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Document 55 of 67.

Copyright 1998 Information Access Company,
a Thomson Corporation Company;
ASAP
Copyright 1998 Maclean Hunter Media Inc.
Progressive Grocer

June, 1998

SECTION: No. 6, Vol. 77; Pg. 17; ISSN: 0033-0787

IAC-ACC-NO: 20812013

LENGTH: 2320 words

HEADLINE: Designing Difference; supermarkets must try to brand their concept to succeed

BYLINE: Lewis, Len

BODY:
Are supermarkets building a total marketing environment?

HUNDREDS OF TIMES A DAY, PEOPLE ARE ASSAULTED BY THE MARKETING and brand icons of our time. From Nike's pervasive swoosh and the towering Golden Arches of McDonald's to the sultry retail environs of Victoria's Secret, aggressive companies are shedding the hobgoblin of mediocrity, reinventing themselves and creating a total marketing environment in which to immerse consumers.

To some degree, the supermarket industry has long been in the forefront of change, redesigning and rethinking the utilitarian, but mundane, idea of big-box retailing. The elder statesmen of this retail creativity are well-known. Byerly's, Stew Leonard's, Ukrop's, Wegmans, Dorothy Lane Markets and many others have built unique shopping experiences through a combination of entertainment, smart merchandising, store brands, meal solutions, decor, data capture or just old-fashioned customer service. Newer entries, but just as formidable in their own right, are Trader Joe's, Foodini's, the new meal-store concept from Chevron in Northern California, and, as profiled later in this issue, retailers like Morton Williams Associated, part of a 150-store co-op whose nine small stores in New York City are bringing a distinct difference to urban retailing.

However, are there more wannabes than successes in the world of environment marketing? Are supermarket operators, like some general merchandise retailers, alienating more people than they attract by viewing "consumers" as one homogeneous group? Overall, is the industry ready to talk the talk and walk the talk by devoting time, money and people resources to creating a point of difference for the future--by using consumers as the starting point and building stores around them, instead of the other way around?

Terry Roberts, managing partner of Design Associates, a Rochester, N.Y.-based design and development firm, notes: "One of the things wrong with the industry is designing a box and then trying to make programs and people fit into it. The store has to be designed last, in order to suit the goal and to create the proper marketing environment. The future is not the store alone, it's in people and services. You don't come out of a Wegmans saying what a great design they have or how the floor looks. People look at their unprecedented service, quality and merchandising."

As Dave Donnan, vice president of the consumer products group. A.T. Kearney. Chicago, puts it: "Creating the total marketing environment means defining the customer you're going after and identifying their particular needs. It may be the convenience of getting in and out quickly or international foods. You have to focus on the market rather than cookie-cutter stores. And the successes of companies like Ukrop's, Wegmans and Harris Teeter are testaments to this strategy.

"If you're looking at branding the store, retailers must have that unique message. Brands represent a point of differentiation. But the store has to be greater than the products it sells." says Donnan, citing such diverse examples as Niketown and Planet Hollywood.

"In the future, we're not going to have supermarkets that everyone just likes a little--only ones that people like a lot," says John Stanton, professor of food marketing. St. Joseph's University, Philadelphia. "That's going to be a big hurdle for supermarkets to get over. It means they have to target stores toward very specific types of customers, and they can't be for everyone."

A prime example of this was the McDonald's of years past, according to Stanton. "They said they wanted the kids' market and did everything humanly possible to delight them--spokesclowns, Happy Meals, promotions, advertising--and all of it focused on kids. Unfortunately, when you do this for so many years, it creates a problem with how you grow, and that's what McDonald's is struggling with right now." he says.

However, McDonald's offers a primer in basic marketing strategies that has yet to be adopted by many supermarkets. "Ask them who their ideal customer is and, without hesitation, they answer 'families with small children.' But do they have clean restrooms containing some private label diapers and wipes for convenience? Is there special parking for mothers in front of the store to eliminate a very stressful situation? Have they expanded the idea of candy-free checkout aisles or have little shopping carts for kids? Most of the time the answer is no. So they're not doing anything to build an environment and attract the group they want." Stanton says.

Meantime, a recent study in The New York Times disclosed that teen-agers spent $ 58 billion in grocery stores last year, more than 10% of total grocery industry sales. Furthermore, 50% go to a supermarket every week and a little over 60% prepare a meal for themselves weekly, according to the study.

There are plenty of environmental marketing lessons to be learned outside the food business. Ikea, the Swedish furniture retailer, is also trying to attract young families with kids. "Mom and pop are talking about spending a lot of money. To distract the kids, you can put them in play centers. And when you have full-time people taking care of the kids, a lot of shopping stress is eliminated," says Stanton.

"Look at Victoria's Secret. Lingerie is available in Kmarts all over America. It's just like supermarkets in that there's nothing unique about the product line. But they turned it into a brand by focusing not on what people buy, but how they feel when they buy it. They are putting the romance back in the purchase," he notes.

Sometimes entertainment is a stronger calling card than romance, especially when it comes to kids, and that's where Norwalk, Conn.-based Stew Leonard's stands out, says Jack Kasulis, associate professor of marketing, Price College, at the University of Oklahoma, Norman. Okla. "Entertainment is what makes it work. For many people, grocery shopping is a boring necessity. Stew Leonard's adds some life and excitement to it. If you have kids it's like a built-in baby sitter when you shop," he says, referring to the store's animated graphics and extensive sampling programs.

