The traditional supermarket is no longer all things to all people.
From Safeway's Lifestyle stores to A&P's Food Basics, supermarket operators are leveraging the knowledge they have about their customers to create differentiated shopping destinations more precisely tailored to meet their specific needs.
"I think what you are finding with retailers is that they understand they are caught in the middle: They aren't the discount guys, they are not the specialty guys, or the high-end guys, or the natural guys. They are something in between," said Paul Weitzel, vice president, Willard Bishop Consulting, Barrington, Ill. "I think what they are looking for are formats that can make them more differentiated and can also accommodate the different types of need states that are out there around shopping."
Whether or not these new formats and initiatives can satisfy another constituency -- shareholders -- is another question. On the following pages, SN explores some of the ways the largest publicly held chains are remaking their boxes and examines their ability to generate a return on investment. In each of the SN sections, beginning on Pages 95, 103, 133 and 145, SN looks more closely at design trends as they relate to nonfoods, perishables, center store and technology, respectively.
Tom Henken, vice president and director of design at Architecture Plus International, Tampa, Fla., has been designing supermarkets for 20 years, and recently worked on Delhaize's Bloom and Sweetbay Supermarket banners in the Southeast. Henken said he thinks supermarket operators are investing a lot more in the planning of their buildings than they used to.
"Supermarket management has gotten quite a bit more understanding of the level of sophistication required to differentiate in the market," he said. "They are investing more dollars in the up-front research and the up-front testing of the concept with the customer.
"They are spending more time, and therefore more money, in understanding what their current brand equities are, and then digging into what the customers want relative to those equities, and what equities they want to build."
Safeway, for example, is determined to differentiate itself from the competition by emphasizing something it feels it can do better than the competition: provide high-quality perishables. Observers believe the company is seeking to boost sales by as much as 20% at stores that are converted to the "lifestyle" format, which in turn could drive margins up by about 1%. (See Page 34.)
As supermarket operators invest in these new formats, they are paying close attention to the costs of operation in order to maximize their returns over the life of the building, according to Henken.
"They used to be concerned only about the initial costs of operating the store, and all their decisions were based on that," he said. "Now, they are looking at the shelf life of the store, and analyzing it on a material-by-material basis. They might spend a little more up front, but in the long run, it's going to save on maintenance."
More and more stores are being built using integral stained concrete as a flooring material, for example, he said, because even though it costs more to install, it requires less maintenance than some options that have lower costs at the outset.
Other innovations are taking place in the areas of wall materials, shelving and lighting.
The first Marsh lifestyle stores, which debuted last year in Indianapolis, Noblesville and Fort Wayne, Ind., are considered among the most innovative boxes in the country, but the chain was able to keep a handle on costs through several design innovations. The stores feature a double-racetrack design taking shoppers through a series of segmented departments around the perimeter, with produce and a coffee shop in the center of the structure.
Jordan Mozer, president, Jordan Mozer and Associates, Chicago, worked with Marsh to design the store. He said Marsh officials told his firm that construction costs for the prototype store were within 50 cents per square foot of the costs of traditional Marsh supermarkets. Such design elements as natural lighting and a low perimeter ceiling should enable Marsh to cut expenses over the long term, Mozer said.
Weitzel of Bishop Consulting said he expected to continue to see innovative new formats from traditional retailers. He pointed to Central Market, the perishables-driven concept operated by H-E-B, San Antonio, as an example of the type of food retailing innovation that more traditional supermarkets are leaning toward.