Center Store

The only thing that seems to stay the same is change.

Of course, progressive grocers know this, or ought to, and it’s no different as we dive headlong into 2012.

“Economic turmoil and the proliferation of new technologies over the past several years have radically changed how consumers behave and companies develop and market products,” says Pat Conroy, Deloitte’s vice chairman and U.S. Consumer Products leader.

What does this mean for center store?

Well, let’s take a look at some of what Conroy says are the key issues facing the consumer product industry this year:

- Higher commodity costs: Due to supply and demand uncertainty and imbalances, supply costs have increased for food, beverage, personal goods, household goods and apparel.

It’s already old news that grocery prices are expected to rise, along with the prices of darn near everything else. So grocers will be competing with retailers across multiple channels for their share of consumers’ dollars. Demonstrating your value to the shopper is going to be more important than ever. Do I need that extra box of cereal this week when the price of socks for the kids and the cost of gas for the car are going up again? Show grocery shoppers how you can help them achieve balance.

- Diverging consumer segments: At the low end of the income continuum are consumers that still feel the lasting sting of the Great Recession and have embraced frugality out of necessity. At the high end, more affluent consumers have not only embraced common tactics such as searching for discounts, shopping across channels and embracing store brands to save, but they also still purchase premium items as well as selectively splurge on luxury products.

This is why hard discounters like Aldi and Save-A-Lot – along with specialty retailers – are thriving while traditional banners are struggling to maintain market share. Even with the rise of supercenters, one-stop shopping seems like a thing of the past, so savvy grocers will need to demonstrate why shoppers should fill entire baskets in their store rather than splitting it with the stores across the street and down the block.

- Growth of dollar, discount and online channels: Dollar stores, various other discount channels and online commerce – including mobile-enhanced shopping – are washing away basis points of market share from traditional retailers and incumbent national brands.

Aggressive grocers will recognize they’re competing on multiple fronts: selection, price, technology, shoppability. It’s not good enough to just have a website – you need a reason for online visitors to keep coming back, it has to work every time without hassle and it has to drive traffic back to your store. My local supermarket (a Chicago-area chain owned by a national retailer) recently incurred my wrath when I tried to attach online coupons to my loyalty card. The retailer’s site did not recognize my long-held card, and a customer service agent was unable to solve the problem after a lengthy phone exchange.

Now that supermarket chain is closing my neighborhood store, and I’m not sure whether it’s worth my while to drive to the next closest location – especially when I have to pass a competing traditional banner and at least two independent grocers to get there.

Jim Dudlicek is senior editor of Progressive Grocer.