SALT LAKE CITY -- Associated Food Stores here sees the potential for its stores to capture another $15 million to $18 million in annual sales when they start using a new program designed to get new items to shelf faster.
Associated's program, dubbed Code Red, is being tested at one of its 23 corporate-owned stores. Rollout at the rest of the corporate stores this year and about 95 conventional supplied stores is expected to start in January, said David Rice, director of Center Store business units and director of category management for the wholesaler.
Using Code Red, Associated will provide stores with a weekly list of new items and their location in the store-specific planogram.
As Associated tries to better position its customers against Wal-Mart Stores, Kroger and other chain retailers, Code Red represents the dry grocery complement to its efforts to offer fresher perishables.
"We equate freshness in the Center Store with new items," Rice said. As independents, Associated's supplied stores tend to be last to market with new items, he said.
Now, it takes eight weeks or more to get new items to stores from the time they're slotted in the warehouse. The projected sales increase is based on the expectation that Code Red will shrink that time to less than a week. Special signing and aggressive advertising will support the new items when they appear, Rice said.
Last year, AFS slotted 5,291 new grocery, frozen, and general merchandise /health and beauty care items (excluding direct-store-delivery, specialty and perishable foods), roughly 100 items per week.
Retailers are showing greater interest in using the Web to distribute planogram information with the goal of getting new products on the shelves immediately, Ron Cox, director of merchandising services for ACNielsen North America, said in an e-mail interview. It typically takes one to three weeks for new items to get to store shelves from the time they appear in the distribution center, which happens after they're slotted in the warehouse, he said.
The interest is understandable: New items drive 70% of any given category sales growth, while existing products drive the remaining 30%, according to Information Resources Inc.
Associated's Code Red pilot is under way at the corporate Dan's test store called the Phoenix, after the self-renewing bird of Greek myth. Rice said Center Store sales increases at that store are twice those at other Dan's stores as a result of Code Red, even while the Phoenix has a smaller Center Store footprint.
Code Red is part of a broader series of changes the wholesaler is making to make its customers more competitive. It's planning 35 to 40 remodels/resets in 2006 that will result in shrinking Center Store by roughly 20% to give more space to perishables. "We believe that guests really want more of a fresh food experience in this era than they were used to in the past," Rice explained.
Other Center Store changes will include use of merchandising centers, new signage and categories organized with customer shopping patterns in mind.
"If we have a lot of time-starved customers shopping our stores, we want to make it easier for them," Rice said.
Similar changes have already improved results in other departments. Sales of kitchen gadget grew 30% after Associated upgraded the assortment, racks, signage and lighting. Meanwhile, similar changes led to a 10% lift in school supplies sales, he said.
Associated pared its GM, HBC and grocery stockkeeping units by more than 3% over the past year and plans to keep reducing SKUs as it remodels stores.
The center of the store remains important, despite the shrink in real estate and number of SKUs, Rice said.
"We feel like we have so many options that it's really frustrating to the guest," he said. "I believe that the guest can find things much easier on the shelf now that we have the right facings on the items they want the most."
Dollar Refresh
SALT LAKE CITY -- Associated Food Stores here plans to roll out quarterly updates of its dollar set merchandise in 2006 to spur sales in that category.
Sales of dollar items grew 50% in 2003 and 2004, but then flattened to about 3% in 2005, said David Rice, director of center store business units and director of category management for the wholesaler.
"We feel the guest has gotten bored with the mix," he said. "The nature of the dollar program is that we need to make sure the mixes at the store level are being revamped aggressively. There's a treasure-hunting aspect to the dollar set that we need to be able to address quickly."
Most of Associated's 480 supplied and owned stores have dollar sets, in runs ranging from 12 to 128 feet.
