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The following is part of a series of key highlights from the 82nd Annual Report of the Grocery Industry, which appears in PG’s April 2015 issue. The full report can be found here.
Perpetually challenged by a cutthroat competitive climate, notoriously thin profit margins, and demanding — and often dichotomous — patrons, the grocery business can be brutal, which speaks directly to the need for grocers to concentrate heavily on enhancing the in-store experience to stand apart from both traditional and upstart competitors.
To that end, signature products, private label and store-within-a-store specialty departments are deemed the top three most productive tactics to augment the in-store experience among retail executives responding to PG’s 2015 Annual Report of the Grocery Industry survey. While signature products and private label are often considered one and the same in the supermarket world, the latter, for purposes of this study, refers to exclusive products housed primarily in the fresh departments, such as gourmet desserts from the in-store bakery, store-made entrées from the fresh meat department, specialty cheese products, bundled meal deals, everyday-value bouquets in floral, and oven-ready regional seafood specialties.
Meanwhile, today’s increasingly sophisticated supermarket private label products are all about differentiation, quality and the overall value proposition, and only partially about price. Retailers have invested countless internal resources and millions of dollars annually into perfecting their vast and diverse private brands across the entire store to provide customers meaningful value while shining a spotlight on items that “can only be had here.” Consequently, private label prominence has forever solidified its place in the hearts of both retailers and consumers alike, and will remain a critical and compelling component of building the in-store experience for years to come.
Conversely, as we glance back 30 years — give or take a few — a retailer’s life was certainly far easier, regardless of the channel. Food stores sold food, drug stores sold medicines and sundries, and fast-feeders sold meals. Beginning in the late 1980s and revving up in earnest by the mid-1990s, however, retailers of all stripes began to realize that they could successfully sell many products beyond the edges of their traditional boundaries. Grocery stores began adding pharmacies with complete HBC sections and morphed quickly into compelling combo food/drug formats. Drug stores followed suit by making significant forays into food, a cause which was vigorously furthered by spunky regional Bentonville, Ark.-based retailer Wal-Mart Stores Inc., which started selling a full line of groceries and high-volume fresh commodities in some stores.
The common denominator for migratory channel-blurring can be explained by a simple answer: store size. Over the period between 1960 and 2000, the square footage of the average store grew relentlessly; the latest year’s prototype floor plan always seemed to be a few thousand feet larger than the prior year, which provided retailers with an incrementally larger platform to test and experiment with new departments housing more products in bigger cases, and with it, bigger ROI needs and expectations.
But much has been learned from yesteryear’s “bigger is best” store configurations, which brings us back to the present day of retailing, when more compact footprints are becoming the preferred choice for many retailers’ new store configurations. Regardless of the size of the box, store-within-a-store departments have been among the most influential tactics for progressive grocers to amp up the in-store experience with full-on specialty departments, be it beauty and wellness, kitchenware, pet food/pet care, or free-from products. To that end, the key to the most successful retailers’ store-within-a-store concepts is to capitalize on categories that drive frequent visits and concurrently surprise and delight their most important shoppers, which in turn enables them to capitalize on those visits with countless other items found throughout the rest of the store.
Other elements cited as being highly influential in enhancing the in-store experience among this year’s retailer panelists include cross-merchandising (57.8 percent), which slid nearly 10 points from last year; prepared foods (57.4 percent), which held steady from the year-ago report; locally sourced products (55.8 percent), which are expected to continue to gain prominence; time-tested BOGOs (34.5 percent); in-store pharmacies (28.8 percent); free WiFi (22.2 percent); and cooking/meal prep stations (22 percent).