Fred Crawford, national director of the retail and consumer products industry services group for Ernst & Young, New York, points to a retailer like Dave's in Cleveland, a family-owned operation serving urban areas that tailors stores so completely to the neighborhood that you never know what you will find from one to another. "They've done a great job of branding themselves in the neighborhood by satisfying ethnic and economic stratas," he says. "It may be old hat to say that you have to define the market and do store-specific offerings by demographic group. Most retailers understand it, but do a poor job of executing it in the value chain, from store level up to corporate decision-making, on what to buy and how to merchandise it."

As Stanton notes: "This business is about doing things for the audience you're going after, like playing music your older shoppers may want to hear--not what appeals to the checkers--or larger labels and signs that customers can see. It's not a matter of advertising, it's marketing. It's understanding and satisfying customers at a profit with products they want, not what you want to sell."

One of the obstacles to building the consummate marketing environment, according to Stanton, is that retailers continue to look more at the backdoor than the front, a situation exacerbated by slotting fees. "It's like heroin. They know they're addicted, but can't kick the habit," he says. "It's a tough nut to crack because it's built into the budget and part of everyday business."

Another dilemma for supermarkets to overcome is that the store is designed for the convenience of putting products into it or to trick customers into walking the whole store, he says. "This whole HMR thing is totally out of proportion. We're trying to act like something we're not. Customers don't expect to find cooked, prepared meals. But we should be designing the stores so that when customers come in, ingredients for meals are all in one place," he says, citing a breakfast section created by Giant Eagle in Pittsburgh. "If we could help them prepare and plan a week's worth of meals--five meals in one trip to the supermarket--that's value-added. And there are a lot of other things we can do, like giving them some money off when they do buy a whole meal."

Roberts of Design Associates calls this "ensemble shopping and merchandising," a strategy adopted by department stores in order to combine complementary items in one place, thereby increasing the department's sales potential.

Bob Goldin, senior vice president, Technomic Inc., Chicago-based foodservice consulting and research firm, notes that supermarkets are facing the same obstacle as the restaurant industry, in that there is a huge oversupply of retail options. "A few years ago everyone had the attitude, 'build it and they will come.' The problem is getting them to come a second and third time," he says, noting that even such theme players as the Rain Forest Cafe and Planet Hollywood are suffering from soft sales.

One of the consequences of oversupply is that consumers are in the driver's seat. "You must market to the points of distinction that are meaningful to consumers. A lot of that revolves around menu and execution," says Goldin. "We've reached a point where creating that total marketing environment is not just being the market leader. You have to deliver value, quality, cleanliness, service, decor and ambiance."

Additionally, Goldin points out that concepts in the foodservice business tends to get stale fast. "The wear-out factor is very high and concepts have to be reinvented. For restaurants and supermarkets, this means ongoing consumer research to find out what customers want and managing the menu by tailoring it to your customer base," he says.

Of course, simply enhancing the shopping experience is a given for any retailer interested in distinguishing himself in marketplace. But supermarkets face additional challenges in the area of foodservice. "Now you have to park, walk the equivalent of a block, take a number and wait. Then wait in another line to pay for all this. Retailers have to look at some new operational paradigms. This is why c-stores like Foodini's will become big players in the [meals] business," says Goldin.

On the other hand, Price College's Kasulis, feels the answer to many marketing questions may be the same in food as in apparel--development of premium private labels. "Developing a set of retailer-controlled brands builds loyalty, and for retailers like The Gap or Banana Republic, it provides them with a distinct image and can be integrated easily with national brands," he says.

Kasulis cites the success of Loblaw's President's Choice brand and a similar house brand strategy that was developed by Loblaw people for Wal-Mart. Kroger is also moving aggressively into premium labels. "However, industrywide, it's virtually unexplored, and I expect to see intense activity over the next decade," says Kasulis.

Also under-explored is getting all facets of the retail organization to start talking to each other in order to come up with a uniform image. "You can walk into a store and be taken back by the elegance of its lighting, flooring, signage and upscale specialty shops," says Ernst & Young's Crawford. "Then you pick up an insert and the first thing you see on the cover is a special on 12-packs of Coke. I guess they forgot to tell the advertising department what they were. The problem is structure," he says, noting that it's surprising how functionalized retailers are. "I don't think the ad folks spend any time talking to the supply-chain people or the merchants. Strategies can be tightly held in an organization. The words can get transmitted down the organizational ladder, but not into coordinated action."

In terms of differentiated marketing, these actions might take the form of occasion-based marketing. "Imagine a store not as aisles, linear feet and facings, but as pods. You can go to a dinner pod for menu planning, the children's lunch pod or the gourmet pod for lobster and liver pate. It seems to make sense for consumers, he says.

He also suggests that retailers scrutinize the marketing models of Dell Computer and Motorola. They both know how to give customers what they want. "They figured out how to delay configuration of computers and pagers until there was a known demand. What's in it for retailers? The notion of having semi-prepared food at the store level that you don't convert to a meal until there's a known demand," Crawford says.

From a pure design standpoint, it's first necessary to understand the vision of the company CEO and other key people, according to Jim Riesenburger, also a managing partner in Design Associates. "We have to understand their vision before we can develop ours. Of course, the consumer's first impression of a store should be a pleasurable one, a kaleidoscope of colors--a titillating experience. Too many stores still provide the old-fashioned supermarket image, and few people can get excited about going to a supermarket. Too many still think all they have to do is put up a facade and do the minimum with regard to product, programs and people," says Riesenburger.

Terry Roberts adds: "Retailers have to understand about creating comfort shopping through the use of access lighting and what this can do to consumers' perceptions of the merchandise and to color. The whole idea is to slow down the traffic to get a few extra minutes from them. That's what you do when you sell cappuccino and pantyhose to someone who just came in for a gallon of milk. Whatever happens, consumers will not compromise anymore. Mediocre retailers will be gone."

LANGUAGE: ENGLISH

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