07.12.2007

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6 (Tough) Tips For Food Retailers

There is obviously little question that food retail is in the midst of dramatic transformation. Center store is disappearing before our eyes - not to mention stalwart retailers such as Albertsons, Winn Dixie and A&P. And while Wal-Mart's effects can be felt throughout the industry, they too, are not immune to significant challenges as they seek to meet ever sophisticated needs of American consumers. Finally, a growing body of consumers are shopping outside the bounds of conventional grocery retail altogether, assembling their food needs from a smorgasbord of specialty retailers, local purveyors and farmers markets.

These changes in retail simply reflect much broader, fundamental changes in the very nature of how consumers come to evaluate food quality. Increasingly canned goods, frozen foods and packaged foods - staples of food retail for the past 50-odd years - simply can't stand up to the panoply of "fresh" options that abound in today's competitive retail arena. And the bottom line is that to stay relevant as a food retailer in today's competitive climate, you must become an expert in the arena of food. While this fact would seem painfully obvious, we are continually struck by the number of grocers who choose to crowd their freezer sections with lawn furniture, automotive parts or hula hoops.

So below we will summarize six critical things that every retailer must execute if they wish to remain competitive and relevant to today's food consumer. Some will prove straightforward, while others may encounter significant resistance within some organizations. Specifically, we are aware that some will obviously require rethinking critical revenue streams with an eye for the future. Here we urge marketers, managers and analysts to remember something we call the "dental paradox": As painful as it may prove in the short term, it's always wiser to fix your cavities now rather than waiting until they fester into a root canal, potentially bringing down the entire ship in the process.

Item 1: Remove all vending machines

Nothing signals membership in the arena of downtrodden public spaces (bus stations, gas stations, the DMV, etc.) better than a rusty vending machine. Do not ever forget that you are striving to be a first class food retailer staffed by passionate team members. Vending machines tell your customer that you care so little about food that you would allow an anonymous machine to sell it.

Item 2: Reclaim critical POS space to truly engage the consumer

One of our most powerful and consistent research findings is that the exit experience is the most critical evaluative moment of the overall customer experience. This is the moment that resonates with your customer long after they've left your store. And to think that for the better part of 50 years most retailers have been content to infantilize their consumer by offering a wondrous selection of commodity candy, tabloid newspapers and random household knick knacks near checkout stands.

Of course aware of the hefty fees many manufacturers and merchandisers dish out for this space, here you've got to bite the bullet and begin treating your customer with the respect they deserve. Political rhetoric notwithstanding, American consumers are a surprisingly sophisticated and well educated lot, so why not engage them with unique, relevant point-of-sale displays. Ideas include food books and magazines, specialty chocolates, healthy living, travel publications, current events, holidays and culture, etc. And on the subject of magazines, it's okay to have a few general interest publications like People or TV Guide, but ditch the tabloid newspapers.

Item 3: No restocking or resets during critical operating hours

Again, this one should be self-evident, but we continually see shoppers navigating carts around dismantled product displays. From roughly 7 am until 9 pm or so, you are operating an engaging food experience, which is (ideally) designed to delight, interest and amuse. Nothing destroys that ambiance quicker than a gaggle of young, often disinterested team members stacking cans on shelves.

Item 4: All department and specialty counters are always "open" and fully staffed

As of late we've encountered a number of retailers that go to the trouble of building impressive counter displays of premium selections (meats, seafoods, cheese, prepared foods, etc.), but then fail to adequately staff them during routine operating hours (i.e., 7am-9pm). Consumers are left to stare wistfully at impressive premium selections that remain off limits due to staffing issues.

Bottom line: If you are going to build an impressive seafood counter, there should be someone staffing the counter at all times. This is not negotiable.

Item 5: You should strive for at least one heralded new product arrival each week

Because you are in the business of providing killer, quality food experiences, there should be at least one anticipated product arrival each week - the sort of thing that galvanizes interest and causes folks to share their passion and enthusiasm. This approach has long benefited retailers in music, electronics and videos.

The item in question need not always be elaborate, expensive or exotic, but it should be the kind of thing that causes people to take a break, however brief, from the banality of everyday life to experience something new, different or unique.

And as it happens, food products are ideally suited for this sort of activity. Examples include regional, seasonal or local specialties (wild salmon, local berries, local tomatoes, artisanal cheeses), specialty foods (cheeses, charcuterie, etc.), new wine releases, seasonal craft beers and on and on.

Item 6: You should seriously reconsider all non-food offerings that may distract you from your goal of delivering high-quality food experiences

Today's consumer is increasingly not interested in one-stop shopping locales that pretend to be all things to all people. Moreover, on the rare occasions in which they do pursue a generalized, one-stop shopping experience, the chances are consumers will favor a mass retailer or big box format.

We increasingly counsel clients against the tendency of adding SKUs or services that do not contribute directly to their ability to deliver on food excellence. While revenue streams from non-food items may appear initially attractive, one also has to realize that they could jeopardize future growth if they deter consumers seeking quality food experiences.

There are obviously no "one size fits all" answers here, but the bottom line is that retailers should consider expansion into non-food/beverage SKUs and services much more carefully than they have in the past.

Some final thoughts

As we said, these are tough tips and fly in the face of a fundamental, traditional labor model. And we do encounter significant resistance to these ideas, taking the approach that food retailers should strive to be all things to all people so as to maximize their shopper base, presumably maximizing profits.

Of course the danger of this approach is that someone who strives to be all things to all people stands the very real possibility of being nobody at all. We learn at a very young age to spot this kind of phoniness in our personal relationships, which is why we all spend most of our lives trying to avoid the likes of Eddie Haskell. Given our collective disdain for pretense and hucksterism, why would we expect consumers to react any differently when retailers engage in the same antics?

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