NEW YORK -- A radical redesign of Center Store may be conventional supermarkets' only chance for survival in a field that's increasingly dominated by mass-market retailers and alternative formats, experts said at a retail conference here last week.
Such a future was one of seven possible scenarios identified by UBS, a global financial company, and Sterling-Rice Group, a branding firm specializing in the food industries. The companies presented ideas they thought could play out in the next five years and discussed their potential implications for the food, beverage and restaurant businesses.
In discussing the consumer context of the sales equation, the panel noted that consumers may respond to globalization by searching for meaning in their lives. For supermarkets, this could create a prime opportunity to offer richer experiences and more excitement by blurring the lines between the often-mundane middle of the store and perimeter departments, they said.
Chains like Krispy Kreme and McDonald's have been busily opening "nontraditional" outlets within supermarkets, a strategy that is ripe with potential, said Rick Sterling, president of Boulder, Colo.-based Sterling-Rice Group.
"It's easier said than done, but if I were a retailer, I would find a way to put the refrigerator system in the middle of the store," he said. "What if the prepared-foods section were in the center of the store, or there was a kitchen, where boxed things are made in the store? Maybe it makes the product come alive, instead of just sampling."
Neil Currie, executive director of UBS Investment Research, Stamford, Conn., said U.S. supermarkets should take a page from their British counterparts like Tesco and Sainsbury's, which are intermingling other departments with Center Store. In U.K. supermarkets, for example, the pharmacy often is located in the store's middle, Currie noted.
"All things slow-moving are in the center of the store," he said. "What I think is needed is a fundamental change in the business. People want exciting stores and exciting products."
Currie also called for supermarkets to reduce their brand selection to the few top sellers and a private label. He conceded, however, that U.S. retailers' dependence on vendor allowances for store profits often means customers' wants come second.
"My supermarket sells 12 brands of ranch dressing. How many do I really care about? They're probably not even selling it, but it's there because of slotting fees," Currie said. "The whole vendor allowance system is really what's stifling supermarkets. That really needs to be destroyed."
While the focus is on the perimeter, mainstream supermarkets shouldn't abandon staples like toilet paper, Currie said.
"Hopefully, you get more people in the store, and everything else falls into place."
Yet according to one participant, supermarkets already lost the opportunity to regain Center Store.
"The consumer cannot shop supermarkets for pet food anymore," said Scottsdale, Ariz.-based marketing consultant Chris Hoyt, founder of Hoyt and Co. "They have lost the price value on these items to price-value leaders."
Hoyt prescribed reducing Center Store in size and scope, and enhancing the in-store experience by lavishing attention on the perimeter departments like produce.
"I would shrink the center of the store down to convenience-store size," Hoyt said. "I'd have that store looking beautiful, with the center of the store focused on convenience items."
Many independent retailers have already adopted such a strategy, primarily offering fresh prepared foods.