Pathmark is a chain frozen in amber, or so it would seem by the challenge its chief executive officer sees.
Many other chains have long ago found improved margin production by increasing space allotments for perishable departments on the perimeter of the store. Pathmark too has perimeter departments, but many of its shoppers still seek out lower-margin Center Store product, leaving an opportunity gap in perimeter departments. Luckily for Pathmark, its 141 stores are in the population-dense Northeast, so it has good store traffic. So the opportunity to build the average ring is at hand, perhaps with the help of a little better merchandising. You'll see much more about Pathmark's situation in the news feature referenced on the front page of this week's SN.
John Standley, Pathmark's CEO, told SN associate editor Jon Springer that, "Customers choose us because they're comfortable in their Center Store experience. The challenge is to get more of the edges of the store into the basket when they shop us. It isn't that we don't do any business on the perimeter, it's just that if you [add] a percentage or two increase, that's worth a fair amount of margin."
Standley acknowledged that Pathmark had long neglected issues such as new investment and better merchandising. No wonder. There have been distractions. The chain has been leveraged, taken through bankruptcy and for years mentioned as a reasonably attractive takeover target, and was nearly absorbed by Ahold at one point. And, owing to a new investment, Pathmark is still mentioned as a takeover target to this day, as has been reported in these pages.
While Pathmark was diverted from merchandising its perimeter departments, many other operators were plumping up their own. It now appears that, at some chains, that years-long initiative was so successful that departmental saturation has been achieved. To solve that, the center of the store is becoming the new perimeter department. Specifically, many chains are adding high-margin product to stores' center in a bid to achieve the kinds of margins typical of the perimeter. But having done that, they are encountering a problem that's the mirror image of Pathmark's, namely that they must seek ways to leverage shoppers away from the perimeter and back to the center of the store so they can see what's changed there.
What can be done to drive shoppers back to the Center Store was the subject of a news feature in last week's SN. At some chains, store workers are being enlisted as food ambassadors to roam stores, talking up the new offerings, handing out recipes and holding out samples. At one store operated by Giant Eagle, all in-store workers - baggers to store director - have taken a class to learn about products to be promoted and to sample them themselves. Other chains are boosting sales of ethnic products by doing the obvious: hiring a diverse staff so store workers can lend additional credibility to such lines and talk them up.
At the end of the day, whether a Pathmark needs to drive shoppers to the perimeter, or an established perimeter merchandiser needs to drive shoppers to the Center Store, the means to do so is plain: Think about what customers want and show it to them.