assortment, grab-and-go products received the most mentions, including personal care, sandwiches, meals and hot drinks. Several retailers say that they don’t want to add anything, indicating that some retailers still want to keep the front end clean.
As an example of this, Bentonville, Ark.-based Walmart reportedly installed 10,000 self-checkouts last year. The corral-style setup still allows for nearby impulse purchases, but they’re not at the physical checkout. Further, consumers checking themselves out are more focused on scanning than on making additional purchases.
In his book, Boomerang! (9th Street Publishing, 2013), Dave Skogen, chairman and “cheerleader” of the Onalaska, Wis.-based Festival Foods grocery chain, wrote that in 1992, he had candy, soda and “suggestive magazines” removed from front end checklanes, which he referred to as “cattle chutes.” “My feeling is, if we’re doing our job right, we’ve sold our guests plenty of stuff before they enter the checkouts,” Skogen wrote. The company ended up merchandising candy, gum, soda and magazines near the front of the store, but at a distance from checkouts. Healthier fare, including yogurt, water and fresh fruit, is now offered at the stores’ checkouts.
For his part, Maceys’ Summers is satisfied with the pre-set planograms his company determines. “[Corporate designers] are tuned in. There’s a concentration on seasonal relevancy. … it’s pretty much what I’d do.”
Seasonal items can also be an element of entertainment, a little something unexpected yet fitting. Checklanes are also a great place to showcase private label items. Just as with the rest of the shopping experience, front ends should be customer-first, providing a mix of product offerings and a balance of merchandising that delights and satisfies customers without slowing the checkout process. The area should be viewed as a service, providing “reminders” of what customers may have forgotten during their shopping trips, as well as “we’re thinking of you and thought you’d like this” displays.
Checklanes of the Future?
What the data don’t reflect is that checklanes as we currently know them might soon be a thing of the past. Some retailers are testing different checkout points within the grocery store, including at the in-store deli. Others are testing mobile checkout systems, and smartphone checkout can’t be much further behind.
It’s safe to say that as retailers invest in mobile checkouts, lanes will be removed, which could open up “impulse stations” that rotate frequently and tap into the success seen with seasonal items. One upside is that as checklanes disappear, valuable real estate will be freed up to enhance the shopper experience, and, it’s hoped, the bottom line.
Despite the fact that margins tend to be higher at the front end than for other departments, most retailers are focused on front end service, not sales.
“If you can carve it out as its own sales department and you can see the P&L for the front end, that space will become golden.”
—Sam Masterson, Bristol Farms
“Category managers recognize that the front end is a better place for merchandising, especially for impulse items.”
—Sam Masterson, Bristol Farms
“My feeling is, if we’re doing our job right, we’ve sold our guests plenty of stuff before they enter the checkouts.”
—Dave Skogen, Festival Foods